STATE OF ARKANSAS DEPARTMENT OF FINANCE & ADMINISTRATION OFFICE OF HEARINGS & APPEALS ADMINISTRATIVE DECISION

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1 STATE OF ARKANSAS DEPARTMENT OF FINANCE & ADMINISTRATION OFFICE OF HEARINGS & APPEALS ADMINISTRATIVE DECISION IN THE MATTER OF GROSS RECEIPTS (SALES) COMPENSATING USE TAX (ACCT. NO.: ) ASSESSMENT AND REFUND CLAIM DENIALS DOCKET NOS.: AUDIT NO. ( 1 ) PERIOD: 5/1/12 TO 4/30/ REFUND NO. ( 2 ) PERIOD: 7/1/12 TO 4/30/ REFUND NO. ( 3 ) PERIOD: 1/31/13 TO 12/31/ REFUND NO. ( 4 ) PERIOD: 7/31/12 TO 12/31/ REFUND NO. ( 5 ) PERIOD: 1/1/14 TO 4/30/15 TODD EVANS, ADMINISTRATIVE LAW JUDGE APPEARANCES This case is before the Office of Hearings and Appeals upon written protests dated July 15, and September 12, , signed by 1 This amount represents the total amount assessed, representing (tax) and (interest). This amount does not include any concessions agreed to by the Department. 2 This amount represents the amount of the tax refund that was denied. This amount does not include any concessions agreed to by the Department. 3 This amount represents the amount of the tax refund that was denied. This amount does not include any concessions agreed to by the Department. 4 This amount represents the amount of the tax refund that was denied. This amount does not include any concessions agreed to by the Department. 5 This amount represents the amount of the tax refund that was denied. This amount does not include any concessions agreed to by the Department. 6 This date was provided on the protests of the refund claim denials. 1

2 ( Taxpayer s Representative ) on behalf of, the Taxpayer. The Taxpayer protested an assessment and several refund claim denials issued by the Department of Finance and Administration ( Department ). A hearing was held in this matter on April 14, 2017, at 12:00 p.m. in Little Rock, Arkansas. The Department was represented by Michelle Baker, Attorney at Law, Office of Revenue Legal Counsel ( Department s Representative ). Also present for the Department was Jonathan Davis, Tax Auditor, and Laura Woods, Audit Supervisor. The Taxpayer s Representative appeared at the hearing and represented the Taxpayer. The record remained open after the hearing for the submission of posthearing filings. The Department filed its initial post-hearing brief on May 10, The Taxpayer filed its post-hearing brief on June 28, The Department filed its final reply brief on July 6, The record was closed and this matter was submitted for a decision on Monday, July 17, ISSUE Whether the Department s assessment and refund claim denials, after concessions, in these matters are correct under Arkansas law. Yes, in part. FACTS AND CONTENTIONS OF THE PARTIES These matters have been narrowed to four issues that remain in dispute: (1) conference bridging services, (2) purchases from and, (3) purchases from, and (4) Purchases from. 7 This date was provided on the protest of the assessment. 2

3 In her Answers to Information Request for Docket No , the Department s Representative provided a brief description of the Taxpayer business, stating as follows, in relevant part: The taxpayer is a member of the, which designs and manufactures,, and products, including These products are then sold to. The taxpayer holds a direct pay permit and it accrues, selfreports, and self-pays gross receipts and compensating use taxes due on its taxable purchases. The Department s witnesses and the Taxpayer s representative provided the following arguments or testimony during the administrative hearing for these matters. Regarding the assessment, the Department s Representative stated that the Department historically taxes switch gear and transformers as electrical devices, discussing the purchases from. Components of a building s electrical system should be limited to items like wiring inside of a wall or breakers. She asserted that switch gear is a combination of many electrical components for electrical switching and protection of the associated machinery. Specifically, she stated that switch gear includes switches, fuses, isolators, circuit breakers, relays, control panels, lightning arrestors, transformers, and other associated equipment. 8 When discussing the purchases, she also argued that supplies for the fork lifts (oil and filters) are not directly used, lack continuing utility, and do not modify, repair, or replace 8 To support this statement, the Department s Representative provided a copy of information from Somethingelectrical.com. See Department s Hearing Exhibit 1. 3

4 components of the forklift. While the statute does not expressly require complexity and continuing utility, she asserted that the Arkansas Supreme Court interprets manufacturing machinery and equipment to require those elements. Consequently, she proposed that those requirements should apply to Ark. Code Ann (Supp. 2015) 9 as well. Regarding the refund claims, the Department s Representative stated that the Invoices were denied because those items did not represent purchases of replacement batteries. Based on the Auditor s explanation, she stated that those purchases represented purchases of additional new batteries. The Department s Representative argued that (construing the tax rebate in limitation of its application) the tax rebate should be denied because a repair or replacement was not implicated. She further stated that the Department assumes that these batteries are regularly cycled into use after charging due to their expense and it seemed unlikely that the batteries are just sitting on a shelf in storage. The Department s Representative conceded that tax was accrued and paid on tax amounts that were billed and paid to vendors for conference bridging services. 10 She argued, however, that conference bridging services are ancillary services and taxable under Ark. Code Ann (Repl. 2014). Taxes were also paid to other states on conference bridging services but she asserted that most of those payments were improper. Consequently, she argued that the Taxpayer should go to those jurisdictions for a refund. The Department s Representative explained that, under court precedent, that the Taxpayer bore the burden of proving that 9 This code section will also be referred to as the tax rebate for purposes of this decision. 10 The Department conceded that this portion of the assessment would be removed. 4

5 the taxes were legally required to be paid in those states to qualify for the tax credit. 11 Since the alleged out of state transactions originated in Arkansas (where the owners of the call primarily worked), those transactions would be taxable in Arkansas. She also asserted that the Taxpayer would have to go to vendors for a refund of any taxes that it thought were improperly paid to both the vendor and by accrual. Regarding the assessment, the Taxpayer s Representative 12 conceded any rags or grease cartridges purchased from were not exempt for purposes of this proceeding. He explained that the services contained in the and invoices were performed after the plant suffered a power failure. During that time, a employee determined that the switchgear and transformer needed to be replaced. The switchgear and transformer were described as part of the electrical power system for the building. He explained electrical power flows from the outside power source, to the switch gear, and on to the transformers before reaching the machine after power buses. 13 He explained that a switch gear s function is similar to that of a circuit breaker in a home: automatically turning off the power in case of a short or fault in the power supply. A transformer adjusts the voltage of the incoming power supply. Individual machines may have their own transformers but he was not addressing taxation of transformers that are installed after the buses for a specific machine. Under GR-21, he noted that services to breakers, wiring, electrical switches, and 11 See Allied Steel Co. v. Larey, 246 Ark. 1009, 440 S.W.2d 567 (1969). 12 The Taxpayer s Representative was sworn in at the beginning of this proceeding. 13 A simple diagram of the power supply system form (the Controller) was provided before the hearing by dated March 7, Additionally, photos of the switch gear and transformer were also provided at that time. 5

6 receptacles are not taxable. 14 He asserted that other field audit offices have allowed switch gears or transformers to be exempt; however, this statement was not verified. The Taxpayer s Representative conceded that switch gear is formed from many different components but argued that it functions similar to a breaker and should be treated as an exempt breaker. While a transformer contains dials and gauges, he described the switchgear as essentially a big box and not adjustable. He acknowledged that a switch gear can be more complicated than the one at issue. He also stated that, when the Taxpayer sells its facilities, the switchgear and transformers are sold with the property. 15 He also cited an administrative decision (Docket No. ) 16 that he summarized as holding that a transformer is part of a buildings electrical system and not a part of a machine. Regarding the tax rebate, the Taxpayer s Representative argued that the tax rebate applies to all components used to modify, repair, or replace components of the forklift in whole or in part. He also stated that nothing in Ark. Code Ann (Supp. 2015) requires complexity or continuing utility of the replaced parts. He stated that Deanna Munds-Smith (Manager of Audit Coordination) agreed with him that forklift oil and filters should qualify for the 14 He further noted that Ark. Code Ann provides that services to (including but not limited to) intercoms, sprinklers, fire systems, fire and security alarms, and other items incorporated into real estate are not taxable. Consequently, he argued that GR-21 does not preclude electrical devices from being exempt. He also noted that only electrical appliances are listed under GR He provided an from the accounting manager in support of this statement. See Taxpayer s Hearing Exhibit No That decision addressed whether a transformer (purchased with a new lathe) should be analyzed as a component part of that lathe and determined that it should not. Here, the issue is whether a transformer should be considered an electrical device for purposes of determining whether services to it are taxable. This issue was not addressed by that decision. Consequently, that decision is not on point to this issue. 6

7 tax rebate. 17 He also argued that a reasonable person would conclude that the replacement of original equipment on the fork lifts (such as oil and filters) should qualify for the exemption. He then discussed the servicing of batteries, which he said should include changing the water and checking the elements. He noted that Ark. Code Ann (Supp. 2015) includes services related to the repair or alteration of machinery. Regarding the refund claims, the Taxpayer s Representative acknowledged that he could not prove that the Invoices represented direct replacement of bad batteries. He asserted, however, that the Taxpayer regularly maintains a supply of batteries that are constantly rotated in and out of the fork lifts for recharging, which are directly used in the manufacturing process. The Taxpayer s Representative further testified that, initially, he did not know what conference bridging services were and, after noticing that such services were excluded from the definition of telecommunication services under the rule, he filed a refund claim on these transactions. He argued that the regulations were vague and misleading with regards to taxation of ancillary services. He agreed that, based on the statute and intent of the law, ancillary services are taxable. He stated that he does not want a refund for taxes paid on conference bridging services directly to the vendor. He only desired a refund for taxes paid directly to the Department on conference bridging services under the Taxpayer s direct pay permit. The Taxpayer s Representative conceded that he had no proof that taxes were properly paid to other states on conference bridging services. 17 An affidavit from Ms. Munds-Smith was provided by the Department in post hearing filings and contradicted this assertion. 7

8 Regarding the assessment, the Tax Auditor testified that that he performed the assessment of the Taxpayer (Audit No. ). During that audit, several purchases from (a vendor that provides repair parts and other parts for plant forklifts) were assessed. He conceded that all the fork lifts at issue are used in the manufacturing process and are exempt from sale tax as directly used manufacturing machinery and equipment. He explained that the Taxpayer claimed a tax rebate on some of the insubstantial replacement parts purchased from this vendor. The Department allowed the tax rebate on true repair parts (items replacing broken parts) but did not allow items that were consumables (i.e. air filters, oil filters, and oil). He was not able to determine if any of the filters or oil qualified as manufacturing machinery or equipment. Addressing the invoice, the Tax Auditor testified that this transaction involved the servicing of a transformer and switch gear, where a single lump-sum amount was charged. This transaction was treated as a taxable service to an electrical appliance or device. Additionally, he asserted that switchgear and transformers are not components to real estate but merely sit on the floor. Consequently, he concluded that the services to the switchgear and transformers were not contractor services. Regarding the refund claims, the Tax Auditor testified that the invoice involved services to switchgear as well, is similar to the Invoice, and the facts and the Department s argument are the same regarding that transaction. The were denied the tax rebate requested by the Taxpayer because those transactions involved purchases of new, nonreplacement batteries utilized on the manufacturing fork lifts. Those items are 8

9 additional batteries that were added to the battery fleet and did not replace other existing batteries. If a battery was purchased to replace a bad battery, he allowed those purchases to qualify for the tax rebate but not additional batteries purchased to rotate in and out of production. The additional batteries are also used on the fork lifts and he assumes that the batteries are regularly cycled into use while other drained batteries are charged. He explained that it would be illogical for the Taxpayer to store and not use a battery. Regarding the assessment, the Audit Supervisor testified that consumable supplies do not qualify for the tax rebate because they did not qualify as manufacturing machinery or equipment. She further stated that the transformers at issue adjust the power for the machinery from the building s electrical power system and are not part of the building electrical system. Additionally, she asserted that switch gear is more complicated than and not similar to a standard electrical switch or breaker. After a general discussion of the burdens of proof in tax proceedings, each type of contested transactions shall be addressed with a legal analysis and associated conclusions. follows: CONCLUSIONS OF LAW I. Burdens of Proof Ark. Code Ann (c) (Supp. 2015) provides, in pertinent part, as The burden of proof applied to matters of fact and evidence, whether placed on the taxpayer or the state in controversies regarding the application of a state tax law shall be by preponderance of the evidence. 9

10 A preponderance of the evidence means the greater weight of the evidence. Chandler v. Baker, 16 Ark. App. 253, 700 S.W.2d 378 (1985). In Edmisten v. Bull Shoals Landing, 2014 Ark. 89, at 12-13, 432 S.W.3d 25, 33, the Arkansas Supreme Court explained: A preponderance of the evidence is not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other. The Department bears the burden of proving that the tax law applies to an item or service sought to be taxed, and a taxpayer bears the burden of proving entitlement to a tax exemption, deduction, or credit. Ark. Code Ann (d) (Supp. 2015). Statutes imposing a tax or providing a tax exemption, deduction, or credit must be reasonably and strictly construed in limitation of their application, giving the words their plain and ordinary meaning. Ark. Code Ann (a), (b), and (e) (Supp. 2015). If a well-founded doubt exists with respect to the application of a statute imposing a tax or providing a tax exemption, deduction, or credit, the doubt must be resolved against the application of the tax, exemption, deduction, or credit. Ark. Code Ann (f)(2) (Supp. 2015). Ark. Code Ann (Repl. 2012) provides for a refund of any state tax erroneously paid in excess of the taxes lawfully due. The Taxpayer bears the burden of proving by a preponderance of the evidence that the claimed refund was erroneously paid and in excess of the taxes lawfully due. II. Assessment A. Transaction Types 10

11 1. Conference Bridging Services The taxation of these transactions turns on whether conference bridging services are taxable. Ark. Code Ann (a) (Repl. 2014) provides that sales of the following services are subject to Arkansas Sales Tax: (1) Any intrastate, interstate, and international telecommunications service that is sourced in this state in accordance with subsection (d) of this section; (2) Any ancillary service; and (3) Any installation, maintenance, or repair service of telecommunication equipment. An ancillary service is defined as a service that is associated with or incidental to the provision of a telecommunications service, including without limitation detailed telecommunications billing, directory assistance, vertical service, and voice mail services.... Id. at (e)(2). A vertical service is defined as an ancillary service that is offered in connection with one (1) or more telecommunications services, which offers advanced calling features that allow customers to identify callers and to manage multiple calls and call connections, including conference bridging services.... Arkansas Gross Receipts Tax Rule GR-7(A)(10). The Taxpayer s Representative argued that Arkansas Gross Receipts Tax Rule GR-7 states that conference bridging services are considered ancillary services and excluded from definition of telecommunication services under Arkansas Gross Receipts Tax Rule GR-7(A)(8)(b)(8). Since conference bridging services are not telecommunications services, he initially argued that conference bridging services were not taxable. 18 The Department s Representatives argued 18 The Taxpayer s Representative later conceded that conference bridging services were taxable as ancillary services under Ark. Code Ann (a) (Repl. 2014). 11

12 that conference bridging services are taxable as ancillary services under Ark. Code Ann (a) (Repl. 2014). Here, the Department has proven that conference bridging services are taxable as ancillary services under Ark. Code Ann (a). Consequently, the denial of the refund with respect to these transactions is sustained. 19 The Department s Representative also asserted that the Taxpayer could not receive a refund for taxes improperly paid to vendors on the same transactions accrued upon under the Taxpayer s Direct Pay Permit, citing County Circuit Court. The Taxpayer s Representative, however, stated during the administrative hearing that the Taxpayer was only requesting a refund for taxes remitted under its direct pay permit and not taxes remitted directly to the vendor. While the Department s argument is well taken, the issue of whether the Taxpayer could claim a refund for taxes paid to its vendors without claiming those refund from its vendors will not be analyzed in this decision because it is not at issue in this proceeding. Additionally, the Department correctly noted that a Taxpayer must demonstrate that taxes were properly paid to another state to receive credit for those tax payments. See Allied Steel Co. v. Larey, 246 Ark. 1009, 440 S.W.2d 567 (1969). Since the Taxpayer has not provided that proof, the credit for tax payments to other states was properly denied. 19 The Department conceded that the Taxpayer was entitled to a refund on any tax amounts accrued and remitted to the Department under its direct pay permit on taxes paid to vendors (i.e. tax on tax). Since that amount is conceded by the Department, it will not be addressed in this decision. 12

13 2. Purchases from and The taxation of these transactions turns on whether switch gear and transformers constitute electrical devices. Arkansas sales tax generally applies to sales tangible personal property and certain specifically enumerated services. Ark. Code Ann (Repl. 2014). The alteration, cleaning, and repair of electrical appliances and devices are specifically enumerated taxable services. Ark. Code Ann (Repl. 2014). Breakers, breaker boxes, electrical switches, light fixtures, fire and security alarms, and wiring are listed as examples of passive, nonmechanical components of real estate. Id. at (3)(B)(viii)(a). The Taxpayer s Representative argued that switch gear and transformers are analogous to breakers, breaker boxes, and electrical switches and should not be taxable. Department s Representative argued that switch gear and transformers are electrical appliances and devices and, thus, the installation, repair, and replacement of these items is specifically taxable under Ark. Code Ann (3)(B)(i)(g) (Repl.2014). Here, the Taxpayer s Representative has explained that the transformers may be adjusted by dials. Additionally, the Taxpayer s Representative conceded that switch gear is formed from many separate components (i.e. switches, fuses, isolators, circuit breakers, relays, control panels, lightning arrestors, transformers, and other associated equipment). The record shows that both switch gear and transformers are significantly more complicated than a passive breaker or light switch and, thus, are not analogous to those items. The switch gear and transformers are properly characterized as electrical appliances or 13

14 devices and taxable. Since electrical devices are expressly listed as taxable and the switch gear and transformers are not excluded under (3)(B)(viii)(a), these transactions are taxable and the assessment of these transactions is sustained. 3. Purchases from This category involves the purchase of rotatable batteries for forklifts and the servicing of those batteries. Initially, Arkansas Gross Receipts (sales) Tax generally applies to all sales of tangible personal property within the State of Arkansas. Ark. Code Ann (Repl. 2014). Arkansas Compensating (use) Tax generally applies to the storage, use, distribution, or consumption of tangible personal property within the state of tangible personal property that purchased outside the state. Ark. Code Ann (Repl. 2014). The purchases at issue are tangible personal property and, thus, are generally taxable unless the Taxpayer can demonstrate entitlement to an exemption or credit by a preponderance of the evidence. part: Ark. Code Ann (Supp. 2015) 20 provides as follows, in relevant (a) The taxes levied under and on the gross receipts or gross proceeds from the sale of the following are subject to a refund as provided in this section: (1) Machinery and equipment purchased to modify, replace, or repair, either in whole or in part, existing machinery or equipment used directly in producing, manufacturing, fabricating, assembling, processing, finishing, or packaging articles of commerce at a manufacturing or processing plant or facility in this state; and (2) Service relating to the initial installation, alteration, addition, cleaning, refinishing, replacement, or repair of machinery or equipment described in subdivision (a)(1) of this section. 20 An identical provision is contained in the Arkansas Compensating (use) Tax section as well; however, this decision shall only discuss the Arkansas Gross Receipts (sales) Tax provision for the sake of simplicity. This analysis will apply equally to the Use Tax provision. 14

15 (b) (1) Beginning July 1, 2014, the taxes levied under and that are subject to a refund under this section are the taxes in excess of four and seven-eighths percent (4.875%).... (d) As used in this section: (1) Manufacturing or processing means the same as defined under (b) and includes activities described in subsection (a) of this section, both independently and collectively; and (2) Used directly means the same as defined under (c). (e) All existing excise tax exemptions, including without limitation exemptions under and , remain in full force and effect and are not limited by this section. (f) A taxpayer may claim the benefit of the tax refund under this section only by using one (1) of the following methods: (1)(A) Both: (i) Obtaining a direct pay or a limited direct pay sales and use tax permit from the Department of Finance and Administration; and (ii) Self-refunding: 21 (a) At the time the taxpayer files his or her original sales and use tax report; or (b) By later filing an amended sales or use tax report with the department. (B) The statutes of limitation stated in apply to claims made under this subdivision (f)(1). (C) Interest shall not accrue or be paid on a refund claimed under this subdivision (f)(1);.... The Department argues that the provision above only contemplates one-on-one replacements of machinery and equipment and should not be applicable to rotatable batteries that are always either charging or operating the forklifts. 21 The Department s Representative initially argued that a taxpayer could not obtain the benefit of this subsection through a formal refund claim but had to file amended returns. The Department s Representative later withdrew this objection only for the purpose of analyzing the assessment and refund claims at issue in this proceeding after it was discovered that the audit staff had allowed this tax rebate in Audit No. (the associated assessment) on assessed transactions against this Taxpayer. The Department s Representative, however, asserted that, going forward, the Taxpayer would not be allowed to claim this tax rebate without claiming the rebate in original sales and use tax reports or by filing amended returns, now that the Taxpayer is notified of this requirement. This issue was further clarified by Act 465 of the 2017 Arkansas General Assembly. 15

16 Here, the governing statute states that it applies to [m]achinery and equipment purchased to modify, replace, or repair, either in whole or in part,... that is directly used in the manufacturing process. This Office has previously held that batteries that are in constant rotation (charging and being utilized before recharging) on forklifts that operate in the manufacturing process can qualify as directly used manufacturing machinery and equipment so long as the other exemption requirements are met. Further, Ark. Code Ann (c)(2)(B)(v) (Supp. 2015) specifically states that equipment utilized to produce steam, electricity, or chemical catalysts and solutions that are essential to the manufacturing process... are directly used in the manufacturing process. While the replacement of a battery would not represent a substantial replacement of the fork lifts for purposes of Ark. Code Ann (Supp. 2015), Ark. Code Ann (Supp. 2015) even applies to partial replacement equipment that modify, replace, or repair existing manufacturing machinery. Here, the testimony proves that the batteries at issue replace existing, depleted batteries that are utilized to power forklifts operating in the manufacturing process. The depleted batteries are then recharged and eventually returned to the forklifts in a constant rotation. Though the Department has argued that Ark. Code Ann (Supp. 2015) should be limited to oneon-one replacements and not include bulk purchases of replacement parts, that limitation is not contained in the statutory section. Consequently, the Taxpayer has proven entitlement to the reduced tax rate under Ark. Code Ann (Supp. 2015) on the battery purchase transactions based on the arguments and facts presented in this matter. The Department incorrectly denied the Taxpayer s 16

17 refund claim regarding the battery purchases. Please note the comments in Footnote 21. Regarding the servicing of the batteries, at the administrative hearing, the Taxpayer s Representative assumed that the batteries terminals were cleaned and the water was checked during this transaction but the invoice does not provide any detail on the services performed. No testimony by someone with direct knowledge of the services performed was provided. Mere inspection during maintenance (standing alone) would not be a qualifying service under the tax rebate. Since it is uncertain whether this transaction actually involved the alteration, addition, cleaning, refinishing, replacement, or repair of the batteries, the Department correctly denied the reduced tax rate under Ark. Code Ann (Supp. 2015) for this transaction, and the Department correctly denied the Taxpayer s refund claim with respect to this transaction. 4. Purchases from This category involves whether oil changes and filter replacements during regular maintenance of the fork lifts qualifies for the reduced tax rate under Ark. Code Ann (Supp. 2015). The Department argued that the Taxpayer must demonstrate that any oil or air filters qualify as directly used manufacturing machinery and equipment, including a demonstration that any items possess continuing utility and complexity. The Taxpayer s Representative argued that complexity and continuing utility was not required under the relevant code section and did not provide evidence regarding these considerations. Ark. Code Ann (Supp. 2015) provides that the reduced tax rate only applies to replacement or repair parts for and services performed to 17

18 directly used manufacturing machinery and equipment. While the relevant code section does not explicitly require complexity and continuing utility, manufacturing machinery and equipment are terms of art under the Arkansas sales and use taxes and have been defined by the Arkansas Supreme Court for purposes of Arkansas sales tax. In Weiss v. The Bryce Co., LLC, 2009 Ark. 412, 330 S.W.3d 756, the Arkansas Supreme Court held that items of tangible personal property must meet certain requirements to be manufacturing machinery and equipment, specifically the items must (1) possess some degree of complexity, (2) possess continuing utility, and (3) be directly used in the manufacturing process by causing a recognizable and measurable mechanical, chemical, electrical, or electronic action to take place as a necessary and integral part of manufacturing, the absence of which would cause the manufacturing operation to cease. Id. Here, insufficient evidence has been provided regarding the oil and filters to prove that those items qualify as directly used manufacturing machinery and equipment for purposes of Ark. Code Ann (Supp. 2015). Additionally, the Taxpayer has not shown that replacing a functioning filter or oil with a slightly cleaner filter or oil qualifies as one of the listed services when a replacement service has not been demonstrated. Consequently, at this point in the administrative process, the Taxpayer s has not proven entitlement to the reduced tax rate under Ark. Code Ann (Supp. 2015) and the full assessment of these transactions must be sustained. B. Interest 18

19 Interest must be assessed upon any tax deficiencies for the use of the State s tax dollars. See Ark. Code Ann (Repl. 2012). Consequently, the assessment of interest on the tax assessment is sustained. DECISION AND ORDER After adjustments necessitated by the above conclusions and concessions agreed to by the Department, the remainder of the assessment and refund claim denials is sustained. The file is to be returned to the appropriate section of the Department for further proceedings in accordance with this Administrative Decision and applicable law. Pursuant to Ark. Code Ann (Supp. 2015), unless the Taxpayer requests in writing within twenty (20) days of the mailing of this decision that the Commissioner of Revenues revise the decision of the Administrative Law Judge, this decision shall be effective and become the action of the agency. The revision request may be mailed to the Assistant Commissioner of Revenues, P.O. Box 1272, Rm. 2440, Little Rock, Arkansas A revision request may also be faxed to the Assistant Commissioner of Revenues at (501) or ed to revision@dfa.arkansas.gov. The Commissioner of Revenues, within twenty (20) days of the mailing of this Administrative Decision, may revise the decision regardless of whether the Taxpayer has requested a revision. The Taxpayer may seek relief from the final decision of the Administrative Law Judge or the Commissioner of Revenues on a final assessment or refund 19

20 claim denial by following the procedure set forth in Ark. Code Ann (Supp. 2015). DATED: July 18,