Effective July 1, 2007, the Arkansas Department of Finance and Administration has reduced from 6% to 4.5%, the sales and use tax rate on the sale of natural gas and electricity to a manufacturer for use or consumption directly in the actual manufacturing process. Local tax rates remain in effect. Effective July 1, 2008, the rate is further reduced to 4%, plus any local rates in effect at that time.
Natural gas and electricity that are subject to the reduced tax rate must be separately metered from any natural gas and electricity used for any other purpose by the manufacturer. Arkansas defines a manufacturer as a manufacturer as classified in sectors 31 through 33 of the North American Industry Classification System (NAICS), in effect as of January 1, 2007.
The seller of natural gas or electricity should obtain a certificate from the consumer certifying that the consumer is eligible to purchase the natural gas or electricity at the reduced tax rate.
The Arkansas General Assembly determined that the current sales and use taxes on utilities consumed by manufacturers located in the state were at a competitive disadvantage, and the change in rates is intended to address the problem to prevent the loss of manufacturing jobs to other states that provide lower taxes on utilities consumed in manufacturing.
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