How Does Vehicle Sales Tax Work in Arkansas?
Understand how Arkansas vehicle sales tax is determined, including the impact of your residence and trade-in, to ensure a smooth registration process.
When purchasing a new or used vehicle in Arkansas, the transaction is subject to a state sales tax. This tax is not collected by the dealership or private seller at the moment of purchase. Instead, the buyer is responsible for paying the tax directly to the Arkansas Department of Finance and Administration (DFA) when titling and registering the vehicle. The final amount owed depends on the vehicle’s price and the buyer’s location.
Calculating Vehicle Sales Tax in Arkansas
The statewide sales tax rate is 6.5%, but the final amount is also affected by local taxes from cities and counties. These local rates are based on the buyer’s residential address, not the dealership’s location, and can result in a combined rate as high as 11.5%. Buyers can find precise rates using the tax lookup tool on the Arkansas DFA website.
The taxable price of a vehicle can be reduced. If you trade in a vehicle, its value is subtracted from the new vehicle’s price before tax is calculated. For example, if you buy a $30,000 car and your trade-in is worth $10,000, sales tax is only applied to the remaining $20,000.
Manufacturer rebates also lower the taxable price. If a manufacturer offers a $2,000 rebate on a $35,000 vehicle, the tax is calculated on the post-rebate price of $33,000.
Arkansas uses a tiered tax structure for used vehicles. Vehicles purchased for less than $10,000 are exempt from sales tax. For vehicles priced between $10,000 and $15,000, a reduced state rate of 3.5% applies, plus local taxes. Used vehicles sold for more than $15,000 are taxed at the full 6.5% state rate plus local taxes.
Vehicle Sales Tax Exemptions
Certain vehicle transfers are exempt from sales tax, but each requires specific documentation to claim.
New Residents
Individuals moving to Arkansas with a vehicle they already own and have registered in another state are not required to pay Arkansas sales tax. The vehicle must have been registered in the new resident’s name in the previous state. When applying for an Arkansas title and registration, the owner must surrender their out-of-state title and registration as proof of prior ownership.
Gifts and Inheritance
Vehicles transferred as genuine gifts are exempt from sales tax. To claim this, the recipient must obtain a completed Gift Certification form (Form 10-395), signed by the donor, affirming that no money was exchanged. Without this affidavit, the state may assess tax based on the vehicle’s presumed market value.
Inheriting a vehicle does not trigger sales tax. The heir must secure an “Affidavit of Inheritance of a Motor Vehicle” (Form 10-306). This legal document certifies that they are the lawful inheritor of the vehicle. The transfer of a vehicle between immediate family members is also exempt, provided it qualifies under the gift exemption rules and the proper forms are completed.
Required Documents for Paying Sales Tax
Before heading to a revenue office, a buyer must gather a specific set of documents to pay sales tax and register the vehicle. Having this paperwork completed helps prevent delays.
- A Bill of Sale that details the transaction. It must include the full names and signatures of both the buyer and seller, the vehicle identification number (VIN), the date of the sale, and the final purchase price. A Bill of Sale is required if the price is not on the title, and it may need to be notarized for vehicles over $10,000.
- Proof of ownership, established through either the vehicle’s title for a used car or the Manufacturer’s Certificate of Origin (MCO) for a new one. The seller must properly sign the document over to the buyer.
- The “Application for Vehicle Registration” (Form 10-381), which can be downloaded from the Arkansas DFA website.
- A current proof of Arkansas automobile insurance.
Paying the Tax and Completing Registration
With all the necessary documents prepared, the final step is to visit a local Arkansas State Revenue Office to officially pay the sales tax and register the vehicle. The state provides an online office locator on the DFA website to help find the nearest location.
Upon arrival at the revenue office, you will present your completed application and all supporting documents to a clerk. The clerk will verify the information, confirm the taxable amount based on the purchase price and any trade-in, and calculate the final sales tax due, along with any title and registration fees.
Payment for the taxes and fees can be made by cash, check, or credit/debit card. After payment is processed, the buyer receives the official vehicle registration paperwork, a new set of license plates or a decal, and a receipt. This completes the process, making the vehicle legally registered in Arkansas.