Arkansas Administrative Code › Agency 168 - Arkansas Economic Development Commission › Rule 168.00.17-009 - Replacement and Repair of Manufacturing Machinery and Equipment Sale and Use Tax Refund

Current through Register Vol. 49, No. 6, June, 2024
I.
Introduction
Overview
Act 1404 of 2013, as amended and codified in §§
			 26-52-447, 26-53-149 and 15-4-3501, establishes two options by which certain
			 state sales and use taxes relating to the partial replacement and repair of
			 machinery and equipment used directly in manufacturing may be refunded to
			 eligible taxpayers beginning July 1, 2014.
Act 465 of 2017 amended the refund options by:
* Increasing the refund available for taxes paid on purchases
			 related to the repair and partial replacement of manufacturing machinery and
			 equipment;
* Sunsetting the tax refund for major maintenance and improvement
			 programs; and
* Phasing in an exemption from tax for purchases related to the
			 repair and partial replacement of manufacturing machinery and equipment.
The first option, which provides for a graduated refund and
			 subsequent exemption of sales and use taxes levied under §§
			 26-52-301, 26-52-302, 26-53-106 and 26-53-107, may be claimed by a taxpayer for
			 the purchase and installation of certain machinery and equipment used directly
			 in manufacturing and processing. Taxes levied under §§ 26-52- 301,
			 26-52-302, 26-53-106 and 26-53-107 subject to refund under this option are the
			 taxes in excess of the following rates:
1. Beginning July 1, 2014, four and
		  seven-eighths percent (4.875%);
2.
		  Beginning July 1, 2018, three and seven-eighths percent (3.875%);
3. Beginning July 1, 2019, two and
		  seven-eighths percent (2.875);
4.
		  Beginning July 1, 2020, one and seven-eighths percent (1.875%);
5. Beginning July 1, 2021, seven-eighths
		  percent (0.875%); and
6. Beginning
		  July 1, 2022, sales qualifying for the tax refund under this option are fully
		  exempt from taxes levied under §§ 26-52-301, 26-52-302, 26-53-106 and
		  26-53-107.
The second option, which provides for an increased refund of all
			 sales and use taxes (5.875%) levied under §§ 26-52-301, 26-52-302,
			 26-53-106 and 26-53-107, is a discretionary incentive that may be offered by
			 the Executive Director of the Arkansas Economic Development Commission (AEDC)
			 to a taxpayer who undertakes a major maintenance and improvement project to
			 purchase and install certain machinery and equipment used directly in
			 manufacturing and processing.
A taxpayer may apply for an increased refund for major
			 maintenance and improvement projects under the second option through June 30,
			 2022. An application for an increased refund for major maintenance and
			 improvement projects under the second option shall not be accepted on or after
			 July 1, 2022.
To qualify for this discretionary refund, a taxpayer
			 shall:
1. Be eligible for a refund of
		  taxes under §§ 26-52-447 or 26-53-149 (partial replacement and repair
		  of certain machinery and equipment);
2. Hold a direct pay or a limited direct pay
		  sales and use tax permit from the DFA; and when claiming the refund, shall file
		  their monthly direct pay sales and use tax report using the Department's
		  electronic tax report filing system;
3. Enter into a financial incentive agreement
		  with the AEDC for the major maintenance and improvement project prior to
		  incurring project expenditures;
4.
		  Expend at least $3 million on an approved major maintenance and improvement
		  project that includes the purchase of tangible personal property and services
		  that are either exempt or subject to partial refund of tax under §§
		  26-52-402, 26-52-447, 26-53-114, or 26-53-149;
5. File a completed Manufacturing Replacement
		  and Repair Sales and Use Tax Refund Application with the AEDC; and
6. Receive approval from the Executive
		  Director of the AEDC to receive the increased refund of sales and use taxes for
		  the major maintenance and improvement project.
All existing excise tax exemptions, including without limitation
			 exemptions under §§ 26- 52-402 and 26-53-114, remain in full force
			 and effect and are not limited by this refund.