Commercial Farming Sales Tax Exemption

Arkansas Code Ann. §26-52-403 provides an exemption from            farming even while at the commercial farm (such as pleasure 
sales tax for new and used farm machinery and equipment.            riding,  household  activities,  residential  yard  work, 
“Farm machinery and equipment  is”defined as agricultural           gardening, hunting, fishing);
implements used exclusively and directly for the agricultural      a machine purchased by a commercial farmer who also uses 
production  of  food  or  fiber  as  a  commercial  business.       the machine to produce food or fiber primarily for his own 
Sometimes, purchasers improperly claim the exemption and            consumption;
fail to take into consideration that the exemption only applies to attachments to and accessories not essential to the operation 
those  purchasers  that  are  engaged  in  the  business  of        of the implement itself (except when sold as part of an 
commercial farming.                                                 assembled unit); or
                                                                   repair labor and repair parts.
The most commonly misused exemption is for All Terrain 
Vehicles (ATVs).                                                   To purchase the machinery exempt from sales tax the purchaser 
                                                                   must certify in writing that he is engaged in the business of 
For the purchase to be tax-exempt, the taxpayer must certify       commercial  farming  and  that  the  farm  machinery  and 
the machinery will be –                                            equipment will be used only in commercial farming. The seller 
1. used exclusively in the agricultural production of food or      then  must  certify  to  the  Department  of  Finance  and 
fiber as a retail business, AND;                                   Administration that the contract price of the item(s) has been 
2. used directly in the actual agricultural production of food     reduced  to  grant  the  full  benefit  of  the  exemption.  Any 
or fiber to be sold in processed form or at retail, OR used        accessories not pre-assembled by the manufacturer are taxable, 
directly in the agricultural production of farm products to be     even if purchased at the same time. Subsequent parts or repairs 
fed to livestock or poultry which is to be sold ultimately in      are taxable sales.
processed form at retail. If the purchaser is not selling farm 
products  produced  in  the  course  of  an  ongoing  farming      Violation of this regulation by the Purchaser or the Seller is a 
business, the purchaser is not entitled to this exemption.         misdemeanor. Any taxpayer who wrongfully claims the farm 
                                                                   machinery exemption will be assessed tax, interest and penalty 
Examples of Non-Exempt items would include –                       upon audit by the Department of Finance and Administration.
a machine owned by a commercial farmer but also used at a 
   location other than the farming property (such as duck club     If you have a question or need additional information, please 
   or deer camp);                                                  contact the Sales and Use Tax Section at (501) 682-7104.
a machine owned by a commercial farmer but also used for 
   any purpose at any time for activities other than commercial 

        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.

                                                                                                                  Form ST-403
                                                                                                                  R 02/2007