Sales/Use/Indirect:
Arkansas Supreme Court Says Use Taxable Event Triggered Upon Temporary Withdrawal from Inventory

Case No. CV-23-450, Ark. (3/28/24). In a case involving two in-state auto dealerships that had assigned vehicles with dealer license tags from their inventory to various employees and owner family members, the Arkansas Supreme Court (Court) held that such assignments triggered taxable withdrawals from stock for use tax purposes under Arkansas statute (i.e., under Ark. Code Ann. section 26-52-322) even though these vehicles technically remained available for sale and were ultimately sold to consumers. In doing so, the Court explained that the relevant Arkansas statute does not require a permanent withdrawal from stock or consumption of the property at issue, and “the rules of statutory construction do not permit us to read into it words that are not there.” According to the Court, the plain language of the Arkansas statute contemplates that the use of the tangible personal property of an established business for use by any person constitutes a taxable withdrawal from stock and that, in this case, the underlying individuals enjoyed the benefits of the vehicles as any person would enjoy a vehicle they owned – that is, “without restriction, they relied on the vehicles as their primary means of transportation and transported their families and pets, ran personal errands, drove to and from work, and went on vacations in the vehicles.” In this respect, the Court concluded that it was clear under these circumstances that the vehicles were used, and therefore, withdrawn from stock based on the plain language of the statute. Please contact us with any questions.