Spotlight on Sunday's tax cuts
Sales tax on energy consumption for manufacturers
With the new state fiscal year beginning Sunday comes the effective date of the tax cuts that were enacted this legislative session. While the reduction in grocery tax has garnered most of the attention, manufacturers will also get a break on their energy bills beginning Sunday. Act 185 of 2007 reduces the state tax on the sale of electricity and natural gas by 1.5% to 4.375%. The tax rate will be reduced by another 0.5% on July 1, 2008. The energy must be consumed for use directly in the manufacturing process.
In order to get an idea of how this tax cut will help Arkansas workers, I toured one of the area's manufacturing plants today that will take advantage of Act 185. Temple-Inland in Hope manufactures industrial grade particleboard for a variety of customers and employs 125 workers from all over southwest Arkansas.
The plant operates around the clock seven days a week, and its electric bill normally runs in the $370,000 to $400,000 range per month. Act 185 will save this particular company approximately $75,000 per year. The 2008 reduction will save them an additional $20,000 annually. This can help existing and potential companies in my area of the state tremendously, since Texas does not levy sales tax on energy consumption.
While I freely admit that the continuing reduction of the sales tax on food and food ingredients is a top priority if revenues continue to increase, of equal importance is the ability to attract and retain businesses, all of whom are competing in a global economy with thin profit margins. One advantage that we have over Texas is lower property taxes, but that's negated by our sales tax on utilities.
One of Temple-Inland's largest customers is Funder America, which is located just right across the street. Another local business that it provides particleboard to is Klipsch. Hopefully, Act 185 will show existing businesses that we appreciate their contribution and loyalty to the Arkansas economy and that we're serious about attracting new businesses to the state.
With the new state fiscal year beginning Sunday comes the effective date of the tax cuts that were enacted this legislative session. While the reduction in grocery tax has garnered most of the attention, manufacturers will also get a break on their energy bills beginning Sunday. Act 185 of 2007 reduces the state tax on the sale of electricity and natural gas by 1.5% to 4.375%. The tax rate will be reduced by another 0.5% on July 1, 2008. The energy must be consumed for use directly in the manufacturing process.
In order to get an idea of how this tax cut will help Arkansas workers, I toured one of the area's manufacturing plants today that will take advantage of Act 185. Temple-Inland in Hope manufactures industrial grade particleboard for a variety of customers and employs 125 workers from all over southwest Arkansas.
The plant operates around the clock seven days a week, and its electric bill normally runs in the $370,000 to $400,000 range per month. Act 185 will save this particular company approximately $75,000 per year. The 2008 reduction will save them an additional $20,000 annually. This can help existing and potential companies in my area of the state tremendously, since Texas does not levy sales tax on energy consumption.
While I freely admit that the continuing reduction of the sales tax on food and food ingredients is a top priority if revenues continue to increase, of equal importance is the ability to attract and retain businesses, all of whom are competing in a global economy with thin profit margins. One advantage that we have over Texas is lower property taxes, but that's negated by our sales tax on utilities.
One of Temple-Inland's largest customers is Funder America, which is located just right across the street. Another local business that it provides particleboard to is Klipsch. Hopefully, Act 185 will show existing businesses that we appreciate their contribution and loyalty to the Arkansas economy and that we're serious about attracting new businesses to the state.
posted by Steve Harrelson @ 6/28/2007 01:26:00 PM | Permalink |
<< Home