Beginning January 1, 2008, local caps will no longer apply to sales transactions except for certain specific items.

The city and county taxes are to be collected on the full selling price of tangible personal property or taxable services except for motor vehicles, aircraft, watercraft, modular homes, manufactured homes, or mobile homes.

Motor vehicle for this application of cap on local taxes refers only to self-propelled vehicles registered for highway use.  Recreational vehicles which are licensed as a motor vehicle (self-propelled) will continue to have the cap on local taxes. The Revenue Office will continue to collect local taxes based on the primary address of the purchaser. 

Towable campers will be subject to the full tax as well as ATVs, dirt bikes, towable trailers, or any other item not registered to be driven on the highway.  Boats, house boats, and airplanes will retain the $2500 cap on local taxes.   

A rebate will be available for qualified purchases.  Act 179 provides for rebates of additional taxes paid by business purchasers as a result of the local tax cap removal.  Business purchasers will pay the full tax to sellers and request rebates from the Department of Finance and Administration for rebate of the additional taxes paid on “qualifying purchases” that exceed $2,500.00. 

Under the provisions of Ark. Code Ann. §26-52-510(b)(1)(A), when a used motor vehicle (truck tractor) or semi-trailer is taken in trade as a credit or part payment on the sale of a new or used motor vehicle tax, shall be paid on the net difference between the total consideration for the new or used vehicle or semi-trailer and the credit for the used vehicle or semi-trailer.

The provisions of Ark. Code Ann. §§26-52-436 and 26-53-144 provide that tax shall only be collected on the first $1,000.00 of the sale of the semi-trailer when the trailer is registered at the same time as the truck.  The $1,000.00 limitation applies to state sales tax only. 

For Semi-trailers to pay the reduced amount of state sales tax at the Department of Finance and Administration (DFA) Revenue Office when licensing the semi-trailer, information referencing a truck-tractor owned by the registrant must be provided to receive the reduced tax benefit for the semi-trailer.  Although they do not have to be licensed at the same time, DFA requires a reference to a truck-tractor to get the reduced state tax benefit on the semi-trailer.  If a purchaser of a semi-trailer did not have a truck-tractor to reference when registering the semi-trailer, the Revenue Office would collect full state and local sales tax on the purchase.  At that point, refunds of additional taxes paid would have to be requested. 

Because registrants of semi-trailers are in nearly all cases businesses, when the Revenue Office registers a semi-trailer and provides the proper information in the computer system to provide for the reduced tax benefit for state sales tax on the semi-trailers, the system will also limit the payment of local tax to the first $2,500.