Ark. Code Ann. § 26-52-402 (2026)

Case Notes

Construction.

Tax exemptions must be strictly construed against exemption, and to doubt is to deny the exemption. Ragland v. Dumas, 292 Ark. 515, 732 S.W.2d 119 (1987).

A tax-exemption provision must be strictly construed against the exemption. ALCOA v. Weiss, 329 Ark. 225, 946 S.W.2d 695 (1997).

Burden of Proof.

The party claiming an exemption from taxes has the burden of proving his entitlement beyond a reasonable doubt. Ragland v. Dumas, 292 Ark. 515, 732 S.W.2d 119 (1987).

Judicial Review.

The standard of review for tax exemption cases is trial de novo on the record, and appellate court will not reverse the chancellor's findings of fact unless they are clearly erroneous. Ragland v. Dumas, 292 Ark. 515, 732 S.W.2d 119 (1987).

Machinery and Equipment.

General Assembly, by the use of the terms machinery and equipment, intended implements, tools, or devices of some degree of complexity and continuing utility and not materials that become fully integrated into a construction project, the utility of which ends upon the termination of each project. Ragland v. Dumas, 292 Ark. 515, 732 S.W.2d 119 (1987).

The taxpayer was entitled to an exemption for initial purchases of chemicals used in the manufacturing of aircraft parts since those chemicals came within the definition of equipment because (1) the chemicals served as instruments or tools to soften metal or mill away excess metal in the manufacturing process, and (2) the chemicals possessed continuing utility. Weiss v. Chem-Fab Corp., 336 Ark. 21, 984 S.W.2d 395 (1999).

The taxpayer was not entitled to an exemption for replacement purchases of chemicals used in the manufacturing of aircraft parts in light of the contention of the Department of Finance and Administration that the issue of whether the replacement chemicals were more efficient or had a longer useful life than the initial chemicals should have been determined at the time the initial chemicals were originally purchased and not at the time of replacement. Weiss v. Chem-Fab Corp., 336 Ark. 21, 984 S.W.2d 395 (1999).

Circuit court did not err in determining that the stickyback tape used by the taxpayer was equipment that was exempt from sales taxes; it met the statutory requirement under subdivision (c)(1)(A) of this section of equipment used directly in the actual manufacturing or processing operation and was necessary and integral, as provided under subdivision (c)(2)(A)(i). Weiss v. Bryce Co., LLC, 2009 Ark. 412, 330 S.W.3d 756 (2009).

Circuit court did not err in finding that the “proppants” used by a taxpayer to extract natural gas from shale were “equipment” and thus exempt from taxation because the proppants were used directly in the extraction of oil and gas, they were injected into a well, were used for the life of the well, were not absorbed into the rock formation, changed the direction of the flow of the gas in the well, increased the speed of the flow, prevented the fracture from closing, and production would cease without them. Walther v. Weatherford Artificial Lift Sys., Inc., 2015 Ark. 255, 465 S.W.3d 410 (2015).

Manufacturing.

Evidence that plaintiff produced its own syrup which was then mixed with other ingredients to produce the finished product was sufficient to show that plaintiff was in the business of producing and selling bottled carbonated soft drinks and entitled it to the exemption as a manufacturer from use tax. Ark. Beverage Co. v. Heath, 257 Ark. 991, 521 S.W.2d 835 (1975).

Where seller of machinery or equipment sells such machinery to graphic arts manufacturers for use in manufacturing finished products such as stationery, wedding, and business announcements, flyers, books, and business cards, the seller is not entitled to exemption from the gross receipts (sales) tax under subsection (a) of this section, since commercial printers who purchase the machinery are not “manufacturers” under this section, because printing, binding, and photography processes are not manufacturing in the ordinary meaning of the term, which is the meaning with which the term must be construed under subsection (b) of this section. Western Paper Co. v. Qualls, 272 Ark. 466, 615 S.W.2d 369 (1981).

Ready-mix concrete plants that are used to mix cement, sand, gravel, and water to produce ready-mix concrete are not exempt from taxation under subsection (a) of this section as manufacturing equipment, since the machinery is just used for mixing materials and does not produce a truly finished product, such as concrete blocks. Ragland v. Lyon's Mach. Co., 279 Ark. 147, 649 S.W.2d 401 (1983).

Trial court erred in granting a limited liability company (LLC) summary judgment in its action seeking a refund of additional use taxes and an order requiring the abatement of the unpaid portions of the final assessment because the LLC was not entitled to the manufacturing exemption; the LLC acquired materials and constructed a facility to treat and clean water, but it did not manufacture the water. Walther v. Carrothers Constr. Co. of Ark., LLC, 2016 Ark. 209, 492 S.W.3d 504 (2016).

Molds and Dies.

Items, such as molds or dies, that are destroyed or disposed of in the manufacturing process, do not qualify for the exemption in § 26-52-401(12)(B) because if they are destroyed, there is no possibility of double taxation. Pledger v. C.B. Form Co., 316 Ark. 22, 871 S.W.2d 333 (1994).

Subdivision (c)(2)(B)(i) of this section provides an exemption for molds that determine the physical characteristics of the finished product; this section does not require that they be permanent since molds need not have a “continuing utility” to come within the statutory definition of equipment. Pledger v. C.B. Form Co., 316 Ark. 22, 871 S.W.2d 333 (1994).

The meaning of the words used in mold and die exemption is clear: there is an exemption for molds that determine the physical characteristics of the finished product, and, when the sentence in the subsection exempting molds is read in full, there is no expressed legislative intent that equipment or machinery have “continuing utility.” Pledger v. C.B. Form Co., 316 Ark. 22, 871 S.W.2d 333 (1994).

Manufacturer's plaster and cardboard forms, or molds, sold to a single customer who utilized the forms to build fuel cells that fit into a cavity in the wing and fuselage of military and commercial aircraft, were exempt from the gross receipts or sales tax under subdivision (c)(2)(B)(i) of this section. Pledger v. C.B. Form Co., 316 Ark. 22, 871 S.W.2d 333 (1994).

Pollution Control.

The exemption from taxes under subdivision (a)(3) of this section is based on the requirement that pollution-control equipment be installed and used to prevent or reduce air or water pollution that results from the operation of a plant or facility, and the exemption did not apply to taxpayer's lease of equipment for a reclamation project. ALCOA v. Weiss, 329 Ark. 225, 946 S.W.2d 695 (1997).

Used Directly.

Trucks used on private property to carry materials and not used in processing, fabricating, or assembly of raw material do not qualify for exemption from the sales tax under subsection (c) of this section. Heath v. Midco Equip. Co., 256 Ark. 14, 505 S.W.2d 739 (1974).

Where diesel locomotive cranes and 72-inch magnet were used as tools not only to move but to roll and position the old railroad tank cars during the time that the culverts were being fabricated, and as such were necessary and integral parts of the manufacturing operation, the trial court erred in classifying such machinery as “transportation equipment.” Ark. Ry. Equip. Co. v. Heath, 257 Ark. 651, 519 S.W.2d 45 (1975).

Where there was a showing that a case conveyor, bottling conveyor, and an electronic bottle inspector in bottling plant were so much a part of a continuous and well-synchronized operation that, if one of the machines failed to operate, the entire operation stopped, there was sufficient evidence that the machines were an integral part of the manufactured product and exempt. Ark. Beverage Co. v. Heath, 257 Ark. 991, 521 S.W.2d 835 (1975).

Cited: Frank Lyon Co. v. United States, 435 U.S. 561, 98 S. Ct. 1291, 55 L. Ed. 2d 550 (1978); Southern Steel & Wire Co. v. Wooten, 276 Ark. 37, 631 S.W.2d 835 (1982); Bosworth v. Pledger, 305 Ark. 598, 810 S.W.2d 918.