Effective January 1, 2008, big changes have happened in Arkansas. The changes include how local city and county sales taxes are to be administered in the following circumstances:
• Delivery of Merchandise to Customers --Beginning January 1, 2008, if your business makes a retail sale of property and delivers the tangible property through common carrier, your truck, mail, or by any other shipping or delivery method to your customer, you will charge the state, county, and city taxes based on where the purchaser takes receipt or delivery.
• Taxable Services Performed in Arkansas -- Beginning January 1, 2008, state and local sales and use tax for taxable services will be collected based on where the customer receives the service. If the service is not received by the purchaser at the seller’s business location, the local taxes due are based on where the purchaser takes receipt of the service provided. In most cases, the customer will take receipt of the taxable services where it is performed; however, this may not apply in all circumstances.
• Rental or Lease of Tangible Personal Property --A lease or rental that requires periodic payments is subject to sales tax as follows:
1. The first periodic payment is subject to state and local taxes based on where the lessee receives the property.
2. For periodic payments made after the first payment, the state, city, and county taxes are based on the "primary property location" of the tangible personal property for each period covered by the payment.
The primary property location is the address for the property provided by the lessee to the lessor in the ordinary course of business. The primary property location is not changed by intermittent use at different locations. If the property is moved to a new location and the lessor has been notified of the new location, the lessor will tax subsequent payments based on
the new location. If the lessor does not receive notice of a change in location, sales tax will continue to apply based on the address the lessee gave the lessor for the primary property location.
• Rental or Lease of Motor Vehicles, Trailers, Semi-Trailers or Aircraft -- If your business leases or rents motor vehicles, trailers, semi-trailers, or aircraft that requires recurring periodic payments, you will collect the state, county, and city taxes due based on the primary property location. The primary property location is the address provided by the lessee in the ordinary course of business. The primary property location does not change by intermittent use at different locations. For a lease or rental that does not require recurring periodic payments, the local taxes are based on where the leased equipment is received by the purchaser.
• Taxable Services Purchased from Out of State Vendors for Use in the State of Arkansas -- If you purchase services from outside the State that are subject to tax in Arkansas and first use the service within the State of Arkansas, then Arkansas state and local use tax is due based on where you take receipt of the services. Credit will be given for taxes legally imposed and paid in the state where the taxable service was performed.
• Elimination of City and County Local Tax Caps -- Beginning January 1, 2008, local tax caps on single transactions will no longer apply when retailers collect city and county sales and use taxes. Since the caps no longer apply, retailers will collect the full amount of state, city, and county taxes on all transactions. Your customer may be eligible to apply to DFA for a refund of the local tax for qualified business purchases made on or after January 1, 2008.
Qualifying businesses may be eligible for a rebate or refund of the additional local tax paid on qualifying business purchases on purchase invoices that exceed $2500.00. A qualifying business purchase means a purchase of tangible personal property or a taxable service for which a business may claim a business expense deduction or depreciation deduction for federal income tax purposes. The purchase will be eligible even though the business purchaser may not be
required to file an income tax return. In addition, governmental agencies (including schools and colleges or universities) and non-profit organizations (including churches) may apply for rebates/refunds of additional local taxes paid.