006.05.06 Ark. Code R. 005-GR-66

Current through Register Vol. 49, No. 10, October, 2024

Rule 006.05.06-005-GR-66 - EXEMPTIONS FROM TAX - MANUFACTURING EXEMPTION - POLLUTION CONTROL MACHINERY

A. The gross receipts or gross proceeds derived from the sale of pollution control machinery and equipment are exempt from the tax if:

1. The machinery and equipment is utilized, either directly or indirectly, by manufacturing or processing plants or facilities, or cities or towns in Arkansas to prevent or reduce air or water pollution or contamination which might otherwise result from the operation of the plant or facility; and,

2. The machinery and equipment is required by Arkansas or federal law or regulations to be installed and utilized to control pollution or contamination as evidenced by written documentation from the Arkansas Department of Environmental Quality or the United States Environmental Protection Agency.

B. Supplies and chemicals used by pollution control machinery and equipment are taxable.

C. Replacement and repair parts for pollution control machinery and equipment are exempt from tax if the machinery or equipment to be repaired or refurbished was initially exempt under this rule.

D. CHEMICALS.

1. The gross receipts or gross proceeds derived from the sale of catalysts, chemicals, reagents or solutions which are consumed or used by manufacturing or processing plants or facilities, or cities or towns, in this state to prevent or reduce air or water pollution or contamination which might otherwise result from the operation of the facility are exempt from gross receipts tax.

A substance prevents or reduces air or water pollution if it acts directly on the air or water to remove or alter an impurity in the air or water.

Example: Chlorine used to kill bacteria in wastewater is exempt.

b. Chemicals, catalysts, reagents and solutions used to test the quality of the air or water are exempt.

3. Definitions.

a. "Catalyst" means a substance that initiates or provokes a chemical reaction allowing such reaction to proceed under milder conditions, such as lower temperatures or with less resistance to reaction.

b. "Chemical" means an element, combination of elements or compound obtained by a chemical process.

c. "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 which it causes. To be a reagent for purposes of this exemption, a substance must be primarily used as a reagent.

d. "Solution" means a chemical in a liquid form which contains a dissolved substance.

E. WASTEWATER TREATMENT PLANTS.

1. Machinery and equipment used in a city or county wastewater treatment plant are exempt if the machinery and equipment is used to remove contaminants from wastewater. The treatment process begins when solids are first removed from the wastewater and ends when all solids and other contaminants are removed from wastewater.

2. The water treatment process does not include:

a. Collecting wastewater from locations outside of the treatment plant and delivering wastewater to the treatment plant; or

b. Disposing of solids or other contaminants removed from wastewater.

3. The following items are examples of exempt machinery and equipment provided that the machinery and equipment is used during the water treatment process as described in GR-66(E)(1) above:

Examples: pipes, pumps, valves, screens, screen baskets, gates, blowers, fans, skimmers, aerators, diffusers, equalization basins, concrete flumes, conveyor belts, flow meters, grit separators, grit removal equipment, back flow preventers, chlorination equipment, digester equipment, vacuators, and air eductors.

4. The following items are examples of taxable items: materials used in constructing improvements to real estate, housing for machinery, handrails, ladders, paint, lighting equipment, pump stations, lift stations, pipes and equipment utilized in sewage collection outside of the treatment area, machinery and equipment which control the flow of wastewater into the treatment facility, sludge de-watering equipment, machinery and equipment used for measuring, controlling, or testing the treatment process, sludge pumping equipment, and sludge application system.

006.05.06 Ark. Code R. 005-GR-66

Ark. Code Ann. §§ 26-52-402; 26-52-401(36)