SALT Report 2409 – The Arkansas General Assembly has approved a partial sales and use tax refund for purchases of machinery and equipment that were, or will be, used to modify, replace, or repair existing machinery and equipment.
All qualified machinery or equipment must be used directly in the production, manufacture, fabrication, assembly, processing, finishing, or packaging of items for resale at a manufacturing or processing plant or facility in Arkansas. The partial refund also applies to services associated with the installation, alteration, addition, cleaning, refinishing, replacement, or repair of qualified machinery or equipment.
The refund can be taken on taxes that are in excess of 4.875%. However, the 1/8% excise tax required by Amendment 75 to the Arkansas Constitution and the temporary 0.5% excise tax required by Amendment 91 do not qualify for the partial refund. To claim the partial refund, the taxpayer must have a direct pay permit and claim the tax refund under the terms of the permit.
Additionally, if a taxpayer is undergoing a major maintenance and improvement project they may be eligible for a 100% tax refund on purchases that will replace or repair manufacturing machinery and equipment.
In this case, the taxpayer will be required to enter into a financial incentive agreement with the Arkansas Economic Development Commission for the project and must invest a minimum of $3 million on the project. This particular refund incentive is available at the discretion of the AEDC and only if the taxpayer meets certain eligibility requirements.
Effective July 1, 2014.
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