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Arkansas has several types of sales taxes for various industries, including retail sales, but the overall state sales tax rate is 6.5 percent. Additionally, Arkansas has over 300 local tax rates to tack onto the state sales tax rate. When opening a new business, check the Arkansas Department of Finance and Administration (Department of Revenue) to find all of the local taxes for your address.
Types of taxes
In addition to regular sales and use taxes, Arkansas has several taxes for various products and services.
Sales and use tax
The sales and use tax rates for Arkansas are the same at 6.5 percent. Purchasers pay sales tax on most tangible personal property on tax returns unless they have a tax-exempt certificate, which allows businesses to purchase goods and services without paying tax. The businesses collect taxes from their customers, then file a report and remit the sales tax to the state.
If a business purchases something tax-free and does not resell it, the business must pay use tax. The use tax return is included on the sales tax return.
Discretionary sales surtax
Arkansas has over 300 discretionary sales taxes (local sales taxes) that you must add to the state sales tax for sales of goods. Local jurisdictions – cities and counties – can add a percentage to the state sales and use tax rate. When figuring out what to charge, you must add the local tax due to the state sales tax rate of 6.5 percent.
You should also check if the discretionary taxes follow the same structure as state taxes. For example, Arkansas has a reduced food tax of 0.125 percent on most food – your city or county might have a lower rate for food, or might not tax food at all.
Reduced food tax
The reduced food tax rate of 0.125 percent is applied to most food products. Instead of paying the full 6.5 percent sales tax, you pay this lower amount on food products, such as baby food, spices, meat, coffee, vegetables, dairy, baking mixes, and more.
Examples of food that you must pay the full state sales tax on include:
- Food sold with eating utensils.
- Non-food items, such as paper goods and soap.
- Ready-to-drink coffee.
- Pet foods.
- Food baskets.
- And more.
Electricity manufacturing tax
If a business sells natural gas or electricity directly to a manufacturer, the tax rate is 0.625 percent. The manufacturer must use natural gas or electricity directly in the manufacturing process. The manufacturer must register with the Department of Finance and Administration to obtain the lower tax rate.
Aviation sales and use tax
If any business sells new or used airplanes, it must collect sales tax at the rate of 6.5 percent plus any local jurisdiction taxes. If the buyer pays taxes to another state, he or she can request credit for the tax paid.
Additionally, if the gross receipt for the sale is less than $2,000, the buyer does not have to pay sales tax.
Mixed drink tax
In addition to state and local sales tax, private club permit holders must add an additional 10 percent tax to the gross receipts, including the sales tax, for serving mixed drinks, beer and wine. If the private club has a beer permit, it must collect the state and local sales tax, but not the supplemental 10 percent on beer sales.
For example, the business would collect state and local sales taxes on the cost of the mixed drink. If the total with tax comes up to $8.29, the business then has to collect 10 percent on the total of $8.29.
Arkansas also has a 4 percent supplemental tax for all alcoholic beverages except beer and wine. This tax is also on gross receipts. Thus, in the above-mentioned example, the total collected would be $9.12. The business must charge an additional 4 percent on $9.12 for a total of $9.48.
Short term rental tax
In addition to regular sales and use tax charged by state and local jurisdictions, short-term rentals must collect an additional 1 percent tax on gross receipts for any rental that is less than 30 days. Businesses subject to short-term rentals include but are not limited to hotels, motels, bed and breakfasts, rooming houses, campgrounds, and other short-term rental businesses.
Residential moving tax
Professional movers must collect 4.5 percent taxes on moving services and items that go along with the moving truck, such as pads, blankets, boxes, and tape. The tax is in addition to the state and local sales and use taxes.
Wholesale Vending Tax
Arkansas charges a wholesale vending tax of 7 percent. Vendors have three choices to pay the taxes:
- Pay the tax on the goods when you purchase them. Vendors who choose this option do not have to have a sales and use tax permit but must open a vending account and place the decals on the vending machines. Arkansas does not charge a fee for these decals.
- The vendor can pay the 7 percent wholesale vending tax every month on any tangible personal property sold in a vending machine. The vendor must have a resale exemption certificate to purchase goods. The vendor must also have a sales and use tax permit, file a monthly ET-1 Excise Tax Report, and remit taxes collected. The vendor must affix the appropriate stickers to the vending machine. The state does not charge a fee for these decals.
- If a vendor is exempt from paying taxes under the resale exemption, it must have a sales and use tax permit and affix the decals on the vending machine. This option is open to certain vendors based on whether the machines are manual or electric, the value of the goods, and whether the goods are bulk or individually vended goods.
Vehicle rental tax
If a business rents a vehicle for less than 30 days, it must charge a 10 percent tax on gross receipts. The tax is in addition to any other state and local sales and use taxes.
Registering for Arkansas’ taxes
If you are a remote seller – you do not have a physical presence in Arkansas, and your sales were less than $100,000, or you had less than 200 transactions, you are not required to collect Arkansas sales and use tax. However, purchasers must pay use tax if a remote business does not collect sales tax. Most small businesses program state and local sales tax by tax type into their point-of-sale systems.
Marketplace sellers must calculate Arkansas sales tax for the point of delivery.
Arkansas tax exemptions
Arkansas has several tax exemptions that apply to certain industries. It does not have tax exemptions for clothing, food, and certain other tangible personal property. The most updated list is dated 2012 on the Arkansas Department of Finance and Administration’s website.
Certain motor fuel sales are exempted, as are sales to the federal government. Low-income households also have certain exemptions, including the first 500 kilowatt-hours of electricity each month and new or used vehicles or trailers that cost less than $2,500.
Additionally, food and food ingredient sales to non-profits for free distribution to the poor and needy are exempt.
Certain farming activities are exempt from paying taxes on electricity, liquefied petroleum, and natural gas. The structure must qualify and must have a separate meter. The farmer must obtain a certificate from the Arkansas Department of Finance and Administration and provide the certificate to the utility supplier.
Examples of qualified buildings include a poultry or livestock facility used for commercial production, cattle or dairy facility including a milk parlor, refrigeration, and milk collection unit.
Greenhouses used for commercial production are also exempt.
Calculating Arkansas’ sales and use tax rates
When calculating what a business should charge for sales tax, you must charge the state’s base rate of 6.5 percent plus any local taxes charged by the jurisdiction you live in. The state also publishes a PDF document that lists the over 300 local sales and use tax rates.
If you provide mobile services, tax the customer at the customer’s tax rate instead of the business location.
Filing and paying Arkansas’ sales and use taxes
The easiest way to file a business’s sales and use tax obligation is for the filer to file the reports and pay online. The only other way to file is via an XML file upload and paying via EFT. However, you must have the exact file specifications, or the Arkansas Department of Finance and Administration will not process the return and payment.
The due dates vary depending on when the 20th of the month falls. Sales and use taxes are due on the 20th day of the month after you collect the taxes. For example, taxes collected in January 2022 are due and payable by February 20, 2022.
Arkansas’ state sales tax is 6.5 percent. Businesses also have to add taxes for their local jurisdictions at the city and county levels.
ATAP is the Arkansas Taxpayer Access Point. You can register a new business and file and pay monthly sales tax reports for the sales of tangible personal property through the online system.
Collect taxes based on the jurisdiction where you do the work.
Most states require you to collect their state taxes after meeting certain requirements. If you know that you need to pay taxes in other states, set a point of sale system up to charge your out-of-state customers their state and local taxes.
No. A business cannot transfer the sales and use tax permit. It must apply for a new tax permit for the new business.
A NAICS Code tells the government which industry your business is in. These codes are published by the United States Census Bureau.