Opinion No.

The Honorable Mike Creekmore State Representative 1837 Scotch Pine Lane Hensley, Arkansas 72065-9024

Dear Representative Creekmore:

I am writing in response to your request for an opinion on a question regarding the state sales tax or "gross receipts tax" law. Specifically, you ask whether the "enforcement of a sales tax on labor only work [is] going to have a devastating impact on contractors." (Emphasis original). You have enclosed several regulations promulgated by the Department of Finance and Administration with your request. You describe the following facts:

Labor only maintenance service inside a manufacturing facility consisting or the following scope of work: to wit i.e.:

A contractor has a maintenance contract to supply experienced personnel to:

Grease and oil equipment Replace broken or defective parts on production equipment Set timers Adjust speeds Change belts and hoses Make minor electrical correction Replace or repair bearings and bushings And other similar and related work

All parts, materials and supplies are purchased by the owner and all sales tax paid with the purchase. The contractor's personnel are actually hourly people working in conjunction with the owner's production personnel and work in the plant fulltime and are not callout technicians. But is there a sales tax on labor only contractors?

RESPONSE

To the extent your request seeks my advisory opinion on the application of state sales tax law to a particular business, I should note that the Department of Finance and Administration, Revenue Division, is the appropriate authority to issue letter opinions on such questions. See Gross Receipts Tax Regulations GR-75 (authorizing the Revenue Division is issue letter opinions on the applicability of the gross receipts tax to particular transactions) and -76 ("No opinion, whether formal or informal, issued by any other agency can be binding on the Department of Finance and Administration, Revenue Division."). I therefore suggest that you submit your questions to that agency.

The question of whether enforcement of such a sales tax, if applicable, on labor-only work will have a "devastating impact on contractors," is one properly addressed to the legislative branch, rather than to this office.

Deputy Attorney General Elana C. Wills prepared the foregoing opinion, which I hereby approve.

Sincerely,

MIKE BEEBE Attorney General

MB:ECW/cyh