The Supreme Court of Arkansas recently upheld use tax assessments imposed upon a contractor that purchased and installed equipment used in a water treatment facility expansion. Arkansas exempts from sales and use tax purchases of machinery and equipment used to create or expand a manufacturing or processing facility in the state. While the purchased equipment was used for the expansion, the court ultimately concluded that the facility’s water treatment process did not constitute “manufacturing” for purposes of the sales and use tax exemption. The court reasoned that manufacturing requires a transformation—raw material must emerge from the manufacturing process as a different article “having a distinct name, character or use.” The taxpayer argued, and two dissenting justices agreed, that the water treatment process transformed contaminated river water into consumable drinking water. The court’s majority, however, disagreed and concluded that “[i]t was water in the beginning, and it was water in the end.” Walther v. Carrothers Constr. Co. of Ark., LLC, 2016 Ark. 209, No. CV-15-799 (Ark. 2016).