Department of Finance and Administration
Legislative Impact Statement
Bill: SB134 Amendment Number: S1
Bill Subtitle: TO INCREASE THE SALES AND USE TAX EXEMPTION FOR USED MOTOR
VEHICLES; AND TO AMEND THE REDUCED SALES AND USE TAX RATE APPLICABLE TO
PURCHASES OF USED MOTOR VEHICLES.
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Basic Change :
Sponsors: Sens. Payton, Dotson, Stubblefield, and Stone; Reps. Maddox and Lundstrum
Senate Amendment No. 1 --- SB134-S1 clarifies that the state law changes proposed by SB134 do
not affect the current sales and use tax exemptions for certain classes of trucks or trailers as follows:
 Class 6 and 7 trucks registered under the International Registration Plan (IRP), which are exempt
from sales and use tax;
 Semitrailers designed to carry property and drawn by a Class 6 or 7 truck registered under the IRP,
which are exempt from sales and use tax; and
 Class 5 or 8 trucks or Class 6 or 7 trucks not registered under the IRP where the proceeds over
$9,150 are exempt.
Original Bill --- SB134 creates a reduced sales and use tax rate of 3.5% for sales of used motor
vehicles having a sales price of at least $10,000 but less than $15,000. The 3.5% tax rate consists of a
2.875% statutory rate and the .625% sales and use taxes levied by Amendments 75 and 101 to the
Arkansas Constitution for conservation and highways. SB134 provides a sales and use tax exemption
for used motor vehicles having a sales price of less than $10,000. Used vehicles with a sales price of
$15,000 or more are subject to the full state sales tax rate.
Under current law, used vehicles costing less than $4,000 are exempt from tax, used vehicles costing
at least $4,000 but less than $10,000 are subject to the reduced tax rate, and used vehicles costing
$10,000 or more are subject to the full state tax rate. SB134 does not change current law regarding the
tax rates applicable to new motor vehicles or to new or used trailers or semitrailers.
SB134 is effective on the first day of the calendar quarter following the effective date of the act. For
purposes of the Revenue Impact below, an effective date of October 1, 2023 is assumed.
Revenue Impact :
FY2024
Total Approximate State Sales and Use Tax Loss $10,050,424
(Estimate includes: 8 months loss of tax on used motor vehicles with sales price of at least $4,000 but
less than $10,000 and 8 months loss of tax on used motor vehicles with sales price of at least $10,000
but less than $15,000).
General Revenue - 4.5% -$6,742,288
Property Tax Relief - .5% -$749,143
Conservation Fund - .125% -$187,286
Educational Adequacy Fund - .875% -$1,311,000
Highway Fund - .5% -$773,110
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2/26/2023 11:50 AM 1
 Department of Finance and Administration
Legislative Impact Statement
Bill: SB134 Amendment Number: S1
Bill Subtitle: TO INCREASE THE SALES AND USE TAX EXEMPTION FOR USED MOTOR
VEHICLES; AND TO AMEND THE REDUCED SALES AND USE TAX RATE APPLICABLE TO
PURCHASES OF USED MOTOR VEHICLES.
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Educational Excellence Trust Fund - $0
Educational Adequacy (GR Transfer) - $0
State Central Services - -$194,824
Constitutional Officers - -$92,773
Total Approximate Local City and
County Sales and Use Tax Loss $2,684,000
FY2025
Total Approximate State Sales and Use Tax Loss $15,075,637
(Estimate includes: 12 months loss of tax on used motor vehicles with sales price of at least $4,000 but
less than $10,000 and 12 months loss of tax on used motor vehicles with sales price of at least
$10,000 but less than $15,000).
General Revenue - 4.5% -$9,075,795
Property Tax Relief - .5% -$1,123,715
Conservation Fund - .125% -$280,929
Educational Adequacy Fund - .875% -$1,966,501
Highway Fund - .5% -$1,159,664
Educational Excellence Trust Fund - -$953,360
Educational Adequacy (GR Transfer) - -$84,279
State Central Services - -$292,235
Constitutional Officers - -$139,160
Total Approximate Local City and
County Sales and Use Tax Loss $4,026,000
[ Statistical data derived from State of Arkansas software reporting for CY2022. All numbers were
calculated based on the assumption that vehicle purchases remain constant. ]
Summary of Revenue Impact:
FY2024 state sales & use tax loss of approximately $4.8 million with 21,210 used motor vehicles
exempt from sales and use tax and loss of approximately $5.3 million with 14,577 used motor vehicles
subject to 3.5% sales and use tax.
FY2025 state sales & use tax loss of approximately $7 million with 31,815 used motor vehicles exempt
from sales and use tax and a loss of approximately $8 million with 21,865 used motor vehicles subject
to the reduced 3.5% sales and use tax.
Taxpayer Impact :
A taxpayer purchasing a used motor vehicle with selling price less than $10,000 would not pay sales or
use tax on that purchase. A taxpayer purchasing a used motor vehicle with selling price of at least
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2/26/2023 11:50 AM 2
 Department of Finance and Administration
Legislative Impact Statement
Bill: SB134 Amendment Number: S1
Bill Subtitle: TO INCREASE THE SALES AND USE TAX EXEMPTION FOR USED MOTOR
VEHICLES; AND TO AMEND THE REDUCED SALES AND USE TAX RATE APPLICABLE TO
PURCHASES OF USED MOTOR VEHICLES.
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$10,000 but less than $15,000 would pay sales or use tax at the reduced 3.5% sales and use tax rate.
Resources Required :
The Arkansas Integrated Revenue System (AIRS) system will need to be programmed to
accommodate this change. Requirements gathering, development, testing, and training will take
approximately 280 hours at a cost of $56,000. This would also require recurring maintenance at a cost
of $20,000 annually.
Time Required :
Adequate time is provided for implementation.
Procedural Changes :
Computer programs and training manuals will need to be updated to account for the change in the
sales tax threshold for used motor vehicles. Department employees and State Revenue Office
employees will need to be educated on changes as well as the taxpayer community.
Other Comments :
None.
Legal Analysis :
None.
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Statutes affected:
SB 134: 26-52-324(a), 26-52-510(b), 26-53-126(b), 26-53-150(a)