Retro Truck Tax Seems Wrong (Editorial)

Still hanging over the head of as many as 400 small trucking companies in Arkansas is the issue of paying retroactive sales taxes.

About 50 truckers recently protested the unfairness of an Arkansas Department of Finance and Administration ruling requiring the companies to pay sales taxes for the past three years before they will be allowed to register their tractors and trailers in Arkansas. It also seems unfair to us.

Here’s the history: Oklahoma had historically allowed trucking companies with just a post office box or phone number in that state to register all their vehicles in Oklahoma. When an Oklahoma court ruled that trucking firms based in other states could not register in Oklahoma, a legal tax break for the trucking firms was eliminated.

When Arkansas-based trucking companies that had previously registered their trucks in Oklahoma tried to register in their home state, the DFA said it “had no choice” but to collect sales taxes dating back three years. The DFA’s reasoning is that the Arkansas truckers had been guilty of tax evasion.

But what the motor carriers were doing was perfectly legal at the time. To require Arkansas carriers attempting to register new equipment in the state to first pay sales tax on all other equipment bought during the past three years seems out of line — and it could force some of those companies to move their headquarters to more truck-friendly states — Oklahoma comes to mind — or go out of business.

Arkansas is one of just seven states that still charges full-ride sales taxes on trucking equipment. Other states exempt trucking companies, charge only a portion of the tax or cap it.

Oklahoma has been the big beneficiary of Arkansas’ policy. Oklahoma charges only a $10 excise tax and nominal licensing fees, plus it is one of 28 states that exempt trucking equipment from sales taxes.

In Arkansas, a company buying a new tractor at the average price of $80,000 and a new trailer at the average price of $20,000 would wind up paying $5,125.

It doesn’t take a genius to see why Wal-Mart Stores Inc., J.B. Hunt Transport Services Inc. and USA Truck Inc. trucks are running around with Oklahoma license plates. ABF Freight registers its vehicles in Illinois.

We say call it even on the retroactive taxes and let the big rigs, and Arkansas’ economy, roll.