Arkansas – Sales Tax Credit for the Sale of a Used Vehicle

SALT Report 2746 – The Arkansas Department of Finance & Administration’s quarterly newsletter discusses the sales and use tax credit available for certain vehicle sales. The newsletter states that if a consumer purchases a new vehicle and within 45 days, either before or after the purchase date, sells a different vehicle rather than using it as a trade in, the consumer is entitled to a credit of the sales or use tax due on the newly purchased vehicle.

The sales tax credit can be taken as follows:

  • If the price paid for the vehicle is greater than the proceeds from the sale of the used vehicle, the consumer will only pay tax on the net difference between the two amounts, or
  • If the purchased vehicle costs less than the proceeds from the vehicle sold by the consumer, the consumer will pay no sales tax on the newly purchased vehicle

The purchaser can receive an immediate tax credit when they register the new vehicle, if the old vehicle has been sold. The taxpayer must provide the Department with a copy of the vehicle’s bill of sale. The bill of sale should include the following information:

  • Signature of both the seller and the purchaser,
  • Names and addresses of both the seller and the purchaser,
  • A vehicle description,
  • VIN,
  • Sales price, and
  • Date of sale

If the new vehicle is purchased and registered with the Department prior to the other vehicle being sold, the taxpayer may request a refund for all or part of the tax paid on the new vehicle. In order to receive a refund, the taxpayer must complete a claim form and provide the documentation requested on the form.

However, a credit will not be allowed if the Department determines that a sale has not occurred. For example, a sale does not occur if the consumer transfers the title to a damaged or stolen vehicle to its insurance company in exchange for a cash settlement. And, a sale does not occur when a vehicle is transferred as a gift.

For Further Information

Arkansas Department of Finance & Administration – Arkansas State Revenue Tax Quarterly