Arkansas Supreme Takes Expansive Reading of Manufacturing Exemption for Pipemaker's Steel Grit

The Arkansas Supreme Court upheld the sales and use tax manufacturing exemption for steel grit used to make pipes in Walther v. Welspun Tubular, LLC, 2021 Ark. 90 (Apr. 22, 2021). This case provides significant clarification of (1) the plant expansion exemption, (2) the articles of commerce requirement, and (3) the continuing utility of equipment requirement. As such, it should be of interest to almost all manufacturers. The positions on each of these issues that were upheld by the court are broader than what the Department of Finance and Administration (DFA) generally has allowed. Arkansas manufacturers should consider whether they can benefit from applying these principles to their own tax situations. [More]

DFA Charitable Determinations Pose a Challenging Test for Nonprofits

Charitable nonprofits in Arkansas need to be aware of the stringent "otherwise performed by the government" test applied by Department of Finance and Administration (DFA) for the sales tax exemptions, as illustrated by recent DFA opinion letters. This test is more stringent than that applied by the IRS for 501(c)(3) status, and nonprofits may face sales tax exposure, especially on their fundraising sales including fundraising dinners or events. With property tax exemption rules and guidelines to be forthcoming soon, these rulings may also preview the direction DFA could take in the property tax charitable exemption context. [More]

All Manufacturers Need to Be Claiming Reduced Sales & Use Tax Rates on Manufacturing Repair Parts and Services

Manufacturers—particularly smaller ones that do not have direct pay permits—need to make sure that they are claiming the benefit of the reduced sales and use tax rate on manufacturing repair parts and services. This is a significant benefit that refunds part of the state-level tax, as a phase-in before full exemption begins July 1, 2022. With a 12-month limitations period for making a claim, taxpayers need processes in place to assure that timely claims are being made. [More]

Administrative Hearing: "Tax-Included" Invoicing Creates Remittance Obligation Regardless of Taxability

States vary in the degree to which they allow sellers to bundle ("tax included") sales tax instead of collecting from the customer as a separate line-item, and Arkansas practice is generally fairly liberal. But this can be a double-edged sword, as shown in Department of Finance and Administration (DFA) Administrative Decision nos. 19-415 & 416 (Jun. 28, 2019), which held that a "tax included" legend meant that the seller was collecting sales tax. As a collector, that seller had an obligation to remit the deemed collected tax regardless of the underlying taxability of the transaction and was found liable for tax for failing to do so. [More]