Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-404 - GROSS INCOME GENERALLY › Rule 1.26-51-404(a)(2) - Installment Sales - Personal Property

Current through Register Vol. 49, No. 6, June, 2024
Dealers who sell personal property on the installment plan
					 may elect to report the income on installment sales over the life of the
					 installment contract provided the initial payment is thirty per cent (30%) or
					 less. The rule prescribed is that a person who regularly sells or otherwise
					 disposes of personal property on the installment plan, whether or not title
					 remains in the vendor until the property is fully paid for, may report as
					 income therefrom, in any tax year, the portion of the installment payments
					 actually received in that tax year which the total or gross profit (i.e.,
					 payments less cost of goods sold) realized or to be realized when the property
					 is paid for bears to the total contract price. Thus, the income of a dealer in
					 personal property on the installment plan may be ascertained by taking as
					 income that proportion of the total payments received in the tax year from
					 installment sales (such payments being allocated to the tax year against the
					 sales to which they apply) which the total or gross profit realized or to be
					 realized on the total installment sales made during each tax year bears to the
					 total contract price of all such sales made during that respective tax year. A
					 dealer who desires to compute his income on the installment basis shall
					 maintain books of account in such a manner as to enable an accurate computation
					 to be made on such basis in accordance with the provisions of this
					 regulation.
In the case of a casual sale or other casual disposition of
					 personal property other than property of any kind which would properly be
					 included in the inventory of a taxpayer if on hand at the close of the tax
					 year, income may be reported on the installment basis. This method of reporting
					 sales may be utilized provided the payments received in cash or property other
					 than evidences of indebtedness of the purchaser during the tax year in which
					 the sale or other disposition is made do not exceed thirty per cent (30%) of
					 the sale price.
If for any reason the purchaser defaults in any of his
					 payments and the vendor reporting income on the installment basis repossesses
					 the property, the entire amount received in installment payments and retained
					 by the vendor less the sum of the profits previously reported as income and an
					 amount representing proper allowance for damage and use, if any, will be income
					 of the vendor for the tax year in which the property is repossessed and the
					 property repossessed must be carried on the books of the vendor at its original
					 cost less proper allowance for damage and use, if any.
If the vendor chooses, as a matter of consistent practice
					 to report the income from installment sales on the straight accrual or cash
					 receipts and disbursement basis such a course is permissible.
Arkansas did not adopt the federal treatment of installment
					 sales contained in IRC Sec. 453(c) referred to as installment receivables until
					 01/01/95. This regulation refers only to tax years beginning before
					 01/01/95.