Form ST-403
R 02/2007
Commercial Farming Sales Tax Exemption
Arkansas Code Ann. §26-52-403 provides an exemption from
sales tax for new and used farm machinery and equipment.
“Farm machinery and equipment” is defined as agricultural
implements used exclusively and directly for the agricultural
production of food or fiber as a commercial business.
Sometimes, purchasers improperly claim the exemption and
fail to take into consideration that the exemption only applies to
those purchasers that are engaged in the business of
commercial farming.
The most commonly misused exemption is for All Terrain
Vehicles (ATVs).
For the purchase to be tax-exempt, the taxpayer must certify
the machinery will be –
1. used exclusively in the agricultural production of food or
fiber as a retail business, AND;
2. used directly in the actual agricultural production of food
or fiber to be sold in processed form or at retail, OR used
directly in the agricultural production of farm products to be
fed to livestock or poultry which is to be sold ultimately in
processed form at retail. If the purchaser is not selling farm
products produced in the course of an ongoing farming
business, the purchaser is not entitled to this exemption.
Examples of Non-Exempt items would include –
a machine owned by a commercial farmer but also used at a
location other than the farming property (such as duck club
or deer camp);
a machine owned by a commercial farmer but also used for
any purpose at any time for activities other than commercial
farming even while at the commercial farm (such as pleasure
riding, household activities, residential yard work,
gardening, hunting, fishing);
a machine purchased by a commercial farmer who also uses
the machine to produce food or fiber primarily for his own
consumption;
attachments to and accessories not essential to the operation
of the implement itself (except when sold as part of an
assembled unit); or
repair labor and repair parts.
To purchase the machinery exempt from sales tax the purchaser
must certify in writing that he is engaged in the business of
commercial farming and that the farm machinery and
equipment will be used only in commercial farming. The seller
then must certify to the Department of Finance and
Administration that the contract price of the item(s) has been
reduced to grant the full benefit of the exemption. Any
accessories not pre-assembled by the manufacturer are taxable,
even if purchased at the same time. Subsequent parts or repairs
are taxable sales.
Violation of this regulation by the Purchaser or the Seller is a
misdemeanor. Any taxpayer who wrongfully claims the farm
machinery exemption will be assessed tax, interest and penalty
upon audit by the Department of Finance and Administration.
If you have a question or need additional information, please
contact the Sales and Use Tax Section at (501) 682-7104.
Commercial Farming Machinery & Equipment Sales Tax Exemption Certification
I, , am engaged in, or provide services for, the production of
(purchaser's name - please print) (products grown or raised)
as a commercial farming business. The farm machinery and equipment I am purchasing will be used
exclusively and directly in the agricultural production of food and fiber to be sold in the commercial
marketplace OR used directly in the agricultural production of farm products to be fed to livestock or poultry
which will be sold in processed form at retail. I am aware that this claim for exemption will be reviewed by the
Department of Finance and Administration. I am also aware that any false representation made by me in an
attempt to purchase farm machinery and equipment free from Arkansas sales tax will result in the assessment
of tax, penalty, and interest against me and is punishable as a misdemeanor under Arkansas law.
Signature of Purchaser Date Telephone Number
Address City State Zip
*These certificates shall be kept on file by the seller for six years from the date of sale for audit purposes.
