A. GENERAL
INFORMATION
All sales of new and used motor vehicles, trailers and semitrailers are
subject to sales or use tax. 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 certificate of title.
2. For purposes of this regulation, motor
vehicles which are not required by Arkansas law to be registered and licensed
for use on public streets and highways are:
1) mopeds, motorcycles, and motor-driven
cycles which are designed or manufactured exclusively for competition or
off-road use, and
2) 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 offroad 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.
5. Tax 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
1.
Motor Vehicles 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 is less than $2,000,000, then the sales or use tax is not due on the
vehicle or trailer.
b. If the total
gross receipts or gross proceeds for the sale of a motor vehicle or trailer is
$2,000.00 or more, then the 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 a used motor vehicle or
trailer.
c. The term "Gross
Receipts" or "Gross Proceeds" means the total amount of consideration for the
sale of the motor vehicle or trailer, whether the consideration is in money or
otherwise and including any manufacturer's or dealer's rebates and federal
luxury excise tax, without any deduction therefor on account of the cost of the
property sold, labor service performed, interest paid by the retailer, losses
or any expenses whatsoever. Federal manufacturer's excise taxes are not a part
of the "Gross Receipts" or "Gross Proceeds" if the excise taxes are separately
stated or separately billed to the consumer. The term "Gross Receipts" or
"Gross Proceeds" includes the value of any property taken in lieu of or in
addition to money as consideration for a sale.
d. Local Tax: The local sales or use tax
levied by the city and county of the purchaser's residence shall be due on the
sale of the motor vehicle. A corporation or partnership is a resident of any
city and county in which it maintains an office or place of business.
e. 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
semitrailers which were first registered by the purchaser in
Arkansas.
f. Warranties: Sales or
use tax is due on the gross receipts or proceeds received for an extended
warranty on a new or used vehicle offered either by the manufacturer or the
dealer. When the extended warranty 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.
Effective May 1, 1991, used car dealers are no longer required to collect sales
tax on extended warranties on used vehicles when the warranty is sold at the
time the car is sold or prior to registration of the vehicle. Tax on used car
warranties is to be paid by the purchaser to the Director at the time of
registration. The dealer will be liable for sales tax on the warranty if the
warranty is sold at the same time as the vehicle but is billed to the customer
on a separate invoice. If the dealer or manufacturer sells a warranty on a new
or used car after the car has been registered, the dealer or manufacturer must
continue to 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.
g. Trade-in credit shall
be allowed only if the item taken in trade for the sale of a motor vehicle,
trailer or semitrailer is a motor vehicle, trailer or semitrailer.
2.
Motor Vehicles Not
Required to be Licensed and Registered
a. The trade-in deduction in Act 3 of 1991
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 paragraph A(2)
of this regulation.
b. Local tax
shall be calculated on sales of vehicles not registered and licensed for use on
public streets and highways at the rate levied, if any, by the city and county
in which the sale occurred.
C. TAXABLE TRANSACTIONS
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 consideration.
2. Examples of taxable 'sales" include:
a. Sale 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. §
18-45-201
et seq. to either a third party or to himself.
c. Sale by the executor or administrator of
an estate.
d. Sale by the owner for
consideration where the seller is unable to transfer title and the purchasee
must obtain an order quieting title to the vehicle and ordering the Department
to issue title to the purchaser.
3. Examples of non-taxable transfers include
transfer by:
a. Gift, where the donor and
recipient of the vehicle or trailer sign an affidavit attesting to the gift and
the donor paid Arkansas sales or use tax at the time of purchase;
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 transfer;
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 title;
d. Repossession pursuant to Ark. Code Ann.
§ Ark. Code Ann.
4-9-501 et
seq.;
e. Transfer of title by an
insured to the insurance carrier which paid the insured or a lienholder
replacement cost of a damaged motor vehicle or trailer.
D. 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:
1. 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.
2. Affidavit signed by
seller and the buyer stating the total gross receipts or gross proceeds for the
sale, value assigned to the traded-in vehicle or trailer, and description and
vehicle identification number (VIN) of the vehicle or trailer sold and vehicle
or trailer traded-in.
3. 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, then the Commissioner may accept the
average retail value of the vehicle as stated in the current edition of the
NADA Official Used Car Guide.
E. EFFECTIVE DATES
1. The effective date of Act 3 of 1991 is May
1, 1991. For purposes of determining whether a sale occurred before the
effective date of Act 3 of 1991, the date on the bill of sale, contract, or
other documents provided by the taxpayer controls.
2. These regulation are effective May 1,
1991.
FINDING OF IMMINENT PERIL AND STATEMENT OF
REASONS
Act 3 of 1991 was signed by the Governor of the State of Arkansas on
January 25, 1991, and will be in full force and effect from and after May 1, 19
91. The Act provides for the application of the Arkansas Gross Receipts Tax and
Arkansas Compensating Use Tax on sales of all new and used motor vehicles,
trailers, mobile homes and airplanes. The Act also provides for a deduction for
trade-ins and an exemption from tax for these items sold for less than
$2,000.00. Section 4 of Act 401 of 1979, as amended, provides that the
Commissioner of Revenues shall administer and enforce the provisions of every
state tax law, including the Arkansas Gross Receipts Tax and the Arkansas
Compensating Use Tax, and shall promulgate rules and regulations necessary for
the enforcement there of.
The current rules and regulations regarding the taxation of new and
used motor vehicles, trailers, mobile homes and airplanes do not address the
changes in tax law created by Act 3 of 1991.
To ensure understanding of and compliance with Act 3 of 1991 and to
prescribe procedures for the implementation of the law, emergency regulations
as authorized by Section 3 of Act 434 of 1967 (Ark. Code Ann. §
25-15-204
) to be effective immediately upon filing thereof with the Secretary of State,
are necessary.
For the above reasons, it is found that there exists an imminent peril
to the welfare of the State of Arkansas and the attached emergency regulations,
regarding the application of the Arkansas Gross Receipts Tax and the Arkansas
Compensating Use Tax to new and used motor vehicles, trailers, mobile homes and
airplanes, are necessary.
