Arkansas Considers Title Transfers Without Consideration to be Nontaxable

Nov 19th, 2021

An Arkansas decision recently determined that a title transfer without consideration paid was not taxable. However, the decision also determined that a title transfer of an aircraft, for consideration, from a taxpayer to a preexisting business is a taxable transaction. The taxpayer owned an aircraft. He transferred the title to the aircraft to a limited liability company (LLC), of which he was the sole owner. The taxpayer did not receive any consideration for the title transfer.

Arkansas taxes sales of tangible personal property unless an exemption applies. A "sale" includes the transfer of title to an aircraft by the seller to a different individual or entity. Arkansas considers a transfer of title to a newly formed partnership or corporation to be nontaxable. The Administrative Law Judge ("judge") found that the taxpayer's business was a preexisting business, so the exclusion for a transfer to a newly formed partnership or corporation did not apply. However, sales tax is based on the consideration given for the transfer of tangible personal property. The taxpayer transferred the title of the aircraft without receiving consideration for the transfer. The judge concluded that the taxpayer was not liable for tax because no consideration was received for the title transfer.