Opinion No. ( 1986 )

The Honorable Ralph (Buddy) Blair Representative, District 28 5220 Highland Drive Fort Smith, Arkansas 72930

Dear Representative Blair:

This is in response to your request for an opinion concerning the following question:

Does the sales tax exemption set forth in Ark. Stat. Ann. 84-1904(r)(2)(D) apply to municipal expenditures for machinery and equipment used to treat the wastewater of manufacturing and processing facilities to prevent water pollution and contamination?

Ark. Stat. Ann. 84-1904(r)(2)(D) provides for an exemption in connection with the "gross receipts or gross proceeds derived from the sale of tangible personal property consisting of machinery and equipment required by State law or regulations to be installed and utilized by manufacturing and processing plants or facilities in this State to prevent or reduce air and/or water pollution or contamination which might otherwise result from the operation of such plant or facility." (Emphasis added.)

The answer to your question requires an initial determination as to whether the City of Fort Smith is engaged in the utilization of manufacturing and processing plants to prevent or reduce air or water pollution. It would appear that the statute would require both manufacturing and processing as two combined activities as conditions precedent to entitlement to the exemption. The treatment of wastewater would not appear to be included in any recognized definition of the term "manufacturing". Therefore, the City of Fort Smith would not be entitled to the exemption since it is not engaged in activities constituting manufacturing and processing.

The foregoing opinion, which I hereby approve, was prepared by Special Assistant Attorney General George A. Harper.