AR HB1266

Creates a sales and use tax exemption for construction materials purchased by regional water distribution districts (exempt entities) to construct, repair, or remodel facilities used in their regular functions and activities.

Exempts construction materials purchased by contractors fulfilling contracts with exempt entities from gross receipts tax under the Arkansas Gross Receipts Act of 1941 and compensating use tax under the Arkansas Compensating Tax Act of 1949.

Requires exempt entities to register projects with the Department of Finance and Administration, obtain exemption certificates, and provide certificates to contractors and suppliers to claim the exemption.

Prohibits the exemption from applying to machinery, equipment, or tools used in construction contracts, and requires contractors to return excess unused materials to suppliers for credit or pay applicable sales and use taxes on unused materials.

Becomes effective on the first day of the second calendar month following the act's effective date.