The Arkansas Supreme Court held that a furniture and electronics retailer’s weekly and semi-monthly rent-to-own leases are subject to the excise tax on short-term – less than 30 days – rentals of tangible personal property. Under the retailer’s rental-purchase agreements, customers select an initial rental term of monthly, semi-monthly, or weekly. At the end of each period, the customer can choose to terminate the arrangement or continue to rent. When the customer reaches a predetermined number of payments or makes a lump-sum payment, it will acquire ownership of the tangible personal property. On protest from an assessment, the taxpayer alleged that its rental-purchase agreements were nontaxable long-term leases, not taxable short-term leases. The taxpayer contended that the tax did not apply because: (1) its customers almost always renewed their leases beyond the initial term; and (2) the legislature intended to tax “true” short-term leases, not rent-to-own purchases. The Arkansas Supreme Court concluded that the weekly and semi-monthly rent-to-own leases were taxable short-term leases because the periods were for less than 30 days. Whether the customer renews the lease does not change the length of the rental or lease period in question.
Rent-A-Center East, Inc. v. Walther, 615 S.W.3d 701 (Ark. 2021).