Arkansas Long-Term Lease Tax Expires

The Arkansas Department of Finance and Administration (DFA) has announced that the 1.5% long-term vehicle lease tax has expired, effective June 30, 2015. The tax no longer needs to be collected on motor vehicle leases with terms of 30 days or more. TRALA has spoken with senior DFA officials who confirmed that this change is applicable to all bills rendered after June 30, meaning that even existing leases entered into before June 30 which were subject to the 1.5% lease tax at the beginning of the lease are no longer subject to the lease tax.
The expiration of the long-term lease tax is due to a provision contained in a law passed in 2013 which stated that "If the Chief Fiscal Officer of the State certifies that three percent (3%) of more of all new motor vehicles registered in Arkansas during a calendar year are leased vehicles based on information and statistics from a reliable source, such as R.L. Polk & Co., then the long-term rental vehicle tax shall expire on June 30 of the fiscal year following the calendar year for which the certification is made." That provision lowered the threshold from ten percent to three percent as part of a larger bill (SB 688) that was passed by the legislature in 2013. The new, lower threshold was met in the next calendar year (2014), which led to the expiration of the tax on June 30, 2015, which was the specified date in the next fiscal year, as indicated by the law.
Senior DFA officials also confirmed to TRALA that there is no provision in law that would automatically re-establish the long-term lease tax in the event that less than three percent of vehicles in the stated are leased in future years. The DFA did reiterate that state and local sales and use taxes will continue to be collected on monthly long term lease payments, because the sales and use tax is a separate tax from the long-term rental tax.
For questions on this issue, contact TRALA's Joe Sculley at or by calling (703) 299-9120.