Current through Register Vol. 49, No. 9, September, 2024
A. The gross receipts or gross proceeds
derived from sales for resale to persons regularly engaged in the business of
reselling the articles or services purchased are exempt from tax provided that
such sales are made to persons to whom a permit has been issued as provided in
Ark. Code Ann. §
26-52-201 et seq.
and GR-72. A seller may accept a valid retail permit, or resale permit, issued
by another state. Sellers should refer to GR-79 for the general provisions
concerning exemption claims and liability.
B. PROOF OF ENTITLEMENT TO EXEMPTION.
1. The sale for resale exemption may be
claimed through the use of the exemption certificate (Form ST 391) or the
multistate certificate of exemption (SSTGB Form F0003).
2. A purchaser may also claim the
sale-for-resale exemption by providing information to the seller that otherwise
establishes that the purchaser is reselling the articles purchased. Such
information includes the purchaser's retail permit number or a written
certification to the seller that the articles or services are purchased for
resale.
3. Any person repeatedly
selling the same type of property to the same purchaser for resale may accept a
blanket certificate covering more than one (1) transaction. A blanket
certificate may not be used if a period of more than twelve (12) months elapses
between transactions.
4. If a
retail permit holder purchases goods, services, wares, and merchandise from a
seller on a regular basis, then the retail permit holder must notify the seller
of all purchases which are not for resale and remit the applicable amount of
tax thereon. If the retail permit holder fails to so notify the seller of
purchases not intended for resale, then sufficient grounds shall exist for the
Commissioner to cancel the retail permit of the retail permit holder who failed
to so notify the seller.
5. A
seller has ninety (90) days from the date of sale to obtain a fully completed
exemption certificate or information that is the equivalent of the information
required by the exemption certificate. If a seller has not obtained an
exemption certificate or equivalent information and the Department makes a
request for substantiation of the exemption, the seller has one-hundred twenty
(120) days from the date of the request to prove by other means that the
transaction was not subject to sales or use tax or to obtain in good faith a
fully completed exemption certificate from the purchaser. (See
GR-79.)
C. SALE FOR
RESALE - MANUFACTURERS.
1. Goods, services,
wares, merchandise, and property sold for use in manufacturing, compounding,
processing, assembling, or preparing for sale, can be classified as having been
sold for resale purposes only in the event such goods, services, wares,
merchandise, or property becomes a recognizable integral part of the
manufactured, compounded, processed, assembled, or prepared products. Sales of
goods, services, wares, merchandise, and property not conforming to this
requirement are classified as being for consumption or use of the purchaser
thereof and are taxable. For purposes of this subsection, the following
definitions shall apply:
a. "Recognizable"
means capable of being recognized in the finished product. The capability to
recognize the effect of goods, wares, merchandise, or property upon the
finished product is insufficient to establish that the goods, wares,
merchandise or property has been resold.
b. "Integral" means essential to the
completeness of the finished product.
2. Services shall be considered a
recognizable and integral part of the finished product if:
a. The services were actually performed on
the items or articles being sold; and
b. The services enhance the value of the
items being sold.
3.
Other services performed for businesses engaged in manufacturing, compounding,
processing, assembling, or preparing items for sale shall not be entitled to
the sale for resale exemption.
4.
Manufacturers, compounders, processors, assemblers, and preparers of goods for
sale must also satisfy the requirements found in GR-53(A)-(C).
5. Packaging Materials.
a. Generally, the sale of materials used by
the manufacturer or processor to package the finished product for sale or
delivery is exempt if the materials become part of the finished product. Shrink
wrap and strapping which bind the finished product together for shipment to the
consumer are exempt. Non-returnable pallets which are delivered with the final
product are also exempt. Returnable pallets are taxable.
b. Materials purchased by the manufacturer or
processor to transport the product to the customer and which are owned by and
returned to the manufacturer or which do not become part of the finished
product received by the consumer are taxable. Dunnage bags which prevent
containers of products from shifting during transit are taxable.
D. SALE FOR RESALE -
RESTAURANT SUPPLIES.
1. As a general rule,
gross receipts derived from the sale of the following items to restaurants are
exempt as sales for resale:
a. Paper, plastic,
and styrofoam cups used for dispensing beverages and the paper and plastic lids
for such cups; and
b. Paper and
plastic bowls, paper boats, boxes, and containers used for dispensing food
items, and the wrappers for such bowls, boats, boxes, and containers.
2. Gross receipts derived from the
sale of the following items purchased by restaurants are not exempt as a sale
for resale: paper plates; paper and plastic straws and stirrers; plastic
tableware and utensils; paper napkins; paper sacks; and premoistened
towelettes. However, restaurants or other food sellers that use paper plates or
other containers for dispensing the food items sold may purchase the plates or
containers exempt as a sale for resale.
3. Gross receipts derived from the sale of
toys which are included as a component part of a children's meal are exempt as
sales for resale when those toys are purchased by the restaurant.
E. SALE FOR RESALE - LEASES AND
RENTALS. Businesses engaged in the business of leasing or renting tangible
personal property may purchase repair parts exempt from sales tax if the leased
property was originally purchased exempt as a sale for resale. However, this
exemption does not apply to service charges for repairs or maintenance work on
the property.
F. SALE FOR RESALE -
CAR DEALERS. New and used car dealers shall be entitled to purchase services
performed on dealer-owned vehicles exempt as a sale for resale if the dealer is
purchasing the services solely and exclusively to prepare the vehicle for sale
and the service enhances the value of the vehicle. For example, the repairing
of windshields, dents, scratches, radiators, engines, and car detailing would
be exempt as a sale for resale if the service enhances the value of the
vehicle. The sale-for-resale exemption is available only for services performed
on the vehicle held for resale. All other services performed for the dealership
will remain taxable.
G. Tangible
Personal Property Provided in Connection with Taxable Services. See the rule
regarding the taxable services. Generally, the service rules begin at GR-9 and
continue consecutively thereafter.
H. SALE FOR RESALE - DROP SHIPMENTS. In the
case of drop shipment sales, a third-party vendor (e.g. drop shipper) may claim
a resale exemption based on an exemption certificate provided by its customer
(e.g. the re-seller) or any other acceptable information available to the
third-party vendor evidencing qualification for a resale exemption regardless
of whether its customer (e.g. the re-seller) is registered with the Department
to collect and remit sales or use tax.
Ark. Code Ann. §§
26-52-401(12);
26-52-510(c);
26-52-517
