Bill Summary – FastDemocracy

Department of Finance and Administration
                                                           Legislative Impact Statement
Bill: SB133                              Amendment Number: S1
Bill Subtitle: TO INCREASE THE SALES AND USE TAX EXEMPTION FOR USED MOTOR
VEHICLES; AND TO REPEAL THE SPECIAL RATE OF TAX FOR CERTAIN USED MOTOR
VEHICLES, TRAILERS, AND SEMITRAILERS.
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Basic Change :
Sponsors: Sens. Payton, Dotson, Stubblefield, Stone, and Sullivan
Reps. Lundstrum, Andrews, Beck, S. Berry, M. Brown, John Carr, Cooper, Duffield, Ennett,
Hawk, D. Hodges, G. Hodges, Hollowell, Hudson, Ladyman, Long, Lynch, Maddox, McAlindon,
McClure, McCollum, McCullough, McGrew, Meeks, J. Moore, Painter, Pearce, Puryear, R. Scott
Richardson, Rose, Underwood, Unger, Watson, Whitaker, and Womack
Senate Amendment No.1 --- SB133-S1 clarifies that the state law changes proposed by SB133 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 exempt.
Original Bill --- Used Motor Vehicles --- Under current law, the sale of a used motor vehicle with a
sales price of at least $4,000 but no more than $10,000 is subject to a reduced state sales or use tax
rate of 3.5%. SB133 provides that the sale of a used motor vehicle for less than $10,000 will be exempt
from sales and use tax. The sale of a used motor vehicle for $10,000 or more will be taxed at the full
state sales tax rate.
Used Trailers and Semitrailers --- Under current law, the sale of a used trailer or semitrailer with a
sales price of less than $4,000 is not subject to sales or use tax. Also, under current law, the sale of a
used trailer or semitrailer with a sales price of at least $4,000 but no more than $10,000 is subject to a
reduced state sales or use tax rate of 3.5%. Under SB133, the sale of a used trailer or semitrailer with
a sales price of at least $4,000 would be subject to the full state sales or use tax rate of 6.5%. The sale
of used trailer or semi-trailer with a sales price of less than $4,000 would continue to be exempt from
sales or use tax.
New Motor Vehicles, Trailers, and Semitrailers --- Under current law, the sale of a new motor
vehicle, trailer, or semitrailer with a sales price of less than $4,000 is not subject to sales or use tax.
Also under current law, the sale of a new motor vehicle, trailer, or semitrailer with a sales price of
$4,000 or more is subject to the full state sales or use tax rate of 6.5%. SB133 repeals the current
exemption for sales of new motor vehicles, trailers, or semitrailers with a sales price of less than
$4,000. Therefore, all sales of new motor vehicles, trailers, and semitrailers would be subject to the full
6.5% sales or use tax rate.
SB133 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.
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                                        Department of Finance and Administration
                                                           Legislative Impact Statement
Bill: SB133                              Amendment Number: S1
Bill Subtitle: TO INCREASE THE SALES AND USE TAX EXEMPTION FOR USED MOTOR
VEHICLES; AND TO REPEAL THE SPECIAL RATE OF TAX FOR CERTAIN USED MOTOR
VEHICLES, TRAILERS, AND SEMITRAILERS.
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Revenue Impact :
FY2024
Total Approximate State Sales and Use Tax Loss                                                                                                  $3,376,599
( Estimate includes: 8 months increase of tax collected on new motor vehicles, trailers, or semitrailers
with selling price less than $4,000; 8 months increase of tax collected on used trailers and semitrailers
with sales price of at least $4,000 but no more than $10,000 at 6.5%; and 8 months loss of tax on used
motor vehicles with sales price at least $4,000 but no more than $10,000. )
General Revenue - 4.5%                                                                                                                                   -$2,265,178
Property Tax Relief - .5%                                                                                                                                -$251,686
Conservation Fund - .125%                                                                                                                                -$62,922
Educational Adequacy Fund - .875%                                                                                                                        -$440,451
Highway Fund - .5%                                                                                                                                       -$259,738
Educational Excellence Trust Fund -                                                                                                                       $0
Educational Adequacy (GR Transfer) -                                                                                                                      $0
State Central Services -                                                                                                                                 -$65,454
Constitutional Officers -                                                                                                                                -$31,169
Total Approximate Local City and
County Sales and Use Tax Loss                                                                                                              $978,000
FY2025
Total Approximate State Sales and Use Tax Loss                                                                                            $5,064,898
( Estimate includes: 12 months increase of tax collected on new motor vehicles, trailers, or semitrailers
with selling price less than $4,000; 8 months increase of tax collected on used trailers and semitrailers
with sales price of at least $4,000 but no more than $10,000 at 6.5%; and 8 months loss of tax on used
motor vehicles with sales price at least $4,000 but no more than $10,000. )
General Revenue - 4.5%                                                                                                                             -$3,049,156
Property Tax Relief - .5%                                                                                                                          -$377,530
Conservation Fund - .125%                                                                                                                          -$94,382
Educational Adequacy Fund - .875%                                                                                                                  -$660,677
Highway Fund - .5%                                                                                                                                 -$389,608
Educational Excellence Trust Fund -                                                                                                                -$320,296
Educational Adequacy (GR Transfer) -                                                                                                               -$28,315
State Central Services -                                                                                                                           -$98,181
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 2/26/2023           11:20 AM                                                                     2
                                        Department of Finance and Administration
                                                           Legislative Impact Statement
Bill: SB133                              Amendment Number: S1
Bill Subtitle: TO INCREASE THE SALES AND USE TAX EXEMPTION FOR USED MOTOR
VEHICLES; AND TO REPEAL THE SPECIAL RATE OF TAX FOR CERTAIN USED MOTOR
VEHICLES, TRAILERS, AND SEMITRAILERS.
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Constitutional Officers -                                                                                             -$46,753
Total Approximate Local City and
County Sales and Use Tax Loss                                                                                                              $1,467,000
[ Statistical data derived from State of Arkansas software reporting for CY2022. All numbers were
calculated based on the assumption that vehicles purchases remain constant.]
Summary of Revenue Impact:
FY2024
            State sales and use tax loss of approximately $5 million with 21,210 used motor vehicles
             exempt from sales and use tax (sales price of at least $4,000 but no more than $10,000);
            Sales and use tax increase of approximately $1 million with 6,488 new motor vehicles, trailers
             and semitrailers taxed at 6.5% (sales price of less than $4,000); and
            Sales and use tax increase of approximately $318,000 with 1,682 used trailers and semitrailers
             taxed at 6.5% (sales price of at least $4,000 but no more than $10,000).
FY2025
            State sales and use tax loss of approximately $7 million with 31,815 used motor vehicles,
             exempt from sales and use tax (sales price of at least $4,000 but no more than $10,000);
            Sales and use tax increase of approximately $1.6 million with 9,732 new motor vehicles,
             trailers and semitrailers taxed at 6.5% (sales price of less than $4,000); and
            Sales and use tax increase of approximately $478,000 with 2,523 used trailers and semitrailers
             taxed at 6.5% (sales price of at least $4,000 but no more than $10,000).
Taxpayer Impact :
A taxpayer purchasing a used motor vehicle with a total consideration paid of less than $10,000 would
not pay sales or use tax on the transaction. A taxpayer purchasing a used trailer or semitrailer with a
total consideration paid of $4,000 or more would be required to pay the full sales or use tax rate. A
taxpayer purchasing a new motor vehicle, trailer, or semitrailer would be required to pay the full sales
tax rate regardless of the amount of consideration paid.
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.
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 2/26/2023           11:20 AM                                                                     3
                                        Department of Finance and Administration
                                                           Legislative Impact Statement
Bill: SB133                              Amendment Number: S1
Bill Subtitle: TO INCREASE THE SALES AND USE TAX EXEMPTION FOR USED MOTOR
VEHICLES; AND TO REPEAL THE SPECIAL RATE OF TAX FOR CERTAIN USED MOTOR
VEHICLES, TRAILERS, AND SEMITRAILERS.
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Time Required :
Adequate time is provided for implementation.
Procedural Changes :
Computer programs and training manuals will need to be updated. Department employees and State
Revenue Office and Office of Motor Vehicle staff will need to be educated on changes as well as the
taxpayer community. Updates to the Motor Vehicle manual and website will be required.
Other Comments :
None.
Legal Analysis :
Original Bill --- SB133 repeals the entirety of §§ 26-52-324 and 26-53-150. SB133 may benefit from
an amendment to include the language contained in §§ 26-52-324(c) and 26-53-150(c) to clarify
whether the purchaser of a vehicle may deduct the amount he or she receives from a trade-in or
private sale when determining whether a vehicle qualifies for the tax exemption. Under current law, for
purposes of the reduced tax rate, the purchase price may not be reduced by the amount received from
a trade-in or private sale in order to qualify for the reduced sales or use tax rate.
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Statutes affected: 
SB 133: 26-52-301, 26-52-317, 26-52-324, 26-52-302, 26-52-103, 26-52-601, 26-52-606, 26-52-510, 26-52-510(b), 26-53-106(a), 26-53-107, 26-53-145, 26-53-150, 26-53-126(b)