006.05.212-GR-21.1. RATES PROPERTY PURCHASED FOR USE IN THE PERFORMANCE OF A CONSTRUCTION CONTR...
AR ADC 006.05.212-GR-21.1Arkansas Administrative Code
Ark. Admin. Code 006.05.212-GR-21.1
006.05.212-GR-21.1. RATES PROPERTY PURCHASED FOR USE IN THE PERFORMANCE OF A CONSTRUCTION CONTRACT - INCREASE IN SALES AND USE TAX RATES.
A. Materials purchased for use in construction contracts that become recognizable components of the completed project are subject to state and local sales and use tax. A contractor that purchases these materials is entitled to a rebate on certain increases in state and local sales or use taxes if the following conditions are satisfied:
Example 1: Pulaski County local sales and use tax is increased by 1% effective October 1, 2008. Purchases of materials used in completing construction contracts entered into prior to October 1, 2008 (but after January 1, 2008), will be eligible for a rebate of the additional 1% tax until September 30, 2013.
Example 2: On November 1, 2008, a construction contractor purchases a hammer and 50 pounds of nails for use in framing an apartment building. The construction contract was signed prior to the October 1, 2008 (but after January 1, 2008), tax increase. The additional tax increase is due on the sale of the hammer because the hammer will not become a recognizable part of the building. The nails are subject to the rebate because the nails, although they cannot be seen, are a recognizable part of the building.
5. For the purposes of the rebate, “construction contract” means a contract to construct, manage, or supervise the construction, erection, or substantial modification of a building or other improvement or structure affixed to real property. Construction contract does not mean a contract to produce tangible personal property.
C. BURDEN OF PROOF. The burden of proving entitlement to the rebate is on the contractor. The contractor is required to keep adequate records to identify the purchases that are eligible for the rebate and follow the process outlined in this rule. Failure to do so will result in the rebate being disallowed.
2. The construction contractor shall furnish a completed exemption certificate or “Certificate of Proof for Contractor's Entitlement to Exemption from Sales and Use Tax Increase” to each seller of exempt property for each contract and shall retain a copy of the certificate with his purchase records.
5. Consumer use tax reports. Some construction contractors report the use tax due on materials purchased from out-of-state sellers directly to the Department. When such a construction contractor claims the exemption, the construction contractor must keep all records required by this rule including maintaining copies of purchase invoices and the contracts for which the exemption is claimed.
6. The burden of proving entitlement to an exemption is on the contractor. In the case of an audit of a seller's business, the burden is on the seller to keep adequate records pursuant to GR-79. In the case of an audit of a construction contractor's business, the burden is on the construction contractor to keep records adequate to prove the validity of the claimed exemptions. Failure to do so will result in the exemptions being disallowed and applicable tax, penalty, and interest being assessed.
Credits
AUTHORITY: Ark. Code Ann. § 26-52-427
Current with amendments received through February 15, 2024. Some sections may be more current, see credit for details.
Ark. Admin. Code 006.05.212-GR-21.1, AR ADC 006.05.212-GR-21.1
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