To claim the Arkansas farm tax exemption, you either show a Farmer Sales Tax Exemption Card at checkout or give the retailer a completed exemption form — ST-403 (Commercial Farming Sales Tax Exemption) or ST-391 (Exemption Certificate) — at the time of sale. The exemption removes the state’s 6.5% sales tax on qualifying new and used farm equipment and machinery under Arkansas Code 26-52-403. The retailer will not apply it automatically, so the paperwork has to be in their hands before you pay.
The Two Ways to Claim the Exemption
Farmer Sales Tax Exemption Card
The card is the simpler path if you buy equipment more than once in a while. You apply through the Arkansas Taxpayer Access Point (ATAP) online portal with the Department of Finance and Administration. The card shows your name, address, issue and expiration dates, and a unique card number the retailer records to document the tax-free sale. An initial card is $20 and lasts eight years. Renewal is $10.1Department of Finance and Administration. Commercial Farmer Sales Tax Exemption
At the register, you hand it over, the seller records the number, and no sales tax is charged on the qualifying items. Nothing else to fill out for each transaction.
Exemption Certificate at Point of Sale
If you don’t have a card, or it hasn’t arrived yet, complete either Form ST-403 (Commercial Farming Sales Tax Exemption) or Form ST-391 (Exemption Certificate) and give it to the retailer when you buy. This works fine for one-off purchases. For frequent buyers it gets tedious, which is why most commercial operations end up with the card.1Department of Finance and Administration. Commercial Farmer Sales Tax Exemption
Who Qualifies as a Commercial Farmer
The form is only valid if you’re actually engaged in farming as a business. The statute defines “farming” as the agricultural production of food, fiber, grass sod, or nursery products conducted as a commercial enterprise. A backyard garden or a few hobby chickens does not qualify, and the DFA can and does examine the distinction on audit.
The IRS uses its own multi-factor test to decide whether a farm is a real business or a hobby, looking at whether you run it in a businesslike manner, the time and effort you put in, whether you rely on farm income, and whether you adjust methods to improve profitability. Showing a profit in at least three of the last five tax years creates a presumption that the operation is a business.2Internal Revenue Service. Farmer’s Tax Guide
What the Exemption Covers
Eligible equipment must be used exclusively and directly in farming. The statute reaches from large implements like plows and harvesters down to irrigation pipe, whether above ground or buried. Equipment used to harvest crops grown by someone else also qualifies, which reflects how much custom harvesting happens in the state.3Justia. Arkansas Code 26-52-403 – Farm Equipment and Machinery – Definitions
Several categories are excluded outright:
- Motor vehicles subject to registration for highway use, including pickup trucks even if driven only on the farm
- Airplanes, including crop dusters
- Hand tools such as shovels and wrenches
- Equipment used in the production and severance of timber
The timber exclusion trips up mixed operations. If you run both crop production and timber, you have to sort which equipment serves which side. Only the machinery tied to food, fiber, sod, or nursery production gets the exemption.3Justia. Arkansas Code 26-52-403 – Farm Equipment and Machinery – Definitions
ATVs Use a Separate Form
All-terrain vehicles get their own paperwork because they’re so often bought for recreation. The ATV itself has to meet four physical specifications before it can even be considered:
- Three, four, or six wheels
- No wider than 50 inches
- Nonhighway tires
- Engine displacement of 1,000cc or less
You then complete Form ET-819, which asks for the farm’s legal name, the ATV’s make, model, year, and VIN, and every purpose you’ll use it for. You sign a statement acknowledging your claim can be audited, and you certify the ATV will be used only for commercial farming. The seller submits the form with their excise tax return by the 20th of the month following the sale.4Department of Finance and Administration. Commercial Farm Exemption for All-Terrain Vehicles Form ET-819
Audits, Penalties, and Records
The DFA verifies exemption claims through audits, and ATV purchases draw particular attention. If a claim doesn’t hold up, you owe the unpaid tax plus interest.3Justia. Arkansas Code 26-52-403 – Farm Equipment and Machinery – Definitions A claim the DFA determines to be fraudulent adds a penalty of 50% of the tax deficiency on top of interest. Repeatedly ignoring DFA notices about missing or false information on returns triggers a $50-per-return penalty.5Code of Arkansas Rules. 26 CAR 30-1218 – Penalties
Keep purchase receipts, any exemption certificates you signed, and copies of forms you or the seller submitted. A workable rule is to hold farm business financial records for at least seven years, and to keep bills of sale for major equipment indefinitely.2Internal Revenue Service. Farmer’s Tax Guide