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Committee hears SB 26 to exempt coal used in manufacturing from sales tax to match gas and electricity
Summary
Senators heard SB 26, sponsored by Sen. James Sturtch, to add coal to sales tax exemptions for energy used directly in manufacturing. A company witness said the change would improve competitiveness; DFA estimated state sales tax losses of $537,000 (8 months) and $826,000 (12 months). No vote was taken.
Senate Revenue & Tax Committee — The panel considered Senate Bill 26, a proposal to add coal used directly in manufacturing to an existing sales tax exemption for energy inputs.
Senator James Sturtch introduced the bill and said it responds to requests from manufacturers in his district. He called it an effort to extend the treatment already applied to electricity and natural gas to coal so Arkansas manufacturers are not at a regional disadvantage.
A representative of FutureFuel Chemical Company identified in the transcript as Gary (later identifying as Jerry) McChesney testified the company uses coal, natural gas and electricity in manufacturing and that the exemption would improve competitiveness. McChesney said FutureFuel employs about 470 people, has annual payroll of about $32 million and estimated the company would save $200,000–$250,000 per year in sales tax on coal under SB 26. He said neighboring states such as Missouri, Tennessee, Mississippi, Louisiana, Texas and Oklahoma provide full or partial sales tax exemptions for coal used in manufacturing.
Paul Goering of the Arkansas Department of Finance and Administration presented DFA’s fiscal analysis for SB 26, reporting an FY2022 (8 months) state sales and use tax loss of $537,000 and an annualized FY2023 impact of about $826,000 in state revenue; he said DFA would verify whether local sales taxes are affected but initial review suggested local taxes may be unchanged.
Committee members asked about the bill’s scope (does it affect electricity generation, propane or other fuels) and about how many manufacturers actually use coal for manufacturing in Arkansas; sponsors said DFA’s initial research showed only a handful of Arkansas manufacturers directly use coal for manufacturing. No committee vote was taken.
Sources: Sponsor remarks by Sen. James Sturtch; testimony by FutureFuel representative (McChesney); fiscal analysis and answers by Paul Goering, Arkansas DFA.
