Arkansas Ruling Treats Short-Term Car Rental Platform as a Marketplace Facilitator

October 29, 2020

As the sharing economy continues to expand, businesses that create online platforms to facilitate those transactions may be required to collect sales and use tax under economic nexus and marketplace facilitator rules.

By: Betsy Tuck, SALT Manager

The sharing economy is everywhere. Where there is a good or service to sell and a buyer, there is a platform to facilitate that transaction. Some of the most well-known platforms are in the retail (e.g., Amazon and Etsy), transportation (e.g., Uber and Lyft) and real estate (e.g., Airbnb and VRBO) industries.

On August 20, 2020, the Arkansas Department of Finance and Administration (DFA) issued a legal opinion to a taxpayer requesting guidance on the taxation of its new business model, described as an online car-sharing platform (also known as “peer-to-peer” model).

In this “peer-to-peer” model, the Car Rental Facilitation Company (Taxpayer) would allow private and commercial vehicle owners to list vehicles online for short-term rental through Taxpayer’s online platform for a fee. Additional facts regarding the platform are:

  • The platform is intended for short-term rentals;
  • Those listing vehicles (“hosts”) would set their own rates with assistance from Taxpayer;
  • Customers (“guests”) will rent vehicles through Taxpayer’s website or mobile application;
  • Taxpayer reviews and approves all hosts and guests before a rental may take place;
  • Vehicles will typically be delivered by the host to guest’s location; and,
  • Taxpayer’s principal place of business is located outside the state of Arkansas.

Taxpayer asked DFA for legal opinions on various taxability issues and responsibilities on behalf of Taxpayer and hosts. Legal declined to opine on responsibilities of hosts, but some of Taxpayer’s responsibilities were summarized as follows:

  1. Taxpayer would be considered a marketplace facilitator for transactions which involve short-term rentals of vehicles supplied by hosts. In Arkansas, a marketplace facilitator is defined as “a person that facilitates the sale of tangible personal property, taxable services . . . or specified digital products by: (A) Listing or advertising tangible personal property, taxable services . . . or specified digital products for sale in a forum; and (B) Either directly or indirectly through an agreement or arrangement with a third party, collecting payment from a purchaser and transmitting the payment to the person selling the tangible personal property, taxable services . . . or specified digital products, regardless of whether the person receives compensation or other consideration in exchange for the person’s services in collection and transmitting the payment.”[1]
  2. Taxpayer must collect gross receipts (i.e., sales) tax and rental vehicle tax for rentals of vehicles through the marketplace if they have met the threshold requirements of $100,000 of aggregate sales or 200 transactions in the current or preceding calendar year.[2] It is interesting to note that this ruling extends the marketplace facilitator collection requirements to the vehicle rental tax considering that tax is separate from the sales tax, though, it is reported on the same form as the sales tax.
  3. If Taxpayer meets the economic nexus thresholds and must collect and remit tax, the sale (rental) will be sourced to the location where the guest takes receipt of the vehicle. If the guest takes receipt of the vehicle at the guest’s home address, then the sale would be sourced to the guest’s home address.

As new business models emerge in response to the growth of the sharing economy, business owners must be mindful of their potential tax obligations. Aprio’s SALT team has experience with these new economic nexus and marketplace facilitator rules. We can assist your business to ensure that it complies with its sales and use tax obligations and that it does not incur unexpected liabilities and penalties. We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

Contact Betsy Tuck, SALT Manager at or Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at for more information.

This article was featured in the October 2020 SALT Newsletter.

[1] Ark. Code Ann. § 26-52-103(36).  A “forum” can be physical or electronic.  See Ark. Code Ann. § 26-52-103(35).

[2] Ark. Code Ann. § 26-52-111.

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