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An Act to Decrease the Sales and Use Tax on Natural Gas and Electricity used by Manufacturers

Overview

The Arkansas sales and use tax rate on electricity and natural gas used in an "actual manufacturing process" has been reduced since 2007, as follows:

Date State Tax Rate Before July 1, 2007 6.0% July 1, 2007 - June 30, 2008 4.5% July 1, 2008 - June 30, 2009 4.0% July 1, 2009 - June 30, 2011 3.25%

New Date Relief

Act 754 of 2011 further reduces the state tax rate as follows:

Effective July 1, 2011: 2.75%

Qualifying Manufacturers

In order to qualify, a manufacturer must still fall within NAICS Sections 31, 32, 33 or fall within the new category of manufacturers qualifying for relief described below.

Qualifying Uses

No change. Only electricity and natural gas used to power machinery and equipment or provide energy used in actual production or assembly or to support actual production or assembly qualify for the reduced rate. See DFA Rule 2007-5 "Reduced Sales Tax Rate for Natural Gas or Electricity Used Directly in the Manufacturing Process."

Application and Compliance Process

No change.

  • File Form ET-185 ARC Reduced Rate Application/Recertification.
  • Direct Pay Permit holders remit at correct rate with monthly excise tax returns.
  • Other qualifying manufacturers either make arrangements to remit correct tax rate through their utilities or file DFA Form ET-185 R Application for Refund of Overpayment for excess taxes collected by utilities on sales.

Rate Relief for Electric Generators

Act 754 of 2011 also expand the definition of manufacturers qualifying for rate relief to include generators of electric power that fall within NAICS Section 22, and use natural gas to operate new or existing electric generating facility using combined-cycle gas turbine technology. For these generators, the tax rate on natural gas and electricity used to operate the combined cycle turbine facility will be as follows:

Date State Tax Rate Before January 1, 2012 6.0% Jan. 1, 2012 - Dec. 31, 2012 5.25% Jan. 1, 2-13 - Dec 31, 2013 4.25% Effective Jan. 1, 2014 2.75%

Effective Date

The Act is effective July 1, 2011.

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