GENERAL INFORMATION. All sales of new and
used motor vehicles, trailers, and semi-trailers are subject to sales or use
tax unless a specific exemption applies. The tax is to be collected as follows:
1. Tax due on vehicles and trailers which are
required by Arkansas law to be registered and licensed for use on public
streets and highways shall be paid by the purchaser at the time of registration
and application for certification of title. Sellers of trailers are not
required to collect tax.
purposes of this rule, motor vehicles which are not required by Arkansas law to
be registered and licensed for use on public streets and highways are (i)
mopeds, motorcycles, and motor-driven cycles which are designed or manufactured
exclusively for competition or off-road use, and (ii) three and four-wheel,
all-terrain cycles, and motorized bicycles.
3. Tax due on the sale of mopeds,
motorcycles, and motor-driven cycles which are designed or manufactured
exclusively for competition or off-road use is to be collected by the seller on
the full purchase price without regard to trade-in.
4. Tax due on the sale of three and
four-wheel, all-terrain cycles, and motorized bicycles shall be collected by
the seller on the full purchase price without regard to trade-in unless the
provisions of GR-50 apply.
due on the sale of motorcycles and motor-driven cycles registered for street
use is to be paid by the purchaser at the time of registration and application
for certificate of title. However, when the motorcycle or motor-driven cycle
was sold in such a condition that it could not be licensed for street use and
sales tax was collected and remitted by the seller, upon the purchaser's
subsequent application for a license to operate the cycle upon the street, the
purchaser shall be entitled to a credit for the sales tax paid by the seller.
The purchaser shall present proper proof of such payment of sales tax at the
time of registration.
CALCULATION OF TAX DUE.
Required by Law to be Licensed and Registered.
a. If the total gross receipts or gross
proceeds for the sale of a new or used motor vehicle or trailer are less than
$2,500.00, then the sales or use tax is not due on the vehicle or
b. If the total gross
receipts or gross proceeds for the sale of a motor vehicle or trailer are
$2,500.00 or more, then sales or use tax will be due on the difference between
the total gross receipts or gross proceeds for the motor vehicle and any credit
resulting from the trade-in of any used motor vehicle or trailer. (See also
GR-12.1 and GR-13.)
c. Local Tax.
The local sales or use tax due is determined by the location indicated at the
time of registration and application for certification of title. (See Ark. Code
d. For all motor vehicles
and trailers purchased after November 3, 1989, no credit will be allowed for
sales or use taxes paid to another state on purchases of motor vehicles,
trailers, or semi- trailers which were first registered by the purchaser in
e. Warranties. Sales or
use tax is due on the gross receipts or proceeds received for an extended
warranty or service contract on a new or used vehicle offered either by the
manufacturer or the dealer. When the extended warranty or service contract is
purchased at the time the new or used vehicle is sold, the price of the
warranty is to be included in the total gross receipts or proceeds on which tax
is collected at the time of registration. If the new or used car dealer or
manufacturer sells a warranty on a new or used car after the car has been
registered, the dealer or manufacturer must collect sales tax on the warranty
and local tax on these sales is calculated at the rate of the city and county
in which the sale occurred. If a vehicle of greater value is traded in for a
vehicle of lesser value, the trade-in credit for the vehicle does not apply to
reduce the sales price of the warranty. Tax is due on the total amount of the
gross receipts for the sale of the warranty or service contract.
f. Trade-in credit shall be allowed only if
the item taken in trade for the sale of a motor vehicle, trailer, or
semi-trailer is a motor vehicle, trailer, or semitrailer.
Motor Vehicles Not Required to be Licensed
a. The trade-in deduction does
not apply to vehicles not required by Arkansas law to be licensed and
registered for use on public streets and highways, as defined in
b. Local Tax: The
local sales or use tax due is determined by Ark. Code Ann. §
1. A transaction is a
"sale" for purposes of imposing tax when possession or title to a motor vehicle
or trailer is transferred from the seller to the buyer for valuable
taxable "sales" include the following:
by a bankruptcy trustee of the debtor's vehicle or trailer;
b. Sale by the holder of a repairman's lien
arising under Ark. Code. Ann. § 1845-201 et seq. to either a third party
or to himself;
c. Sale by the
executor or administrator of an estate; and
d. Sale by the owner for consideration where
the seller is unable to transfer title and the purchaser must obtain an order
quieting title to the vehicle and ordering the Department to issue title to the
of non-taxable transfers include transfer by the following:
a. Gift, where the donor and recipient of the
vehicle or trailer sign an affidavit attesting to the gift and the donor paid
sales or use tax at the time of purchase and registered the vehicle in his own
b. Inheritance or intestate
succession, where the beneficiary provides the Commissioner with a certified
copy of a Probate Court order or other proof of testamentary
c. Court order, other
than quiet title actions, where the prevailing party provides the Commissioner
with a certified copy of the order or decree ordering the Commissioner to issue
d. Repossession pursuant to
Ark. Code Ann. §
e. Transfer of title to a
damaged or stolen vehicle or trailer by the vehicle owner to an insurance
company as a result of the settlement of a claim for damages. A cash settlement
includes payment to a lienholder. For the replacement of the motor vehicle by
the owner, see GR-12.1;
of title by a dissolving partnership, corporation, or limited liability company
to a partner, shareholder, or member as a distribution to the partner,
shareholder, or member; and
Transfer of title to a newly-formed partnership or corporation by the vehicle
owner if the newly-formed partnership, corporation, or limited liability
company is merely a change of form of an ongoing business operated by the
Example: John Smith operates a store in the name John Smith
d/b/a Smith's Store. Mr. Smith owns a car which is titled in the name "John
Smith." Mr. Smith decides to incorporate his business and transfers all assets
to the corporation including the car. The transfer of the vehicle to the
corporation is not taxable.
EXEMPTION FOR RENTAL MOTOR VEHICLES.
The gross receipts or gross proceeds
derived from the sale of a motor vehicle to a person engaged in the business of
renting licensed motor vehicles shall be exempt from sales and use tax in the
a. The person has a
rental exemption certificate and retail sales tax permit issued by the
b. The motor
vehicle is titled and registered in the name of the person holding the rental
Definitions. The following terms for purposes of this rule and rule GR-20 shall
have the following meanings:
motor vehicle" means any automobile, truck, van, motorcycle, truck tractor, or
other self-propelled vehicle required to be licensed for highway use under the
law of Arkansas. A vehicle which is titled and registered in a state other than
Arkansas but which is the type of vehicle that would be required to be
registered for highway use in Arkansas is a licensed motor vehicle. Trailers
and semi-trailers are not motor vehicles. The term "motor vehicle" does not
include special mobile equipment as defined in Ark. Code Ann. §
or implements of husbandry as defined in Ark. Code Ann. §
b. "Engaged in the business of renting
licensed motor vehicles" means that the person regularly and persistently rents
licensed motor vehicles for gain or profit.
c. "Rental exemption certificate" means a
certificate issued by the Commissioner through the Sales and Use Tax Section
which provides that the person is registered to engage in the rental of
licensed motor vehicles for either short-term or long-term use.
d. "Short-term rental" means rental for less
than thirty (30) days.
"Long-term rental" means rental for thirty (30) days or more. Whether a rental
of a motor vehicle is considered long-term or short-term is dependent on the
written contract and period for which payment is initially due.
Example: If a vehicle is rented initially for fourteen (14)
days with the rental contract reflecting a term of rental for fourteen (14)
days and the customer subsequently decides to continue renting the vehicle for
twenty-one (21) more days, the transaction is treated as two (2) short-term
order to claim the exemption from sales and use tax, the motor vehicle
purchaser must provide a copy of the rental exemption certificate to the
Revenue Division Office at the time of registration and titling of each vehicle
along with the other documents required by law for registration and titling.
The certificate will become a part of the permanent record of the Office of
Motor Vehicles and all information must be provided as requested on the
certificate. A short-term rental exemption certificate issued previously may
not be used to register a vehicle intended for long-term rental. The long-term
lessor must register with the Sales and Use Tax Section and obtain a new rental
exemption certificate. A separate copy of the certificate must be presented for
each vehicle registered and titled.
exemption is valid only if the motor vehicle is used exclusively for short-term
or long-term rentals. If the motor vehicle is used for any other purpose, then
the exemption granted at the time of registration is revoked and the purchaser
is obligated to pay the applicable sales or use tax, plus penalty and interest
as provided by the Arkansas Tax Procedure Act.
b. Use of the motor vehicle by anyone other
than a short-term or long-term lessee for business or personal purposes will
cause the exemption to be revoked. For example, use of a vehicle registered as
a leased vehicle as an airport shuttle or free customer "loaner" car will cause
the exemption to be revoked. Driving the vehicle to the nearest repair facility
for purposes of repairs will not cause the exemption to be revoked.
5. See GR-20, ET-6, and ET-7 for
the application of the rental vehicle tax, long-term rental tax, and record
PROOF OF VALUE.
When a motor vehicle or
trailer is sold or taken in trade, the taxpayer shall provide to the
Commissioner documented proof of the gross receipts, or gross proceeds or the
value assigned to the traded-in item. Examples of sufficient documents include
a. A bill of sale or financing
contract signed by the seller and buyer separately stating the total gross
receipts or gross proceeds for the sale, value assigned to the traded-in
vehicle or trailer, description, and vehicle identification number ("VIN") of
the vehicle or trailer sold and vehicle or trailer traded-in.
b. An affidavit signed by the seller and the
buyer stating the total gross receipts or gross proceeds for the sale, value
assigned to the traded-in vehicle or trailer, description, and VIN of the
vehicle or trailer sold and vehicle or trailer traded-in.
2. If the taxpayer is unable to provide
sufficient documentation for either the total gross receipts or gross proceeds
for the sale of the vehicle or trailer, or the value of the traded-in vehicle
or trailer, or if the buyer and the seller disagree on the consideration (gross
receipts) for the sale of the used vehicle, then the total gross proceeds shall
be presumed to be the greater of the actual sales price as provided on the bill
of sale, invoice or financing agreement, or the average loan value of the
vehicle as listed in the most current edition of the National Automotive
Dealers' Association Official Used Car Guide or any pricing guide that may be
approved by the Director for use in determining vehicle values.
USED MOTOR VEHICLES REGISTERED
BY VEHICLE DEALERS.
1. Used motor vehicle
dealers are prohibited from assigning a motor vehicle using the Manufacturer's
Statement of Origin ("MSO"). Used vehicle dealers are required to apply for
title and registration to the vehicle before it may be transferred.
Pursuant to Ark. Code Ann. §
any motor vehicle dealer who has purchased a used motor vehicle for resale may
register the vehicle for the sole purpose of obtaining a certificate of title
to the vehicle without payment of gross receipts tax except as provided in
GR-12(F)(2)(b). No license plate is issued with this registration and the
vehicle may not be operated upon the highway without a dealer's plate.
b. The sale of a motor vehicle
from the original franchise dealer to any other dealer, person, corporation, or
other entity other than a franchise dealer of the same make of vehicle, which
sale is reflected on the statement of origin, shall be subject to gross
motor vehicle" is defined as any motor vehicle which has previously been sold,
bargained, exchanged, given away, or the title thereto transferred from the
person or corporation who first took title from the manufacturer, importer,
dealer, or agent of the manufacturer or importer, or that is so used as to have
become which is commonly known as a secondhand or previously owned motor
vehicle. In the event of a transfer reflected on the MSO from the original
franchise dealer to any other dealer, individual, or corporation other than a
franchise dealer of the same make of vehicle, the vehicle shall be considered a
used motor vehicle.
a. When a motor vehicle dealer removes a
vehicle from its inventory and the vehicle is used by the dealership as a
service vehicle, the dealer shall register the vehicle, obtain a certificate of
title, and pay sales tax on the listed retail price of the new vehicle.
b. When the motor vehicle dealer
returns the service vehicle to inventory as a used vehicle and replaces it with
a new vehicle for dealership use as a service vehicle, the dealer shall pay
sales tax on the difference between the listed retail price of the new service
vehicle to be used by the dealership and the value of the used service vehicle
being returned to inventory. The value of the used service vehicle shall be the
vehicle's highest wholesale value as listed in the most current edition of the
National Automotive Dealers' Association's Official Used Car Guide or any
pricing guide that may be approved by the Commissioner for use in determining
For purposes of this subsection, the term "service vehicle"
means a motor vehicle driven exclusively by an employee of the dealership and
used either to transport dealership customers or dealership parts and
vehicle" does not include motor vehicles which are rented by the dealership,
used as demonstration vehicles, used by dealership employees for personal use,
or used to haul or pull other vehicles.
H. Only the first $9,150.00 of the sales
price of a new or used Class Five, Six, Seven, or Eight truck tractor that is
sold in this state or sold in another state for use in this state is subject to
state tax. The gross proceeds in excess of $9,150.00 are exempt from tax. This
exemption does not apply to local (city, town, or county) tax.
I. Only the first $1,000.00 of the sales
price of a new or used semitrailer sold in this state or sold in another state
for use in this state is subject to state tax. The gross proceeds in excess of
$1,000.00 are exempt from tax. This exemption does not apply to local (city,
town, or county) tax.