To Amend The Sales And Use Tax Exemptions For Certain Machinery And Equipment Used In Manufacturing; And To Provide A Sales And Use Tax Exemption For Machinery And Equipment Used In Closed-loop Recycling.
Summary
HB1702 expands Arkansas’s existing sales and use tax exemptions for manufacturing machinery and equipment. The bill adds a new exemption category for machinery and equipment used to mechanically recycle post-use materials in a closed-loop circular process, where materials generated in a manufacturer’s own process are reclaimed, converted, and fed back into that same manufacturing process as a recognized component of the finished product.
The bill defines key terms to limit the exemption to certain in-house, controlled recycling operations. “Closed-loop circular process” means the reclaimed material is reintroduced into the original process; “mechanically recycle” is limited to physical processes such as washing, drying, grinding, regranulating, and compounding; and “post-use material” must come directly from the taxpayer’s manufacturing operation, be managed as a valuable item, and not be mixed with other solid or hazardous waste. The same exemption is added to both the sales tax and use tax statutes, and the changes take effect on the first day of the calendar quarter after the act becomes effective.
Impact
HB1702 would amend Arkansas Code §§ 26-52-402 and 26-53-114 to broaden the manufacturing machinery and equipment exemptions under the state’s sales and use tax laws. In practical terms, manufacturers that install qualifying closed-loop recycling equipment could purchase that equipment without paying state sales or use tax, so long as the equipment is used to reclaim and reintroduce post-use materials generated by the manufacturer’s own process. The bill would affect manufacturers, equipment suppliers, and potentially recycling-related capital investment decisions within Arkansas.
Sentiment
No committee transcript or recorded vote information was provided, so there is no direct evidence of debate, support, or opposition in the available materials. Based on the bill text alone, the measure appears pro-manufacturing and pro-recycling, with a policy goal of encouraging investment in circular production systems through tax relief.
Contention
The main potential points of contention are the scope and eligibility limits of the exemption. Supporters would likely favor the incentive for manufacturing efficiency and waste reduction, while critics could question the revenue impact of expanding tax exemptions or whether the definitions are narrow enough to prevent broader recycling or waste-handling equipment from qualifying. The bill’s requirement that materials be generated directly from the taxpayer’s own manufacturing process, remain uncontaminated by other waste, and be reintroduced into the original process may also be a focal point for interpretation and compliance.
Establishes that a renewable energy resource shall pay $5.00 per kilowatt of alternating current nameplate capacity for tangible property and $3.50 per kilowatt of alternating nameplate capacity for real property.
Establishes that a renewable energy resource shall pay $5.00 per kilowatt of alternating current nameplate capacity for tangible property and $3.50 per kilowatt of alternating nameplate capacity for real property.