Opinion No. 1992-260

Carolyn Pollan

Attorney General of Arkansas — Opinion
Opinion Delivered October 8, 1992

WINSTON BRYANT, Attorney General

The Honorable Carolyn Pollan State Representative 400 N. 8th Street Fort Smith, AR 72901

Dear Representative Pollan:

This is in response to your request for an opinion on whether a utility can collect sales tax on a franchise tax.

It is my opinion that the answer to your question is “yes.”

I have enclosed copies of Op. Att’y. Gen. Nos. 86-027 and 83-026 which answer this question in the affirmative. Both opinions conclude that the franchise tax charge appearing on a utility bill is a part of the “gross proceeds” of the sale by the utility pursuant to A.C.A. § 26-52-103(a)(4) (Cum. Supp. 1991).

In addition, the legislature, in my opinion, has recognized the fact that franchise taxes may be included in computing sales taxes on utility services. Section 26-52-416 (Cum. Supp. 1991) of the Arkansas Code exempts certain low income households from the payment of state sales tax on electricity. The section provides in pertinent part that:

(a) The sale of the first five hundred (500) kilowatt hours of electricity per month and the total franchise tax billed to each residential customer
whose household income is no more than twelve thousand dollars ($12,000) per year shall be exempt from the Arkansas gross receipts tax . . . and all other state excise taxes which would otherwise be levied thereon. [Emphasis added.]

This act was passed in 1983, and evidences at least the tacit recognition by the legislature that the state gross receipts tax, without the exemption of the statute, would otherwise be levied on the franchise taxes included on a utility bill.

It is therefore my opinion that the franchise taxes charged by utilities are includable in the “gross proceeds” of the sale of utility services, and as such are subject to the levy of state gross receipts tax.

The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Elana C. Wills.


WINSTON BRYANT Attorney General