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Sales Tax State Activity Update - December 2006

News Manufacturers Can Use

Arkansas

The following is the new Arkansas regulation related to labor charges associated with manufacturing machinery and equipment:

• A. The service of initial installation, alteration, addition, or replacement of machinery and equipment that qualifies for the exemption from the gross receipts or compensating use tax provided by Ark. Code Ann. §§ 26-52-402 and 26-53-114 (machinery and equipment used directly in manufacturing) is not subject to gross receipts or use tax.

• B. Labor services that are exempt from tax as provided in this rule are exempt without regard to who performs and bills for the labor services.

• C. Labor performed in connection with the replacement of exempt manufacturing machinery is exempt from tax only if the machinery being replaced meets all of the requirements for exemption required by Ark. Code Ann. §§ 26-52-402 and 26-53-114, including the requirement that substantially all of the machinery required to perform an essential function is replaced.

• D. The service of repair of exempt machinery is taxable.

The full text can be accessed on the Arkansas.gov Website.

(Arkansas Department of Finance and Administration Revenue Rule 9.18)

Kansas

The Kansas Department of Revenue recently revised Notice 00-08 Kansas Exemption for Manufacturing Machinery & Equipment as Expanded by House Bill No. 2011. The expanded exemption related to integrated production operation, warehouse machinery and equipment and labor to install or repair qualified machinery and equipment.

The full text can be accessed on the Kansas Department of Revenue's Policy Information Library.

( Kansas Department of Revenue Notice 00-08, November 9, 2006 )

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