Arkansas Administrative Code
Agency 006 - Department of Finance and Administration
Division 05 - Division of Revenues
GROSS RECEIPTS TAX RULES
Rule 006.05.06-005-GR-76 - DETERMINATION OF TAX DUE - SOURCING TRANSACTIONS

Universal Citation: AR Admin Rules 006.05.06-005-GR-76

Current through Register Vol. 49, No. 9, September, 2024

A. Sales transactions shall be sourced in accordance with this rule, unless otherwise provided.

B. APPLICABILITY.

1. Products. The sourcing provisions of this rule apply regardless of the characterization of a product as tangible personal property or a service.

2. Sellers. The provisions of this rule only apply to determine a seller's obligation to pay or collect and remit sales or use tax with respect to the seller's retail sale of a product.

3. Purchasers. The provisions of this rule do not affect the obligation of a purchaser or lessee to remit tax on the use of the product to the taxing jurisdiction of that use.

C. RECEIVE AND RECEIPT. For the purposes of this rule, "receive" and "receipt" mean taking possession of tangible personal property or making first use of services. Receive and receipt do not include possession by a shipping company on behalf of the purchaser.

D. RETAIL SALES - EXCLUDING LEASES AND RENTALS.

1. Except as otherwise provided, a retail sale is sourced as follows:
a. Over-the-counter. When the purchaser receives tangible personal property or a service at the business location of the seller, the sale is sourced to that business location.

Example: XYZ is a business located in Jacksonville, Arkansas that repairs automobile motors. After repairing the motor, the customer picks-up the motor at the shop in Jacksonville. XYZ will collect the state sales tax, Jacksonville sales tax, and Pulaski County sales tax.

b. Delivery to a specified address. When the purchaser does not receive the tangible personal property or service at the business location of the seller, the sale is sourced to the location of receipt by the purchaser (or the purchaser's donee, designated as such by the purchaser), including the location indicated by instructions for delivery to the purchaser (or donee), known to the seller.

Example 1: XYZ is a business located in Jacksonville, Arkansas that repairs automobile motors. After repairing the motor, XYZ ships the motor by common carrier to Conway, Arkansas. Since the customer took receipt of the service in Conway, XYZ will collect the state sales tax, Conway sales tax, and Faulkner County sales tax.

Example 2: ABC performs a landscaping job in Monticello, Arkansas. ABC will collect the state sales tax, Monticello sales tax, and Drew County sales tax.

c. Delivery address unknown. When the purchaser does not receive the tangible personal property or service at the business location of the seller and the delivery address is unknown, the sale is sourced to the first of the following addresses that is known to the seller:
(1) The address of the purchaser;

(2) The billing address of the purchaser; or

(3) The address from which the tangible personal property was shipped or from which the service was provided.

2. Retail sales of specific property.
a. Motor vehicles, trailers, and semi-trailers that do not qualify as transportation equipment.
(1) The sale of motor vehicles, trailers, and semi-trailers that are required by Arkansas law to be registered and licensed for use on public streets and highways are sourced to the location indicated at the time of registration and application for certification of title.

(2) The sale of motor vehicles, trailers, and semi-trailers that are not required by Arkansas law to be registered and licensed for use on public streets and highways are sourced in accordance with GR-76(D)(1).

b. Aircraft that does not qualify as transportation equipment. The sale of aircraft is sourced in accordance with GR-76(D)(1).

c. Watercraft, modular homes, manufactured homes, and mobile homes. The sale of watercraft, modular homes, manufactured homes, and mobile homes are sourced in accordance with GR-76(D)(1).

d. Transportation Equipment. The retail sale of transportation equipment is sourced as provided in GR-76(D)(1). See GR-3 for the definition of transportation equipment. Sales of property that meet the definition of transportation equipment are sourced in accordance with the specific provisions pertaining to transportation equipment and not as motor vehicles, trailers, semitrailers, or aircraft.

E. LEASES AND RENTALS.

1. Except as otherwise provided, the lease or rental of tangible personal property is sourced as follows:
a. Periodic Payments. For a lease or rental that requires recurring periodic payments, the first payment is sourced the same as a retail sale in accordance with GR-76(D)(1). Periodic payments made subsequent to the first payment are sourced to the primary property location for each period covered by the payment. The primary property location shall be indicated by the address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of this address does not constitute bad faith. This location shall not be altered by intermittent use at different locations, such as use of business property that accompanies employees on business trips and service calls.

Example 1: XYZ is located in Little Rock and leases fork lifts. The payment terms are a down payment and twenty-four (24) monthly payments. The customer picks up the forklift in Little Rock and takes it to the customer's warehouse in North Little Rock. State, Little Rock, and Pulaski County sales taxes apply to the down payment, and state, North Little Rock, and Pulaski County sales taxes apply to the remaining monthly lease payments.

Example 2: XYZ is located in Little Rock and leases fork lifts. The payment terms are a down payment and twenty-four (24) monthly payments. XYZ delivers the forklift to the customer's warehouse in North Little Rock. State, North Little Rock, and Pulaski County sales taxes apply to the down payment and all monthly lease payments.

Example 3: XYZ is located in Little Rock and leases backhoes. XYZ delivers a backhoe to its customer in Jonesboro, Craighead County on January 1, 2008. Two months later, the customer moves to Little Rock. On March 1, 2008, the customer informs XYZ that the backhoe is in Little Rock. State, Jonesboro, and Craighead County sales taxes apply to the lease payments for January and February. State, Little Rock, and Pulaski County sales taxes apply to the lease payments beginning with the March payment.

Example 4: XYZ is located in Little Rock and leases backhoes. XYZ leases a backhoe for six (6) months to its customer for use at a construction site in Tennessee. The customer picks up the backhoe in Little Rock. Because the customer (lessee) receives the equipment in Arkansas, the first payment is subject to Arkansas state and local sales taxes. The remaining lease payments are subject to any applicable Tennessee taxes.

b. Non-periodic Payments. For a lease or rental that does not require recurring periodic payments, the payment is sourced the same as a retail sale in accordance with GR-76(D)(1).

Example 1: XYZ is located in Little Rock and rents tables and chairs for meetings and parties. The customer picks up the tables and chairs at XYZ's business location. State, Little Rock, and Pulaski County sales tax apply, as well as the short-term rental tax.

Example 2: XYZ is located in Little Rock and rents tables and chairs for meetings and parties. XYZ delivers the tables and chairs at the party location in North Little Rock. State, North Little Rock, and Pulaski County sales tax apply, as well as the short-term rental tax.

2. Leases and rentals of specific property.
a. Motor vehicles, trailers, semi-trailers, or aircraft that do not qualify as transportation equipment.
(1) Periodic Payments. For a lease or rental that requires recurring periodic payments, each payment is sourced to the primary property location. The primary property location shall be indicated by the address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of this address does not constitute bad faith. This location shall not be altered by intermittent use at different locations.

(2) Non-periodic Payments. For a lease or rental that does not require recurring periodic payments, the payment is sourced the same as a retail sale in accordance with GR-76(D)(1).

Example 1: XYZ is located in Little Rock and rents motor vehicles on a short-term basis (less than thirty (30) days). The customer picks up the motor vehicle at XYZ's business location. XYZ should collect state, Little Rock, and Pulaski County sales taxes, as well as state and local shortterm rental vehicle taxes. Use of the motor vehicle outside of Little Rock or Pulaski County does not affect the state or local taxes collected.

Example 2: XYZ is located in Little Rock and rents motor vehicles on a long-term basis (thirty (30) days or more). The customer picks up the motor vehicle at XYZ's business location, but the primary property location of the motor vehicle is in Sherwood, Pulaski County. If sales tax was not paid on the motor vehicle at the time of registration, then XYZ should collect state, Sherwood, and Pulaski County sales taxes, as well as the long-term rental tax. If sales tax was paid on the motor vehicle at the time of registration, then tax is not collected on the period payments.

Example 3: XYZ is located in Little Rock and rents airplanes on a short-term basis (less than thirty (30) days). The customer takes receipt of the airplane in Little Rock. XYZ should collect state, Little Rock, and Pulaski County sales taxes, as well as the short-term rental tax, regardless of whether tax was paid on the airplane at the time of purchase.

Example 4: XYZ is located in Little Rock and rents an airplane for six (6) months to a business (a long-term rental). The primary property location of the airplane is Fayetteville, Washington County. If tax was not paid on the aircraft at the time of purchase, then XYZ will collect state, Fayetteville, and Washington County sales taxes on all payments for the lease of the airplane. If sales tax was paid on the aircraft at the time of purchase, then tax is not collected on the payments for the long-term rental.

b. Watercraft, modular homes, manufactured homes, and mobile homes. The lease or rental of watercraft, modular homes, manufactured homes, and mobile homes are sourced in accordance with GR-76(E)(1).

c. Transportation Equipment. The lease or rental of transportation equipment is sourced as a retail sale in accordance with GR-76(D)(1). See GR-3 for the definition of transportation equipment. The lease or rental of property that meets the definition of transportation equipment is sourced in accordance with the specific provisions pertaining to transportation equipment and not as motor vehicles, trailers, semitrailers, or aircraft.

Ark. Code Ann. § 26-52-521

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