Arkansas DFA legal opinion effectively adopts convenience of the employer test

With telework on the rise, the state taxation of remote employees has become a hot issue. The Arkansas Department of Finance and Administration has now published Revenue Legal Counsel Opinion no. 20200203 (Feb. 20, 2020), which adopts what is effectively a "convenience of the employer" test imposing income tax on remote, out-of-state employee income where the employee is working for an Arkansas-based office. This policy marks an apparent reversal of the position laid out in DFA's Individual Income Tax Regulation 1.26-52-202(c), which requires allocation of nonresident employment income based on where the work was performed. [More]

DFA Charitable Determinations Pose a Challenging Test for Nonprofits

Charitable nonprofits in Arkansas need to be aware of the stringent "otherwise performed by the government" test applied by Department of Finance and Administration (DFA) for the sales tax exemptions, as illustrated by recent DFA opinion letters. This test is more stringent than that applied by the IRS for 501(c)(3) status, and nonprofits may face sales tax exposure, especially on their fundraising sales including fundraising dinners or events. With property tax exemption rules and guidelines to be forthcoming soon, these rulings may also preview the direction DFA could take in the property tax charitable exemption context. [More]

Charlie Collins Is the New Arkansas Commissioner of Revenue!

In a positive development for taxpayers, Arkansas Department of Finance and Administration Secretary Larry Walther announced today the appointment of Charlie Collins as the new Commissioner of Revenue. With his background in business and politics, he brings a fresh viewpoint to an important position, essentially the lead state tax administrator for Arkansas, that has historically been filled by individuals who "came up through the ranks" in the DFA Revenue Division. [More]

Administrative Hearing: "Tax-Included" Invoicing Creates Remittance Obligation Regardless of Taxability

States vary in the degree to which they allow sellers to bundle ("tax included") sales tax instead of collecting from the customer as a separate line-item, and Arkansas practice is generally fairly liberal. But this can be a double-edged sword, as shown in Department of Finance and Administration (DFA) Administrative Decision nos. 19-415 & 416 (Jun. 28, 2019), which held that a "tax included" legend meant that the seller was collecting sales tax. As a collector, that seller had an obligation to remit the deemed collected tax regardless of the underlying taxability of the transaction and was found liable for tax for failing to do so. [More]

Summary of 2019 Arkansas Tax Procedure and General Administration Legislation

The following general tax administration changes were made by the General Assembly in 2019. While most of the changes were relatively minor technical adjustments, the consolidation of franchise tax administration and the Assessment Coordination Department into the Department of Finance and Administration will have long-term significance, as will the biennial tax preference reviews beginning 2021-2022 ahead of the 2023 legislative session. [More]