006.05.06 Ark. Code R. 005-GR-12.1

Current through Register Vol. 49, No. 10, October, 2024

Rule 006.05.06-005-GR-12.1 - SALES TAX CREDIT FOR PRIVATE SALE OF A USED VEHICLE

A. PURPOSE. This rule is promulgated to implement and clarify the allowance of a sales tax credit for the sale of a used vehicle when the proceeds from such a sale are applied toward the purchase price of another vehicle.

B. DEFINITIONS.

1. "Consumer" means any private individual, business, organization or association.

2. "Vehicle" means an automobile, truck, motorcycle (registered for highway use), trailer and semitrailer.

3. "Sale" means the transfer of title to a used vehicle by a consumer (the seller) to another individual or business enterprise (the buyer) in exchange for cash or the equivalent of cash, such as a check or money order. A sale does not occur, and therefore no credit will be allowed, when the title to a damaged vehicle is transferred by a consumer to an insurance company in exchange for a cash settlement paid by the insurance company.

4. "Trade-in" means a vehicle is taken by a seller as a credit or partial payment on the sale of another vehicle.

C. GENERAL INFORMATION.

1. If a consumer purchases a vehicle and within forty-five (45) days of the date of purchase, either prior to or after such purchase, sells a different vehicle in lieu of a trade-in, the consumer will be entitled to a credit against the sales or use tax due on his or her newly purchased vehicle.

2. If the consideration for the vehicle purchased by the consumer is greater than the proceeds from the sale of the used vehicle, the consumer shall pay sales or use tax on only the net difference between these amounts.

3. If the vehicle purchased by the consumer costs less than the proceeds received from the vehicle sold by the consumer in lieu of a trade-in, the consumer shall pay no sales tax on his or her newly purchased vehicle. However, the credit shall not exceed the price paid by the consumer for the newly purchased vehicle.

D. CERTIFICATION.

1. In order to obtain the sales tax credit as set forth in this rule, the consumer must provide a properly completed bill of sale to the Department.

a. If the vehicle sold by the consumer in lieu of a trade-in is sold prior to the time the consumer registers and pays sales tax on his or her newly purchased vehicle, a bill of sale for the vehicle sold must be submitted to the Revenue Office at the time the newly purchased vehicle is registered. The bill of sale must be signed by both the consumer and the purchaser. The bill of sale must include name and address of purchaser and seller, vehicle description and VIN, sales price, and date of sale. (A Bill of Sale form and instructions can be found on the DFA website in the Motor Vehicle Section.) Failure to provide a bill of sale will result in the disallowance of the deduction.

b. If the vehicle sold by the consumer in lieu of a trade-in is sold after the consumer has already registered and paid sales tax on his or her newly purchased vehicle, a Refund Claim form, a copy of the newly purchased vehicle's registration certificate, and a copy of the bill of sale for the vehicle sold must be submitted by the consumer to the Department's Tax Credits and Special Refunds Section at the following address:

Arkansas Department of Finance and Administration

Revenue Division

Tax Credits and Special Refunds Section

P.O. Box 8054

Little Rock, AR 72203-8054

2. The bill of sale and refund forms will be provided by the Department. The consumer shall be responsible for properly completing the form. Arkansas law provides that it is a felony to knowingly submit a form containing false information.

E. MULTIPLE SALES. If the consumer sells more than one vehicle within the forty-five (45) day periods prior to or after purchasing a vehicle, the consumer shall be entitled to claim all of the sales as sales "in lieu of a trade-in" for sales tax credit. However, the cumulative credit shall not exceed the price paid by the consumer for his or her newly purchased vehicle and shall not be carried forward and applied to the purchase of additional vehicles.

F. TRADE-IN. Consumers who make a trade-in on the purchase of a vehicle may also take a sales tax credit against the purchase price for any used vehicles sold by the consumer within forty-five (45) days either prior to or after the purchase. Any such credit shall be limited to the cash proceeds received by the consumer and shall in no event exceed the balance paid by the consumer for his or her newly purchased vehicle after receiving credit for the vehicle traded in.

G. SPECIAL ORDER VEHICLES. Additional rules apply when the time between the transfer of the old vehicle and the transfer of the new vehicle exceeds forty-five (45) days because of a delay in delivery of the new vehicle.

1. Sale of used vehicle prior to new vehicle order: If a special order for a new vehicle is placed with a dealer after the used vehicle is sold and the customer is contractually bound to purchase the new vehicle when it is delivered, then the forty-five (45) day period is calculated using the date of sale of the old vehicle and the date when the purchaser was contractually obligated to purchase the new vehicle.

2. Sale of used vehicle after new vehicle order: If a used vehicle is sold after placing a special order for a new vehicle and the new vehicle is not delivered until after forty-five (45) days from the sale of the used vehicle, then the forty-five (45) day deadline is met if the sale of the used vehicle occurs within forty-five (45) days of placing a binding order for a new vehicle.

006.05.06 Ark. Code R. 005-GR-12.1

Ark. Code Ann. § 26-52-510