After convening for a little more than three months, the General Assembly adjourned sine die on May 5. AADA entered the legislative session with an incredibly aggressive plan, and overall, we were very successful. We cannot thank each dealer enough for their work in making AADA a strong force at the Capitol.

AADA Legislative Package

Lease Reform
A key victory for AADA this session was the comprehensive lease reform bill we were able to pass. This legislation will be critical for dealers moving forward, especially as vehicle prices continue to rise and EVs continue to sit on lots.

The need for lease reform was obvious: 

1. Currently Arkansas is not competitive for leasing vehicles, with the lowest lease penetration rate in the country.
2. EVs are a more attractive lease option for some consumers.
3. Vehicle prices are extremely high.
4. Ford dealers were especially uncompetitive because Ford adds a 25% mark-up to each monthly lease payment for the purpose of remitting personal property taxes.
5. Leasing was very confusing in Arkansas for consumers, dealers and DMV employees.

HB1960, now Act 1013, by Rep. Wardlaw fixes a number of key problems with leasing in Arkansas:

1. Act 1013 makes the lease process similar to the vehicle purchase process. 
2. Act 1013 clarifies that the lessee is responsible for assessing and paying personal property taxes rather than the lessor. 
3. Act 1013 caps the local sales tax at $2,500, similar to a vehicle purchase.

These items should make leasing a much more attractive option for dealers and consumers. AADA is committed to providing training for both dealers and state employees on vehicle leasing.

Dealer Extra Tags
Arkansas dealers faced a very concerning problem following a March 28, 2024, split decision by the Arkansas Supreme Court. Reversing a Circuit Court decision, the Supreme Court ruled that use of vehicles in a dealership’s inventory with dealer’s extra license plates by persons not authorized by statute or rule to use these plates amounts to a withdrawal from stock or use and will trigger assessment of sales tax based on the value of the vehicle.

For background: During routine tax audits, two Arkansas dealers were assessed sales tax for alleged misuse of dealer extra license plates. The sales tax assessments were appealed, and the Circuit Court reversed DF&A’s assessments of sales tax. DF&A appealed that decision to the Arkansas Supreme Court.

DF&A’s position was the use of vehicles with dealer’s extra license plates by persons not authorized by statute or rule to use them amounts to “withdrawal from stock or use” of the vehicles within the meaning of Ark. Code Ann. § 26-52-322, thus giving rise to the gross receipts tax based on the value of the vehicle. The Supreme Court ultimately agreed with DF&A.

This decision opened up an enormous amount of financial exposure for dealers. Additionally, the only clear way to fix this problem was legislatively.

AADA Solution: First, HB1688, now Act 710, by Rep. Cavenaugh and Sen. Stone, has two key provisions: 

• Act 710 updates the eligible users and uses for dealer extra license plates by updating the definition of manager and adding to the provisions regarding allowable uses. 
• Act 710 also specifically states that the use of a dealer extra license plate does not constitute a withdrawal from stock and is therefore exempt from Arkansas use tax.

Second, HB1834, now Act 816, adds a right of action for the Motor Vehicle Commission to deny, suspend or revoke a dealer’s license issued by the Commission in the event a dealer misuses a dealer extra license plate by allowing a non-eligible user to drive on this license plate. This bill was critical in order to alleviate concerns that there was no penalty for dealers misusing extra tags.

AADA will issue more guidance on dealer extra tag use as a result of this bill.

Electronic Registration and Titling
Arkansas dealers have long needed a solution to allow for electronic signatures on key forms and to digitally upload customer paperwork. HB1845, now Act 926, by Rep. Holcomb and Sen. Hill, is a permissive bill that allows DF&A to establish an electronic registration and titling system that will allow dealers in Arkansas to digitally upload customer documents with the goal of ultimately speeding up the registration and titling process.

Bills And Issues AADA Opposed

Dealers Collecting Sales Tax (Temporary Tag Reform)
Expired temporary tags on the highways are a common source of frustration for many Arkansans. There were several reform efforts to address this issue, but one that AADA opposed was an effort by Rep. Perry with HB1968 that would have required dealers to collect sales tax on vehicles at the point of sale. Additionally, this bill would have required consumers to pay the full sales tax amount of their vehicle purchase and file for a rebate in order to get the tax credit for the trade-in.

For a variety of reasons, including the fact that dealers collecting sales tax would have no impact on the number of expired temporary tags on vehicles, Rep. Perry moved this bill to interim study. We anticipate it will come back next session.

Factory Sales
Heading into the legislative session, we were preparing to oppose a factory sales bill similar to the one filed last session, as that bill’s sponsor indicated this was a certainty. Through the hard work of many dealers, we were able to fend off this issue and avoid a fight this session. This issue will remain a fight in future sessions.