How to Figure Sales Tax on a Car in Arkansas

Understanding sales tax implications is important when purchasing a vehicle in Arkansas. Calculating the exact amount involves considering state and local tax rates, along with various factors specific to your purchase. Being aware of these details helps ensure a smooth transaction and prevents unexpected expenses.

Understanding Arkansas Vehicle Sales Tax

Arkansas imposes a state sales tax of 6.5% on vehicle purchases. This rate applies to most transactions, establishing a baseline for the tax owed. The Department of Finance and Administration (DFA) oversees its collection.

Local sales taxes, levied by cities and counties, also apply to vehicle purchases. These rates vary from 0% to 5%. The combined state and local rates mean total sales tax can range from 6.5% to 11.5% depending on the vehicle’s registration location. The Arkansas DFA provides resources to look up precise combined rates by address or location.

The “purchase price” or “total consideration” forms the base for calculating sales tax. This refers to the agreed-upon price of the vehicle itself. However, certain items like registration, title, or lien filing fees are excluded from this taxable amount. For out-of-state purchases, tax may be calculated based on the vehicle’s fair market value (FMV) rather than the purchase price.

Factors Influencing Your Sales Tax Calculation

Several factors influence the final sales tax amount. A significant factor is the trade-in value of an existing vehicle. When trading in a used vehicle as part of a new purchase, sales tax is calculated on the net difference between the new vehicle’s price and the trade-in value. This deduction can lead to savings on your overall tax liability.

The type of vehicle, new or used, impacts the sales tax rate. For new vehicles purchased for $4,000 or more, the full 6.5% state sales tax rate applies. Used vehicles are subject to a tiered tax structure. Those with a purchase price of less than $4,000 are exempt from state sales tax.

For used vehicles costing at least $4,000 but less than $10,000, a reduced state sales tax rate of 3.5% applies. If the used vehicle’s purchase price is $10,000 or more, the standard 6.5% state sales tax rate applies.

Sales tax applies regardless of whether the vehicle is purchased from a licensed dealership or through a private sale. Arkansas tax law does not exempt isolated private sales. In private sales, the buyer pays sales tax directly to the state when registering the vehicle. A bill of sale is required, as it establishes the purchase price for tax calculation and registration.

Exemptions from Vehicle Sales Tax

While most vehicle purchases are subject to sales tax, certain situations qualify for an exemption. Vehicles received as a gift are exempt. To claim this, the recipient must complete and submit a Gift Certification Form (Form 10-395) to the Arkansas Department of Finance and Administration (DFA). This form confirms no payment or consideration was exchanged.

Arkansas does not have a specific sales tax exemption solely for transfers between family members. However, if the vehicle is transferred as a gift, it falls under the gift exemption rules. If a used vehicle’s value is below the $4,000 threshold, it is exempt regardless of the relationship.

Certain organizations may qualify for sales tax exemptions on vehicle purchases. New motor vehicles purchased by qualified non-profit organizations are exempt if used for specific contracts with the Department of Human Services or purchased with Federal Transit Administration funds. A broader sales tax exemption for general non-profit purchases in Arkansas explicitly excludes motor vehicles. These exemptions are strict and require proper documentation.

Paying Your Vehicle Sales Tax

After calculating sales tax, the next step is payment and registration. In Arkansas, sales tax on a newly purchased vehicle is paid at the time of registration. This must be completed within 30 days of the vehicle’s purchase date. Failing to pay taxes when due can result in a 10% penalty.

Sales tax and registration are handled through your local county revenue office, a branch of the Arkansas Department of Finance and Administration (DFA). Some online portals allow prepaying sales tax before visiting the office, which can help avoid late penalties.

When paying sales tax and registering your vehicle, you will need to present several documents. These include the vehicle’s title or Manufacturer’s Statement of Origin (MSO) signed over to you, a bill of sale, and proof of valid vehicle insurance. An odometer disclosure statement is required for vehicles less than 10 years old. You may also need a property tax printout or waiver, demonstrating that personal property taxes have been paid or assessed. You will also need to complete the Application for Title & Registration (Form 10-381) at the office.