1. “Consumer” or “user” means the person to whom the taxable sale is made or to whom the taxable services are furnished. All contractors are deemed to be consumers or users of all tangible personal property including materials, supplies, and equipment used or consumed by them in performing any contract, and the sales of all such property to contractors are taxable sales. The contractor must pay tax at the time of purchase or pay tax at the time the materials are withdrawn from stock for use in the performance of the contract. A contractor cannot rely on the direct pay permit of the other party to the contract for payment of the tax on the construction materials.

2. “Contract” means any agreement or undertaking to construct, manage or supervise the construction, erection, alteration or repair of any building or other improvement or structure affixed to real estate, including any of their component parts. The term contract shall not include a contract to produce tangible personal property.

3. “Contractor” means any person who contracts or undertakes to construct, manage or supervise the construction, erection, alteration or repair of any building or other improvement or structure affixed to real estate, including any of their component parts.

1. The initial installation, alteration, addition, cleaning (with exceptions noted in GR-21(C)(1)), refinishing, replacement, or repair of nonmechanical, passive or manually operated components of buildings or other improvements or structures affixed to real estate, including but not limited to the following: walls, ceilings, doors, locks, windows, glass, heat and air ducts, roofs, wiring, breakers, breaker boxes, electrical switches and receptacles, light fixtures, pipes, plumbing fixtures, fire and security alarms, intercoms, sprinkler systems, parking lots, fences, gates, fireplaces, and similar components which become a part of real estate after installation, are not taxable services. This means, generally, that services performed on non-mechanical components or fixtures within or on a building or other improvement to real estate are not taxable.

2. First-time installation of mechanical or electrical equipment into a newly constructed or substantially modified building or other improvement to real estate is not a taxable service. For example, labor charges for the first-time installation of heating and air conditioning machinery and heating and air ducts into a newly constructed or substantially modified building are not taxable. The initial installation of mechanical or electrical equipment into an existing building is taxable. See GR-21(D) for tax liability on materials.

3. First-time installation of carpeting or other flooring into a newly constructed or substantially modified building or other improvement to real estate is not a taxable service. The initial installation of carpet or other flooring in an existing building is taxable. See GR-21(D) for tax liability on materials.

1. The services enumerated in Ark. Code Ann. § 26-52-301(3)(D) including the service of providing cleaning or janitorial work are taxable. The cleaning of the interior or exterior of any building or structure, including vents, ducts, windows, walls, ceilings, or floors, is a taxable service.

2. The initial installation, alteration, addition, cleaning, refinishing, replacement and repair of motors, electrical appliances, machines, and other mechanical items are taxable. For example, initial installation in existing structures and the repair or replacement of dishwashers, stoves, ovens, refrigerators, heating and air conditioning units, garbage disposals, water heaters, ceiling fans, garage door motors, electric signs, washing machines, and dryers is taxable.

3. The initial installation in existing buildings and the alteration, addition, cleaning, refinishing, replacement and repair of carpet and rugs remain taxable.

4. The replacement or repair of elevators is a taxable service.

1. Permitted Business. A business holding a sales tax permit should purchase all materials used in its construction, repair, and retail business exempt from sales tax as sales for resale. Any materials used in the performance of non-taxable services are not taxed to the customer; however, the business must self-assess, report, and pay sales tax as a withdrawal from inventory (stock) on the purchase price of the materials. Tax is due at the time the goods are withdrawn from stock. (See GR-18.) The business must collect sales tax from its customers on retail sales of materials. Sales tax on materials used in performing taxable services is to be collected from the customer along with the labor charges.

2. Non-permitted Business. A business which is not required to hold a sales tax permit must pay tax on all purchases of materials. Use tax is required to be reported and paid on the purchase of materials from out-of-state sellers.

1. Heating and Air Contractors.

2. Plumbing. The installation, replacement or repair of pipes and non-mechanical plumbing fixtures are not taxable services. The plumbing contractor is to pay tax to the vendor on plumbing materials used in these services, or self-assess tax as a withdrawal from inventory (stock) on the purchase price of the materials used. No tax will be collected from the customer. The initial installation of mechanical or electrical items or appliances in new construction is not taxable. The initial installation of mechanical or electrical items or appliances in an existing building is taxable. Tax must be collected from the customer for both the taxable labor and the sale of any tangible personal property.

3. Electrical Contractors.

4. Carpeting and Flooring Installation.

5. Carpenters.

6. Garage Door Contractors.