Rental vehicle tax

(a)(1) In addition to the state and local sales or use tax, there is a rental vehicle tax on the gross receipts or gross proceeds derived from the short-term rental of motor vehicles required to be licensed in Arkansas.

(2) The rate of the rental vehicle tax is equal to ten percent (10%) of the gross receipts or gross proceeds, plus a local rental vehicle tax equal to the sales tax rate of the city and county in which the lessor’s business is located.

(3) This section should be read in conjunction with 26 CAR §§ 30-702 and 30-1002.
(b)(1) A motor vehicle required to be licensed in Arkansas includes any automobile, truck, van, motorcycle, truck tractor, or other self-propelled vehicle required to be licensed for highway use under the law of Arkansas, as well as a vehicle that is titled and registered in a state other than Arkansas, but that is the type of vehicle that would be required to be registered for highway use in Arkansas.

(2) The term “motor vehicle” does not include special mobile equipment as defined in Arkansas Code § 27-14-211 or implements of husbandry as defined in Arkansas Code § 27-14-212.

(c) The rental vehicle tax does not apply to the following:

(1) Rentals of diesel trucks for commercial shipping;

(2) Semitrailers, trailers, or other nonmotor vehicles;

(3) Farm machinery or equipment leased for a commercial purpose; and

(4) A gasoline-powered or diesel-powered truck leased or rented for residential moving or shipping.

(d) If the consideration for the lease of the motor vehicle is not separately stated from the consideration for the lease of a trailer, then rental vehicle tax will apply to the total consideration for the rental of both vehicles.

(e) A lessor with no physical business location should collect the city and county portion of the rental vehicle tax based on the city and county in which the lessee resides.

(f) The rental vehicle tax applies whether or not Arkansas gross receipts or use tax was paid when the vehicle was registered.
(g)(1) Whether a rental of a motor vehicle is considered long-term or short-term is dependent on the written contract and period for which payment is initially due.

(2) If a vehicle is rented initially for fourteen (14) days with the rental contract reflecting a term of rental for fourteen (14) days and the customer subsequently decides to continue renting the vehicle for twenty-one (21) more days, the transaction is treated as two (2) short-term rentals, not one (1) long-term rental.

(3) Lessors must maintain sufficient records to establish the intended term of the rental.