How is a car lease taxed in Arkansas?

What this means for your lease

In plain English: tax is added to each monthly payment. Arkansas's state-level lease tax rate is 6.5% (before any local add-on).

Your cap-cost reduction (cash down or rebates applied as a down payment) IS taxed in Arkansas, so putting more cash down does not escape the tax. LeaseWorth's estimate also taxes positive trade-in equity applied to the lease. Ask the leasing company how it handles a trade-in.

The detail

Act 1164 of 2013 requires tax on a motor vehicle lease or rental of 30 days or more to be paid on the lease payments made to the lessor during the term. The lessor collects sales tax on all gross receipts paid or transferred by the lessee as consideration for the lease, including down payments and periodic payments (26 CAR 30-1002); local sales tax applies only to the first $2,500 (Act 1013 of 2025). A vehicle the lessee transfers to the lessor as an initial lease payment is taxable gross receipts at its value, and the rule states that the purchaser trade-in deduction (26 CAR 30-701, formerly GR-12) does not apply to leased vehicles, so trade-in equity is taxed. The DFA rule still describes an older option to pay tax up front on the purchase price at registration; the 2013 statute governs.

Local add-ons

County and city sales taxes also apply to a lease, but only to the first $2,500: all periodic payments due on the lease are added together for that limit, and the lessor may collect the local tax on the first payment or spread it evenly across the payments (Act 1013 of 2025). The local tax on a lease is therefore at most the combined local rate times $2,500. The separate long-term rental vehicle tax has been 0% since July 1, 2015 (DFA rate table), so it no longer adds to a lease.