1. (a) Contractors are defined to be consumers of:

   1. (1) All tangible personal property used or consumed in the performance of a contract in this state; and
   2. (2) All tangible personal property stored for use or upon which the contractor may exercise any right or power in this state.

2. (b)

   1. (1) All tangible personal property that is procured from outside this state for use, storage, consumption, or distribution including machinery, equipment, repair or replacement parts, materials, and supplies used, stored, or consumed by a contractor in the performance of a contract in this state shall be subject to compensating use tax on the purchase price or its market or book value (whichever is greater) unless such property has been subjected to prior use before coming to rest for use, storage, or consumption within this state.
   2. (2) Such tax shall be due and payable regardless of whether or not any right, title, or interest in the tangible personal property becomes vested in the contractor.
3. (c) In the case of leases or rentals of tangible personal property by a contractor for use, storage, consumption, or distribution in this state, the contractor shall report and remit compensating use tax on the basis of rental or lease payments made to the lessor of such tangible personal property during the term of the lease or rental.

4. (d)

   1. (1) The provisions shall not apply with respect to the use, consumption, storage, or distribution of tangible personal property or taxable services upon which a like tax equal to or greater than the amount imposed by the Arkansas Compensating Tax Act of 1949, Arkansas Code § 26-53-101 et seq., has been paid in another state, the proof of payment of such tax to be according to rules made by the Commissioner of Revenue.
   2. (2) If the amount of tax paid in another state is not at least equal to or greater than the amount of the Arkansas compensating use tax, then the contractor shall pay to the commissioner an amount sufficient to make the tax paid in the other state and this state equal to the total amount of tax due under Arkansas law.
   3. (3) No credit shall be given under this section for taxes paid on such property in another state if that state does not grant credit for taxes paid on similar tangible personal property in this state.

5. (e) Rebates.

   1. (1)

      1. (A) A contractor that purchases tangible personal property that becomes a recognizable part of a completed structure or improvement to real property and that is purchased for use or consumption in the performance of a construction contract shall be entitled to a rebate on any additional sales or compensating use tax levied by this state or any city or county if certain requirements are met.
      2. (B) See Arkansas Code § 26-53-138 and 26 CAR § 30-1004.

   2. (2)

      1. (A) As of January 1, 2008, local caps on single transactions no longer apply.
      2. (B) Contractors may be eligible for a rebate or refund of the additional local tax paid on qualifying purchases on invoices exceeding two thousand five hundred dollars ($2,500).
      3. (C) Contractors should pay the full tax on the purchase of materials and follow the rebate procedures provided in Arkansas Code § 26-52-523 and 26 CAR § 30-1225.

6. (f) Withdrawal from stock.

   1. (1) An out-of-state contractor that withdrawals an item from stock for use in a construction contract in Arkansas is responsible for any applicable Arkansas state and local use tax.
   2. (2) The applicable local use tax for the withdrawal from stock is determined by the location of the job site.
   3. (3) The out-of-state contractor will be given credit for tax paid on the item in another state pursuant to Arkansas Code § 26-53-131.

Codification Notes: This section as promulgated prior to codification into the Code of Arkansas Rules contained a footnote as follows: "Source: Ark. Code Ann. §§ 26-53-138; 26-53-203"