The Honorable Bob "Sody" Arnold State Representative 2315 Elaine Street Arkadelphia, AR 71923
Dear Representative Arnold:
This is in response to your request for an opinion regarding the ad valorem taxation of rental vehicles. Your question, as described in an attached letter from Larry Crane, Director of the Assessment Coordination Division, is whether there is any legal prohibition against an owner of rental vehicles passing on the cost of ad valorem taxes onto the lessees of the vehicles, as a separate, identified charge. In my opinion, there is no legal prohibition against the owner of such vehicles passing the cost of ad valorem taxation onto the lessees of the vehicles, provided that appropriate disclosures are made.
Under Arkansas law, personal property is assessed to and corresponding property taxes are paid by the owner of the property. See A.C.A. § 26-26-903(a) (1987). Thus, as Mr. Crane notes in his letter to you, rental vehicles should generally be assessed to and the property taxes thereon paid by the owners of such vehicles, the lessors.1 The question of whether the owner of rental vehicles may lawfully pass the cost of ad valorem taxation onto the lessees of the vehicles appears to be a matter of contract between the parties involved. I have been unable to find a legal prohibition against this practice. Federal law, however, would require the lessor of the vehicles to disclose the passing on of the cost of such taxes. The Consumer Leasing Act,15 U.S.C.S. § 1667 (1982), specifically requires the lessor of leased property to disclose any amount paid or payable by the lessee for taxes. See 15 U.S.C.S. § 1667(a)(3); 17 Am. Jur. 2dConsumer Protection § 165 (1990). The implementing regulations of the Consumer Leasing Act, which can be found at12 C.F.R. § 213.4 (1991), should be consulted for additional disclosure requirements. Assuming that the appropriate disclosures are made, the proposed practice would appear to be lawful.
The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Catherine Templeton.
Sincerely,
WINSTON BRYANT Attorney General
WB:cyh
1 Although A.C.A. § 26-26-905 (1987) provides that certain property held under a lease for a term exceeding ten years would be taxable to the lessee, that provision would not appear to apply to the fact situation you describe.