DALLAS, Sept. 2, 2016 /PRNewswire/ -- The Arkansas Department of Finance and Administration ("Department") issued a ruling on the application of the Arkansas agricultural exemption to a taxpayer's purchase of an aircraft. The taxpayer in question operated an agricultural flying service and purchased a used aircraft outside the state and brought it into Arkansas to use in the business. The Department conducted an audit and determined that because airplanes are specifically excluded from the definition of farm equipment and machinery, the purchase was subject to use tax and consequently assessed use tax and interest.
The taxpayer appealed, arguing that the purchase should qualify for the agricultural exemption under GR-51(B)(1)(a). This regulation defines "farm equipment and machinery" as agricultural implements used exclusively and directly for the agricultural production of food or fiber as a commercial business or the agricultural production of grass sod or nursery products as a commercial business. Although it does exclude airplanes, it specifically includes "sprayer" and "spreaders." The taxpayer contended that because the airplane was used solely in crop-dusting, it should be considered a "sprayer" or "spreader" and did not fit the meaning of "airplane" as used in applicable Arkansas statutory laws and rules.
The Appellate Court ultimately upheld the Department's assessment, finding that although the taxpayer provided evidence showing the aircraft had no function other than the application of seeds, fertilizers, and chemicals, it did fit the plain and ordinary meaning of the word airplane and, therefore, was excluded from the exemption.
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