006.05.98 Ark. Code R. 002 - Emergency Amendment to Regulation GR-3(C) - Manufacturers' Buydowns

Arkansas Gross Receipts Tax Regulation GR-3(C) is amended to add two new paragraphs, to be paragraphs (4)(a) and (4)(b), to read as follows:

"(4)

(a) Manufacturers' buydowns shall not be considered a part of the gross proceeds or gross receipts paid by consumers for products on which buydowns have been paid. The provisions of this regulation do not affect sales of property involving the use of manufacturer's or retailer's coupons. Sales involving the use of such coupons shall be governed by Gross Receipts Tax Regulation GR-18.

(b) For purposes of this regulation, a "buydown" is a cash payment made to a retailer by a manufacturer as an incentive to the retailer to reduce the retail price of the manufacturer's products for the purpose of increasing sales of such products. A buydown is a transaction between the manufacturer and the retailer, to which the consumer is not a party."

Issued and hereby effective this 23th day of Feb 1998 in the City of Little Rock, Arkansas.

FINDING OF IMMINENT PERIL AND STATEMENT OF REASONS

The use of "buydowns" have become a popular selling incentive within this state. Buydowns are cash payments from the manufacturer to a retailer which allow the retailer to sell a particular product at a lower price. Buydowns are frequently used by manufacturers instead of issuing manufacturers' coupons. Retailers are confused about how sales tax is to be collected from a consumer if the selling price of an item is reduced based upon the buydown received by the retailer from the manufacturer. These buydowns occur solely between the manufacturer and retailer and should not be considered part of the taxable gross receipts paid by the ultimate consumer for the manufacturer's product.

Because retailers are confused concerning how to treat buydowns for sales tax purposes, some retailers are collecting sales tax from their customers on the value of any buydown while others do not. As a result, some consumers will be charged an excessive amount of sales tax on the sale of such products. Therefore, the Director of the Department of Finance and Administration and the Commissioner of Revenue find that a state of imminent peril exists requiring the issuance of the attached amendment to Gross Receipts Tax Regulation GR-3(C) on an emergency basis. This regulation is necessary to clarify this issue and to prevent taxpayers from collecting an improper or excessive amount of sales tax from their customers.

Notes

006.05.98 Ark. Code R. 002

2/27/1998