SALT Report 3821 – On May 19, 2016, the Arkansas State Supreme Court ruled against allowing a manufacturing exemption for equipment purchased in the expansion of a water treatment facility. The captivating and descriptive introduction follows:
“The Illinois Bayou begins on the south slopes of the Ozarks in the Boston Mountains. Its four forks merge and provide Class II/III whitewater canoeing. On its downstream route through Pope County, it passes near the communities of Hector, Scottsville, and Dover before joining Lake Dardanelle in the Arkansas River. Although ideal for canoeing and bass fishing, the waters of the Illinois Bayou and the Huckleberry Creek Reservoir are not suitable for drinking by the residents of Russellville. The waters must first be cleaned. Thus begins this tax litigation”
The ruling winds down the river of logic leading us to a taxable conclusion sending the claimed exemption down the drain for the taxpayer – the lower court was reversed and remanded.
“Here, Russellville’s water-treatment plant did not manufacture or process a new product. Through an elaborate three-phase process, the water-treatment plant turned river water into drinking water. That water was taken from the Illinois Bayou, and that water was supplied to the residents of Russellville. It was water in the beginning, and it was water in the end.”
No manufacturing, no exemption.
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