TRALA Eliminates Double Taxation in Arkansas
TRALA members with vehicles in Arkansas will not be subject to double-taxation when the new tax law goes into effect on October 1, 2013. Following the passage of legislation which makes significant changes to taxation of motor vehicles in the state, the Arkansas Department of Finance and Administration (DFA) has signaled that it agrees with TRALA that Arkansas-based motor vehicles under existing long term lease which have already fulfilled their tax obligations should not be subject to any further taxation when the new law becomes effective.
The passage of Arkansas SB 688 created some uncertainty about how vehicles under existing long term lease would be treated when the new law becomes effective on October 1, 2013. The new law will eliminate the ability for lessors to choose to either pay the sales tax based on the price of the vehicle at the time of registration, or to purchase vehicles tax-exempt and collect taxes on the lease stream. The main reason for the uncertainty was that some language in SB 688 gave the impression that the state might mandate the collection of additional tax on trucks under existing lease beginning October 1, even if those trucks had already had their tax obligation fulfilled.
TRALA held several educational conference calls with the DFA to stress that vehicles under existing lease which had already fulfilled their tax obligations should be "grandfathered" under the new law in order to avoid double taxation. TRALA also formally submitted an industry interpretation - which it developed by working through its Tax Advisory Council - of the new tax law to the DFA. After much deliberation, the DFA responded favorably to almost all of TRALA's positions.
In addition to trucks that have already fulfilled their tax exemptions being "grandfathered" into the new tax law to avoid double taxation, there are also existing exemptions from both the sales tax and the long term rental tax that reduce the tax burden TRALA members and their customers face. One is the confirmation from the DFA that the exemption from the long term rental tax for diesel-powered trucks used in commercial shipping applies to all trucks under long term lease, not just trucks in for-hire operations. The second is that some heavy trucks registered under the International Registration Plan (IRP) are exempt from both the sales tax and the long term rental tax.
To see a copy of the Arkansas DFA's response, please click here. The TRALA document that was sent to the DFA can be seen here. For questions, contact TRALA's Joe Sculley at firstname.lastname@example.org or by calling (703) 299-9120.