Arkansas Utility Sales Tax Exemption
Arkansas provides a sales and use tax exemption for electricity, natural gas, and coal used directly in manufacturing. This exemption is authorized under Arkansas Code §§ 26‑52‑319 and 26‑53‑148. While the exemption reduces the state gross receipts and use tax rate to 0% on qualifying utility usage, certain constitutional taxes totaling about 1.125% still apply.
Qualifying Uses
The exemption applies to utility usage that is directly consumed in the actual manufacturing process. Eligible businesses include manufacturers classified under NAICS codes 31 through 33, as well as those under code 115111 for post-harvest activities. Certain electric power generators classified under NAICS 22 and using combined-cycle gas turbine technology may also qualify. Utilities used for lighting, office HVAC, or non-production functions are not exempt.
Utility Study Requirement
To determine the exempt percentage, a utility study is required. The study must include a list of utility-consuming equipment, usage allocation between production and non-production activities, and supporting calculations. If utilities are not separately metered, the study must estimate the exempt usage.
Filing Requirements
To receive the exemption, businesses must submit a completed exemption certificate such as Arkansas Form ET-186 A or another form issued by the Department of Finance and Administration to their utility provider, who will then apply the reduced tax rate to the qualifying portion of utility usage. If sales tax was previously paid on eligible usage, businesses may request a refund for up to three years, either through the utility provider or directly from the Department of Finance and Administration, depending on the circumstances.