006.05.212-GR-55.1. EXEMPTIONS FROM TAX - CHEMICALS USED IN MANUFACTURING:
AR ADC 006.05.212-GR-55.1Arkansas Administrative Code
Ark. Admin. Code 006.05.212-GR-55.1
006.05.212-GR-55.1. EXEMPTIONS FROM TAX - CHEMICALS USED IN MANUFACTURING:
3. “Reagent” means any substance which by reason of its capacity for taking part in certain reactions is used for various purposes, including detecting, examining, or measuring other substances or in preparing materials. A reagent is also a substance used to convert one substance into another by means of the reaction that it causes. To be a reagent for purposes of this exemption, a substance must be primarily used as a reagent.
1. The gross receipts or gross proceeds derived from the sale of catalysts, chemicals, reagents, and solutions which are consumed or used directly in manufacturing or processing articles of commerce at manufacturing or processing plants or facilities in the State of Arkansas are exempt from gross receipts tax. “Manufacturing or processing” has the same meaning as set forth in Ark. Code Ann. § 26-52-402(b) and GR-55.
a. A substance is consumed or used in manufacturing or processing an article of commerce if it is used to produce or prevent a chemical or physical effect during the manufacturing process and the chemical or physical effect, or prevention of that effect, is a direct and necessary step in the production of the article.
Example: Mold release chemicals; nitrogen used to prevent oxidation in an annealing process; cutting/cooling oil applied to metalwork in process during milling; and sanitization chemicals used to meet USDA standards for machinery and equipment used in processing meat and poultry for human consumption.
Examples:
D. The Arkansas Supreme Court has determined that in certain circumstances, chemicals can be considered “equipment” for purposes of this exemption if the chemicals are used directly in manufacturing, serve as instruments or tools with some degree of complexity, possess continuing utility, and are not fully integrated into some other object. The initial purchase of chemicals which meet these tests is exempt from sales and use tax. Purchases of replacement chemicals will be exempt if the provisions of GR-55(D)(2) are met. See Weiss v. Chem-Fab Corporation, 336 Ark. 21 (1999). The following are examples:
Credits
AUTHORITY: Ark. Code Ann. § 26-52-401(35)
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-55.1, AR ADC 006.05.212-GR-55.1
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