Arkansas Trucking Association sues Arkansas over attempt to collect back taxes

| 6/11/2003

The Arkansas Trucking Association and Wayne Smith Trucking have sued the Arkansas Department of Finance and Administration over the agency’s attempt to collect back sales tax from truckers.

Judge Ellen Brantley will hear the case, which was filed May 23 in Pulaski County Circuit Court. No first court date has been set, and the department has until June 24 to respond to the complaint. The case will not likely go before a jury, Lane Kidd, president of the Arkansas Trucking Association, said.

Kidd said the plaintiffs want the state to return the back sales tax it has already collected.

“At this point what we seek is to get all the taxes paid under this policy returned to the companies and the individuals who paid them,” Kidd said. “Whether there are any damages that are sought over and above that would be nice if received, but it has not yet been requested.”

So far, Kidd’s organization and Wayne Smith Trucking are the only plaintiffs. No owner-operators have joined the suit at this point, but the suit does refer several times to “similarly situated carriers.” The Arkansas Trucking Associations is paying all the legal fees in the case.

The controversy erupted earlier this year when the International Registration Plan, an interstate compact regulating trucking fees, ruled that truckers who did not live in Oklahoma could no longer base plate there. That forced hundreds, perhaps thousands of truckers to move their plates to their home states.

Officials at the Arkansas Department of Finance and Administration contended the truckers would owe back taxes when the companies or individuals moved their truck registrations back to Arkansas. The department contended that those truckers who had base plated outside of Arkansas did so illegally.

The state sales tax could run as high as $6,000 on a new rig.

Legislators in the state acted quickly, introducing a bill to cap the sales tax on trucks in Arkansas. The bill, HB1030, was signed into law by Gov. Mike Huckabee March 21. Now called Act 551, the law limits the state’s sales tax to the first $9,150 of the value of a tractor and to the first $1,000 of the value of a trailer. Rep. Don House, D-Walnut Ridge, one of the bill’s primary sponsors, said that would make the tax on a trailer $51.25, and the maximum tax on a tractor $469.

However, a provision in the bill that would have given returning truckers amnesty from paying the tax for previous purchases was removed after Attorney General Mike Beebe contended lawmakers could not, under the state’s constitution, give Arkansas-based companies who register their vehicles in other states a break on back taxes.

Kidd, OOIDA and others contend that the Oklahoma registrations were legal at the time truckers held them.

“Arkansas is really out on a pretty thin limb with this position of collecting back sales taxes by nullifying past registrations issued by Oklahoma,” he said.

That position was bolstered earlier this year in a letter sent to Arkansas officials Jan. 27 by Robert Pitcher of IRP Inc.

In the letter, he said Arkansas truckers who previously base plated in states such as Oklahoma had done so legally under the multi-state agreement’s rules at the time.

“This letter is to inform you that the board has never taken a position that motor carriers registered under Oklahoma law as in effect prior to April 15, 2002, were not legally registered, or that registrations issued to such carriers were invalid under the plan,” Pitcher wrote in the letter.

“Now that these companies are returning to register here after Oklahoma has changed its rules, Arkansas, in order to collect back sales tax, is essentially nullifying the registrations issued by Oklahoma,” Kidd said. “That seems pretty disingenuous considering that Arkansas accepted their proportionate registration fees those years and never questions those registrations.”

However, Tim Leathers, a spokesman for the Department of Finance and Administration, had a quick, two-word response regarding the allegations in the suit: “They’re wrong.”

Leathers said the trucks that baseplated out of state “did not meet the requirements for not being required to pay the tax and baseplate in Arkansas,” he said. He confirmed that Arkansas did receive fees from Oklahoma under the IRP during that time, but “no sales tax.”

“Some of those fees in Oklahoma wound up in some pockets,” he said. “Generally, we accepted whatever Oklahoma sent us.”

Leathers stressed that the state had taken steps to reduce the burden that the back tax collections might place on truckers. The state has, for example, arranged payment plans so truckers do not have to pay the back taxes all at once. That, he said, allowed truckers to go ahead and register their vehicles.

“We only went back three years,” he added. “The attorney general’s opinion said that the statute might have gone beyond that because there’s no filing (of the tax in previous years on those trucks).”

“There were local truckers who did not choose to try and avoid the tax that were competing with these people,” he said. Those trucker have “voiced in the local press, in interview and other places that it was unfair for them to have been paying that tax when their competition did not have to pay the tax.”

Lane did not know how much in back taxes has been collected so far, but he noted that during hearings earlier this year, the agency said it expected to collect as much as $1.5 million from truckers and carriers.

“We don’t know if that’s a good figure, if it’s close or if they’ve surpassed it yet,” Kidd said.

The amount collected so far should come out during the trial. Meanwhile, Kidd is optimistic.

“Everything we hear from our legal counsel is that the arguments are sound that this is a real rogue policy that the state’s taken,” Kidd said. “They feel confident that we’ll win.”

--by Mark H. Reddig, associate editor

Mark Reddig can be reached at