SALT Report 1376 –The latest issue of the Arkansas State Revenue Tax Quarterly Newsletter discusses the sales tax exemption for new and used farm machinery and equipment. Arkansas Code Ann. §26-52-403 provides an exemption from sales tax for new and used farm machinery and equipment. The exemption only applies to purchasers that are engaged in the business of commercial farming.
For the purchase to be exempt, the taxpayer must certify that the purchased machinery will be:
- Used exclusively in the agricultural production of food or fiber as a retail business, and
- Used directly in the actual agricultural production of food or fiber to be sold in processed form or otherwise at retail, or
- Used directly in the agricultural production of farm products to be fed to livestock or poultry and will be sold in its processed form at retail. If the purchaser is not selling farm products produced in the course of an ongoing farming business, the purchaser is not entitled to this exemption.
The following are examples of nonexempt items:
- A machine used at a location other than the farming property
- A machine used for any activity other than commercial farming, even while at the commercial farm
- A machine used to produce food or fiber primarily for the commercial farmer’s own consumption
- Attachments to and accessories not essential to the operation of the implement itself, except when sold as part of an assembled unit
- Repair labor and repair parts, and
- Fencing materials
The purchaser must certify in writing that he is engaged in the business of commercial farming and that the farm machinery and the equipment will be used only in commercial farming. Additionally, the seller must certify to the Arkansas Department of Finance and Administration that the contract price of the item(s) has been reduced to grant the full benefit of the exemption.
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