The Arkansas Department of Revenue recently issued a legal opinion addressing the “transactions” threshold in Arkansas’ economic nexus sales and use tax law. The taxpayer offered colleges and universities access to digitized academic and scholarly content on a subscription basis. Typically, customers entered into one-year contracts and paid an upfront deposit based on the customer’s expected amount of purchases or downloads during the one-year contract period. Implicit in the ruling was that there was a charge for each download and a reconciliation between the taxpayer and customer at some point. Under Arkansas law, remote sellers and marketplace facilitators are required to collect and remit sales and use tax on sales of tangible personal property, taxable services, digital codes, or specified digital products if, in the previous or current calendar year, the seller or marketplace has over $100,000 of sales or 200 transactions delivered into Arkansas. The taxpayer requested a ruling that the upfront deposit made for a one-year contract constituted a “transaction.” The Revenue Legal Counsel for the Department of Finance and Administration disagreed, concluding that the deposit was for reserving “the right to make purchases during a contract term.” The Legal Counsel further determined that a “transaction” occurred when the customer made a purchase or downloaded digital content for consideration. In other words, each digital download constituted a transaction that counted toward the 200 transactions threshold. For more information on this opinion, please contact Michael Andruchek at 214-840-2467.