In Tyson Chicken, Inc. v. Hudson, the Arkansas Supreme Court addressed whether rented wooden shipping pallets used to deliver chicken products qualify for the state’s sale for resale exemption. The court concluded they do not, affirming the circuit court’s grant of summary judgment in favor of the Department of Finance and Administration.
Three Tyson subsidiaries – Tyson Chicken, Inc., Tyson Mexican Original, Inc., and Tyson Poultry Inc. – rent reusable wooden pallets from Commonwealth Handling Equipment Pool (CHEP), the world’s largest supplier of reusable pallets, and use those pallets to ship chicken and other food products through their supply chains. CHEP retains ownership throughout the procession of pallets through Tyson’s supply chain. The pallets are unloaded, returned, inspected, and repaired before being rented out again.
Tyson paid Arkansas sales tax on the rentals under Ark. Code Ann. § 26-52-301, then sought refunds for two periods spanning 2015-2017 and 2020-2021, arguing that the rentals were exempt ‘sales for resale’ under Ark. Code Ann. § 26-52-401(12) because it used the pallets to deliver its products. The Department of Finance and Administration denied the request, and the circuit court granted summary judgment for the Department.
Turning to the statutory framework, the court explained that the sales-for-resale exemption under Ark. Code Ann. § 26-52-401(12)(A) generally prevents items that are merely resold from being taxed twice. But where an item is ‘sold for use in manufacturing . . . assembling, or preparing for sale,’ Ark. Code Ann. § 26-52-401(12)(B) adds a requirement: the item must ‘become[] a recognizable integral part of the . . . prepared products.’ Because both parties conceded the pallets are used to ‘assemble’ and ‘prepar[e]’ products for sale, it was this stricter provision – not the general exemption – that controlled.
The court rejected Tyson’s argument that it effectively sells ‘pallets of chicken,’ reasoning that the statute focuses on the actual product, and wooden pallets do not become part of the chicken – they are a means of delivery.
Tyson Chicken, Inc. v. Hudson, 2026 Ark. 104 (June 4, 2026).