Department of Finance and Administration
Legislative Impact Statement
Bill: HB1317
Bill Subtitle: TO PROVIDE FOR A REDUCED SALES AND USE TAX RATE FOR NATURAL GAS,
ELECTRICITY, AND COAL USED BY A DATA CENTER; AND TO DECLARE AN EMERGENCY.
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Basic Change :
Sponsors: Rep. Pilkington and Sen. J. Boyd
HB1317 provides that sales of natural gas, electricity, and coal to a "data center" are to be taxed at the
reduced rates for manufacturers established in § 26-52-319 and § 26-53-148. The sale of natural gas,
electricity, and coal remain subject to the sales and use tax of 1/8 of 1% in the Arkansas Constitution,
Amendment 75, the temporary sales and use tax of 1/2% in Amendment 91, and the sales and use tax
of 1/2% in Amendment 101.
To be eligible for the reduced tax rate, the data center must:
Be a free-standing structure or a facility within a larger structure that uses environmental control
equipment to maintain the proper conditions for the operation of electronic equipment;
Primarily contain electronic equipment used to process, store, and transmit digital information;
Not be a facility used for cryptocurrency operations; and
Have redundant capacity components and redundant distribution paths that serve the computer
equipment and protect against most or almost all physical events.
To be eligible for the reduced tax rate, the natural gas, electricity, and coal must:
Be used only for the data center; and
Be metered separately from natural gas and electricity used for any other purpose by the data
center.
HB1317 contains an emergency clause and will be effective on the date of its approval by the
Governor; the expiration of the period of time during which the Governor may veto the bill; or the date
the last house overrides the veto. For purposes of the Revenue Impact below, an effective date of July
1, 2023 is assumed.
Revenue Impact :
FY2024
Total Approximate State Sales and Use Tax Loss $ - 2,300,000
General Revenue - 4.5% $ - 1,707,089
Property Tax Relief - .5% $ - 189,677
Conservation Fund - .125% $ - .000
Educational Adequacy Fund - .875% $ - 331,934
Highway Fund - .5% $ - .000
Educational Excellence Trust Fund - $ - .000
Educational Adequacy (GR Transfer) - $ - .000
State Central Services - $ - 48,300
Constitutional Officers - $ - 23,000
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3/15/2023 6:41 PM 1
Department of Finance and Administration
Legislative Impact Statement
Bill: HB1317
Bill Subtitle: TO PROVIDE FOR A REDUCED SALES AND USE TAX RATE FOR NATURAL GAS,
ELECTRICITY, AND COAL USED BY A DATA CENTER; AND TO DECLARE AN EMERGENCY.
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Total Approximate Local City and County $ - 766,667
Sales and Use Tax Loss
FY2025
Total Approximate State Sales and Use Tax Loss $ - 2,323,000
General Revenue - 4.5% $ - 1,461,439
Property Tax Relief - .5% $ - 191,573
Conservation Fund - .125% $ - .000
Educational Adequacy Fund - .875% $ - 335,253
Highway Fund - .5% $ - .000
Educational Excellence Trust Fund - $ - 241,382
Educational Adequacy (GR Transfer) - $ - 21,339
State Central Services - $ - 48,783
Constitutional Officers - $ - 23,230
Total Approximate Local City and County $ - 774,333
Sales and Use Tax Loss
Taxpayer Impact :
A data center that meets the requirements of HB1317 would be eligible for the reduced sales and use
tax rate on purchases certain utilities for the facility. These entities would be required to obtain a
certification from the Department of Finance and Administration (DFA) prior to claiming the reduced
rate.
Resources Required :
Programming changes for the Arkansas Integrated Revenue System (AIRS) is estimated at $8,000.00.
Time Required :
Adequate time is provided for implementation.
Procedural Changes :
Updates to the Sales and Use Tax Rules will be promulgated and DFA staff would be trained on this
update to existing Arkansas tax law.
Other Comments :
HB1317 provides for an immediate effective date of its approval by the Governor. Due to existing
Arkansas tax law which requires the DFA to provide notification of this tax change and the
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3/15/2023 6:41 PM 2
Department of Finance and Administration
Legislative Impact Statement
Bill: HB1317
Bill Subtitle: TO PROVIDE FOR A REDUCED SALES AND USE TAX RATE FOR NATURAL GAS,
ELECTRICITY, AND COAL USED BY A DATA CENTER; AND TO DECLARE AN EMERGENCY.
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requirements of the Streamlined Sales and Use Tax Agreement (SSUTA), the earliest this bill could
become effective and comply with DFA’s taxpayer notification requirements without being in violation of
the law and the SSUTA agreement would be July 1, 2023.
Legal Analysis :
None.
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