Arkansas Legislators Work to Cut Sales Tax on Used Vehicles

Arkansas lawmakers have proposed four bills that would change the rules on paying a sales tax for used vehicles.

Senate Bill 459 — sponsored by state Sen. Trent Garner, R-El Dorado — and House Bill 1453 — sponsored by state Rep. Kendon Underwood, R-District 90 in Benton County —  remove the sales tax on used vehicles. 

The sales tax sits at 6.5% for used vehicles. Arkansans do not have to pay the sales tax on used vehicles that cost fewer than $4,000. 

House Bill 1431 – sponsored by state Rep. Robin Lundstrum, R-District 87 – would up the dollar amount from $4,000 to $10,000, meaning people would not have to pay a sales tax on vehicles that cost $10,000 or less. District 87 includes parts of Benton and Washington counties.

The final bill House Bill 1160 – sponsored by state Rep. John Payton, R-District 64 –would up the dollar amount that excludes people from paying the sales tax on used cars from $4,000 to $7,500. In two years, that $7,500 would rise to $10,000. District 64 includes parts of Baxter, Cleburne, Marion, Searcy, and Stone counties. 

“I think people are putting up choices so we can shop ’til we drop,” Lundstrum said. 

The bills all await review by the Revenue and Tax Committee, Lundstrum explained. The committee will decide which bill it wants to support, and then the state House of Representatives or the Arkansas Senate, depending on where the bill originated, will vote on the proposal.

The tax on used cars goes to pay for road improvements throughout the state.

What those selling used cars think 

Several used-car dealership owners agreed that any bill to reduce the amount of money that people have to spend on sales taxes for used vehicles is a good thing. 

Arturo Salas, with S&R Sales on Midland Boulevard in Fort Smith, was in favor of a reduction.

“That would help a lot,” Salas said, adding it would help customers and up his sales.

Mohammad Yasin, with MJM Used Cars on Midland Boulevard in Fort Smith, said he thinks the move would keep people in the state. 

“We need to do whatever we can to keep people here,” Yasin said. 

Many of Yasin’s customers do not want to buy vehicles that cost more than $4,000 so they can avoid the tax, and it is difficult to sell cars and make money at that price. 

Buying cars so cheap also makes it hard for people to buy quality vehicles, Yasin said. Those cars can break down and keep people from going to work.

Lundstrum agreed and said it “doesn’t do much good to have a great job and not have a vehicle that you can rely on.”

“People need good transportation,” she said.

Yasin said the issue is something the upper class often can overlook. 

“Some people that have money don’t think about these little things,” Yasin said.

Often Yasin sells cars with a state sales tax that adds up to $1,000.

“When your tags is more expensive than your rent that is a lot of money,” Yasin said. 

Terri Kitching, with Midway Auto Sales on Towson Avenue in Fort Smith, said he has customers who do not want to pay a sales tax on used cars because they have already been taxed as new cars.

Frequently, people can pay for the car but cannot afford the tax, Kitching said. 

A reduction in tax would allow poorer Arkansans to buy better cars, Kitching added.

“We’ve got to do something,” Lundstrum said.

Source: Legislators work to cut sales tax on used vehicles