Overview
The Arkansas Department of Finance and Administration Office of Hearings and Appeals has sustained a compensating use tax assessment issued against a taxpayer for a purchase of tangible personal property made from an out-of-state vendor.
Legal Basis
Under Arkansas law, every person who is:
- Storing
- Using
- Distributing
- Consuming
in the state tangible personal property, specified digital products, a digital code, or taxable services purchased from a vendor will be liable for use tax.
Case Review
Upon review of the relevant documents:
- The items purchased by the taxpayer were determined to be tangible personal property.
- The documents also supported a finding of the sales price of the purchased items, as reflected on the Remittance Transfer Receipt provided by the taxpayer.
Conclusion
The use tax assessment was upheld on the basis that the purchase met the requirements under Arkansas law for compensating use tax on tangible personal property bought from an out-of-state vendor.
Frequently Asked Questions
What is a compensating use tax in Arkansas?
A compensating use tax in Arkansas is a tax levied on tangible personal property, specified digital products, digital codes, or taxable services purchased from out-of-state vendors when these items are stored, used, distributed, or consumed in the state. It ensures that in-state and out-of-state purchases are taxed equally.
Who is liable for use tax in Arkansas?
Anyone who stores, uses, distributes, or consumes taxable items in Arkansas that were purchased from a vendor particularly out-of-state is liable for use tax. This includes both businesses and individuals.
Why was the taxpayer in this case assessed a use tax?
The taxpayer was assessed a use tax because they purchased tangible personal property from an out-of-state vendor. The Arkansas Department of Finance and Administration determined that the items qualified as taxable under state law and that the purchase met the criteria for compensating use tax.
What evidence supported the tax assessment?
The tax assessment was supported by documentation that confirmed the nature of the items as tangible personal property and identified the sales price through a Remittance Transfer Receipt. This evidence was sufficient to sustain the assessment.
Can out-of-state purchases be exempt from Arkansas use tax?
Some out-of-state purchases may be exempt if they qualify under specific statutory exemptions, but in general, if the purchased goods are brought into Arkansas for use, storage, distribution, or consumption, they are subject to use tax unless an exemption applies.