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Arkansas Statute of Limitations - and How It's Unique

author photo of B.J. Pritchett

The Arkansas Tax Procedures {Act 401 of 1979} provides a three year statute of limitations for assessments and refunds {Arkansas Statute 26-18-306(a)(1)}. However, Arkansas is unique in that under assessments, if the taxpayer has understated the tax liability by 25% or more, the state of Arkansas has the right to review and assess six years {Arkansas Statute 26-18-306(e)}. Unfortunately, if the tax is overstated by 25% or more, there is no extension to a six year refund.

The state of Arkansas has the right to make assessments for the three year statute of limitations. While the state of Arkansas has the right to review and assess tax in six years, the state is limited as to the years 4, 5 and 6. When the years 4, 5 and 6 are added, the state of Arkansas can only assess the months in those years that are understated by 25% or more. If a month in years 4, 5 and 6 is understated by 24%, it cannot be assessed tax under the audit.

If the taxpayer has signed a waiver extending the statute of limitations for assessments to a future date, mutually agreed upon, this also extends the statute of limitations for refunds. Sometimes it is in the taxpayer’s best interest to sign a waiver that extends the statute of limitations in order to address overpayments of tax in years 4, 5 and 6 of an audit.

About the Author: B.J. Pritchett, CMI, is the owner of Pritchett Sales & Use Tax Consulting and the Arkansas Sales and Use Tax School based in Hot Springs National Park, Arkansas. Learn more about her by visiting her author bio page.

Comments or questions may be submitted by using the on-page "Comment" feature, subject to disclaimer at bottom of page. Additional contact options (and Consultation Requests) are also available on B.J.'s associated Firm Profile page.

Other recent “Arkansas (AR)” posts by B.J. Pritchett, CMI:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.

Comments

17 Responses to Arkansas Statute of Limitations - and How It's Unique

  • Posted by Nat on October 10, 2018 8:09am:

    I was forced to close my business in 2012. I couldn't pay my last sales tax. (We lost everything, house, etc.). I attempted an offer in compromise with the state, and they wanted the full amount. Does this debt ever go away? I did a federal offer in compromise and settle that debt.

    • Posted by Author photo of B.J. Pritchettbjpritchett on October 10, 2018 1:42pm:

      Nat,

      There are times when the State of Arkansas loses perspective and this is one of those cases. My advice is to sit on it!

      Here's why:

      After 10 years which for you would be 2022, the certificate of indebtedness disappears from the state's books.

      When you made the offer to the state, they should have worked with you - now they get nothing.

  • Posted by Maurice on October 1, 2018 7:26am:

    Is there a statute of limitations, Arkansas, on Certificates of Indebtedness for non-payment of collected sales tax from 1985 and 1986?

    • Posted by Author photo of B.J. Pritchettbjpritchett on October 1, 2018 12:06pm:

      Maurice,

      Now you can breathe a sigh of relief. After 10 years the Certificate of indebtedness falls off. Liens should be removed after 10 years.

      • Posted by Maurice on October 10, 2018 6:37pm:

        Are the taxes associated with the certificate of indebtedness still collectible.

        • Posted by Author photo of B.J. Pritchettbjpritchett on October 11, 2018 7:49am:

          No they are not collectible and the lien should be lifted.

  • Posted by Melissa on August 20, 2018 3:51pm:

    I received a letter from the Baxter County Tax Collector (8/16/2018) stating I owe delinquent taxes - from 1994 for Ad Valorem. I have not lived in Arkansas since 1992, and this is the first I have been notified. Can they still legally collect this tax 24 years later?? It is for $62 including late fees but I am a bit skeptical... and I don't even know what the tax is for.

    • Posted by Author photo of B.J. Pritchettbjpritchett on August 20, 2018 7:39pm:

      Please know my comments are for Sales/Use Taxes; however, if I had received a Property Tax Bill and did not own any property in Arkansas in 1993 or 1994, I would contact the Baxter County Tax Collector and ask what property is being assessed. If I sold the property I would tell the Baxter County Tax Collector who I sold the property to. If I did own the property, I'd pay the tax because the County can put a lien on any of your current assets in the state of Arkansas.

      Taxes never go away unless you die. And it's not worth it to go to that length to escape paying the tax.

      Investigate where the County is coming from on the issue and look at your records. Remember property taxes are paid in arrears. So you may have owned property in Arkansas in 1993 and sold it in 1993. Just check it out.

      I hope this at least puts you on the right path to addressing your Ad Valorem Tax Bill.

  • Posted by gail on December 23, 2017 1:52am:

    is there a statue on personal property tax in arkansas I filed bankruptcy in 2006 everything was included chapter 7 now after 14 years they are coming up saying I owe never notified nothing

    • Posted by Author photo of B.J. Pritchettbjpritchett on December 26, 2017 11:15am:

      Thank you for your question; however, this is not a sales/use tax issue. I would advise getting legal advice by contacting the attorneys who filed the bankruptcy. I wish you luck in pursuing the answer to your question.

    • Posted by BJ on December 26, 2017 11:11am:

      I appreciate you asking the question regarding statute of limitations on personal property tax in Arkansas. However, this is not a question for sales/use taxes.

      You will want to consult the attorneys who filed your bankruptcy claim and seek legal advice. I am not an attorney and providing legal advice regarding bankruptcies is beyond the scope of the web site Sales Tax Support.
      I wish you well in seeking your answer.

  • Posted by Ann on November 15, 2017 3:04pm:

    Is the out of state compensating use tax a trust tax? We have An S corp that is bankrupt and no longer doing business in Arkansas which was assessed use tax under audit. Are the shareholders personally liable for the tax?

    • Posted by BJ on November 15, 2017 4:05pm:

      I'm not sure what you mean by a trust tax - the state does trust the taxpayer to remit the appropriate tax when due. An S Corporation that is bankrupt and no longer doing business in Arkansas which was assessed use tax under audit would require the individuals who were owners of the S Corporation to pay the tax due. If none of the owners live in Arkansas, the state of Arkansas would have nothing to attach a lien to and would wait until such time as one of the individuals comes into the state of Arkansas with tangible personal property or real property ownership. If all owners are out-of-state, the state of Arkansas is out of luck. Let me know if this answers your question.

  • Posted by Carmen on September 27, 2017 12:39pm:

    I am in the process of a sales and use tax audit for our business. After the auditor has finished and given us their findings, what is the proper way to request a waiver of statute of limitations and it only to be extended 30-60 days?
    Thank you for your help!

    • Posted by Author photo of B.J. Pritchettbjpritchett on September 27, 2017 2:21pm:

      As soon as the auditor sits down with you to review the exceptions found, request the auditor to provide you a waiver of statute of limitations with an extension date of 30 or 60 days (your choice). The auditor should be able to have the waiver to you on the same day you requested it.

      If the auditor has already provided the "Summary of Findings" you may need to request from the auditor's supervisor or manager the waiver of statute of limitations. Generally, when the "Summary of Findings" is delivered, the taxpayer will next receive the "Notice of Assessment" from Little Rock and then you'll be in the "Protest" Phase of pay it or protest it within 60 days of receipt of the "Notice of Assessment". Keep the Envelope the Notice comes in as this would have a postal date on it.

      Just keep in mind, interest will continue to accrue on the tax due portion of your audit.

  • Posted by Author photo of B.J. Pritchettbjpritchett on September 18, 2017 8:27am:

    The sales tax is imposed on all Contractors making purchases of materials to be used in construction or substantial remodeling of buildings.

    If the Contractor is a Sub-Contractor, the Sub-Contractor is also liable for the sales tax on purchases of materials to be used in construction or substantial remodeling of buildings.

    As long as the Contractor/Sub-Contractor are working on Real Property, the tax liability falls to the Contractor/Sub-Contractor.

    There are three exceptions: flooring, locks and electrical devices in EXISTING BUILDINGS.

    If the Contractor/Sub-Contractor works on flooring, locks and electrical devices in Existing Buildings, the Contractor/Sub-Contractor may purchase the materials used in the three exceptions Tax-Free as these three exceptions are Taxable Services by Contractors/Sub-Contractors.

    SOURCE: Arkansas Rule GR-21 or Statute 26-52-307

  • Posted by alan on September 18, 2017 6:22am:

    Thank you for your time- we contract our labor with small installation companies for all our work including jobs pertaining to remodeling. Q? who pays the sales tax on labor for the remodeling jobs?

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