The Arkansas Department of Finance and Administration recently ruled that the resale exemption did not apply to replacement parts that became part of a manufactured product. The taxpayer claimed the exemption on the basis that materials from the replacement parts unavoidably "wear into" the manufactured product over time.
The Arkansas resale exemption applies to manufacturing materials that become an integral and recognizable part of the manufactured product. The ruling determined that materials from the replacement parts were not integral to the manufactured product. The ruling reasoned that the taxpayer did not provide sufficient evidence to prove the materials were essential to the completeness of the finished product.