DFA ALJ Denies Arm's Length Exception to Related-Party Interest Addback

The recent Administrative Decision of the Arkansas Department of Finance and Administration Office of Hearings and Appeals in dockets 20-109 and 20-110 (Dec. 9, 2019) highlights the challenge involved obtaining a refund on an amended return claiming an exception to the addback statute. Intercompany interest charges face substantial scrutiny, and taxpayers will need to be prepared to provide comprehensive documentation to claim an exception to add-back, and particularly if the intercompany interest is at a higher rate than the corporate group's third-party financing. [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]