The Arkansas Department of Finance and Administration recently ruled that a vehicle used to transport in-process materials from an out-of-state production facility to an in-state production facility did not qualify for the manufacturing exemption.
The taxpayer was an Arkansas manufacturer that purchased a truck, battery, and battery charger for use in transporting in-process materials between production facilities. The taxpayer claimed a refund on the basis that the truck and accessories were used directly in manufacturing.
The Arkansas manufacturing exemption applies to equipment that is "used directly" in manufacturing. Material handling equipment and transportation equipment used prior to the manufacturing process are not used directly in manufacturing. The ruling determined that the taxpayer's truck was not used during the manufacturing process, and it was therefore taxable.