§ 15-4-1704 - Refund of sales and use tax -- Tax credit.
15-4-1704. Refund of sales and use tax -- Tax credit.
(a) (1) The Revenue Division of the Department of Finance and Administration shall authorize a refund of sales and use taxes imposed by the state and a municipality or county if the municipality or county authorized the refund of its local tax on the purchases of the material used in the construction of a building or buildings or any addition, modernization, or improvement thereon for housing any legitimate business enterprise and machinery and equipment to be located in or in connection with such a building.
(2) A refund shall not be authorized for routine operating expenditures.
(3) (A) (i) A refund shall not be authorized for the purchase of replacements of items previously purchased as part of a project under this subchapter unless the items previously purchased will not enable the project to function as originally intended.
(ii) In order to qualify for a refund under this subchapter, the replacement of an item previously purchased must be necessary for the implementation or completion of the project.
(B) However, a program participant may make changes in a project by amendment to the project plan filed with the Arkansas Economic Development Council.
(4) (A) All claims for sales and use tax refunds under this subchapter shall be filed with the Revenue Division within three (3) years from the date of the qualified purchase or purchases.
(B) Claims filed after three (3) years from the date of the qualified purchase or purchases shall be disallowed.
(5) (A) The time limitation in this section for filing claims shall be tolled if:
(i) A program participant fails to pay sales or use tax on an item that was taxable; and
(ii) The applicable tax is subsequently assessed as a result of an audit by the Revenue Division.
(B) All claims for sales and use tax refunds relating to an audited purchase shall be filed with the Revenue Division within one (1) year after payment of the assessed tax or the date of a final administrative or judicial order, whichever is later.
(6) A program participant that files a claim for a sales or use tax refund relating to an audited purchase shall be entitled to a refund of interest paid on the amount of tax assessed on the audited purchase if a refund is approved for the purchase.
(b) A sales and use tax refund as provided for in subsection (a) of this section shall be authorized, provided that the business is classified as one (1) of the following types of businesses:
(1) Manufacturers classified in Standard Industrial Classification codes 20-39, including semiconductor and microelectronic manufacturers, that create one (1) or more net new full-time permanent jobs;
(2) (A) Computer businesses primarily engaged in:
(i) Providing computer programming services;
(ii) The design and development of prepackaged software;
(iii) Businesses engaged in digital content production and digital preservation;
(iv) Computer processing and data preparation services;
(v) Information retrieval services; and
(vi) Computer and data processing consultants and developers.
(B) All businesses in this group must:
(i) Create five (5) or more net new full-time permanent jobs after July 1, 2001;
(ii) Derive at least seventy-five percent (75%) of their revenue from out-of-state sales; and
(iii) Have no retail sales to the general public;
(3) Businesses primarily engaged in commercial physical and biological research as classified by Standard Industrial Classification code 8731 that create one (1) or more net new full-time permanent jobs;
(4) (A) Businesses primarily engaged in motion picture production that will create twenty-five (25) or more net new full-time permanent jobs.
(B) All businesses in this group must derive at least sixty percent (60%) of their revenue from out-of-state sales and have no retail sales to the general public;
(5) A distribution center with no retail sales to the general public, unless seventy-five percent (75%) of the sales revenues are from out-of-state customers, that creates twenty-five (25) or more net new full-time permanent jobs;
(6) An office sector business with no retail sales to the general public that creates twenty-five (25) or more net new full-time permanent jobs;
(7) A corporate or regional headquarters with no retail sales to the general public that creates twenty-five (25) or more net new full-time permanent jobs;
(8) A trucking/distribution terminal as classified by Standard Industrial Classification code 4231 with no retail sales to the general public that creates twenty-five (25) or more net new full-time permanent jobs; and
(9) A coal mining operation that employs twenty-five (25) or more net full-time permanent persons.
(c) The business shall file an endorsement resolution with the Arkansas Economic Development Council and the Department of Finance and Administration. The endorsement resolution must be approved by the governing body of a municipality or county in whose jurisdiction the facility is located and must:
(1) Approve the specific entity's participation in the program; and
(2) Specifically state whether the municipality or county authorizes the Department of Finance and Administration to refund local sales and use taxes to the entity under the program. A municipality or county can authorize the refund of all or part of a tax levied by it but cannot authorize the refund of any tax not levied by it.
(d) In the event it is found that any business receiving the benefits contained in subsection (a) of this section has failed to comply with the conditions contained in subsections (b) and (c) of this section, that business will be liable for the payment of all sales and use taxes which were refunded under subsection (a) of this section.
(e) If the business does not continuously and throughout the project term meet the requirements of subdivisions (b)(1)-(8) of this section, then that business will automatically be disqualified from receiving any benefits under this section and will be required to repay any tax benefits already received under this subchapter, plus penalty and interest, as allowed by law.
(f) (1) In the event that a business fails to notify the Department of Finance and Administration that the number of employees has fallen below the required number to continue to receive benefits under this subchapter, that business will be liable for the repayment of all benefits which were paid to the business after it no longer qualified for the benefits.
(2) Interest shall also be due at the rate of ten percent (10%) per annum.
(g) (1) The requisite number of net new full-time permanent employees must be employed by the business within twenty-four (24) months following the date the financial incentive plan was signed.
(2) In the event that the requisite number of net new full-time permanent employees cannot be employed within the twenty-four-month period, the business can file a written application with the commission explaining why additional time is necessary. The business can be afforded up to twenty-four (24) more months to hire the requisite number of employees if the Director of the Arkansas Economic Development Council and the Chief Fiscal Officer of the State determine that the need for additional time is due to:
(A) Unanticipated and unavoidable delay in the construction of a facility that must be completed before the employees can be hired;
(B) The project as originally planned will require more than twenty-four (24) months to complete; or
(C) A change in the business ownership or business structure due to a merger or acquisition.
(h) (1) The Revenue Division of the Department of Finance and Administration shall authorize an income tax credit equal to one hundred (100) times the average hourly wage paid, with a maximum of three thousand dollars ($3,000) per net new full-time permanent employee hired within sixty (60) months following the date of the approved financial incentive plan of a business qualifying under subsection (b) of this section.
(2) (A) This tax credit may be used for the taxable year in which the net new full-time permanent employee was hired.
(B) However, with respect to projects approved prior to March 25, 1997, if the entire credit cannot be used in the year earned, the remainder may be applied against the income tax for the succeeding four (4) years or until the credit is entirely used, whichever occurs first. For projects approved on or after March 25, 1997, the credit may be applied against income tax for the succeeding nine (9) years or until the credit is entirely used, whichever occurs first.
(3) The multiplier allowed under this section shall be four hundred (400) multiplied by the average hourly wage paid with a maximum credit of six thousand dollars ($6,000) if the business is located in a high-unemployment county.
(i) (1) An income tax credit as provided for in subsection (c) of this section shall be authorized, provided that:
(A) The request for such a credit is accompanied by an endorsement resolution approved by the governing body of the appropriate municipality or county in whose jurisdiction the establishment is to be located; and
(B) All of the net new full-time permanent employees are employed at the facility.
(2) (A) In the event it is found that any business receiving the benefits contained in subsection (h) of this section has failed to comply with the conditions contained in this section, that business shall be disqualified from receiving any further benefits under the program and shall be liable for the payment of such additional income taxes as may be due after the income tax credits provided for in subsection (h) of this section are disallowed.
(B) Interest shall also be due at the rate of ten percent (10%) per annum.
(j) To be counted as a net new full-time permanent employee for the purpose of qualifying for the tax credits and incentives provided in this section, the employee in the position or job must have been an Arkansas taxpayer during the year in which the tax credits or incentives were earned.