Arkansas Sales Tax
Arkansas Sales Tax At a Glance
State rate: 6.5%
Maximum combined rate: 12.625%
Sourcing: Destination
Tax Holidays: Back to School
Governing Body: Arkansas Department of Finance and Administration
When making sales to customers in Arkansas, there are several factors to consider in determining if you must register to collect and remit sales tax to the state and meet tax compliance requirements. For small businesses in Arkansas, that calculation is straightforward enough, but sellers not based in the state must determine if a combination of other factors creates a nexus for them. Additionally, you’ll need to know if what you’re selling is taxable in Arkansas, as well as what rate to collect sales tax at, based on the applicable jurisdiction for each individual sale.
Arkansas State Sales Tax Rates
The state tax rate in Arkansas is 6.5%, and cities and counties can each impose their own local taxes. That makes the applicable rate the total of state, county, and city rates. This total varies from one part of Arkansas to another, with the highest combined rate at 12.625% in Gillham, AR. By contrast, the effective rates in Little Rock and Fayetteville, two of the largest cities in the state, are 8.63% and 7%, respectively.
The total sales tax rate you charge your Arkansas customers is based on the final destination of shipped goods or location of purchase. For instance, if you run a clothing store in Fort Smith, you’ll charge each customer the 9.75% rate applicable at that location, regardless of where in the state they live. If you’re shipping goods, however, whether from in-state or out-of-state, you’ll charge your customers the rate at the final delivery address.
Sales Tax Nexus Regulations in Arkansas
Having a brick-and-mortar store automatically qualifies you to collect and remit Arkansas state sales tax on all taxable purchases. If you’re based out-of-state, however, determining your sales tax responsibility for full tax compliance can be a bit more complex. Arkansas requires any seller with a significant presence in the state to register to collect sales tax on purchases to Arkansas customers. A significant presence for the purposes of physical and economic nexus is generally considered:
- Having a physical place of business, including a warehouse, office, or retail store in Arkansas
- Having employees operating in an official capacity within the state
- Conducting directed and sustained marketing efforts within Arkansas
If you use fulfillment by Amazon, you may be aware that the presence of an Amazon Fulfillment Center in a state generally triggers a nexus condition for you since your goods are in all likelihood stored there.
Economic nexus was established in Arkansas in 2019 with the passage of Act 822. This requires all remote, out-of-state sellers to collect sales tax if they make $100,000 in sales or 200 or more transactions in a calendar year of tangible personal property, digital products, or taxable services.
What’s Taxable?
Most tangible personal property is taxable in Arkansas, while many services are not. There are exceptions to both of these rules, however, with taxes applied to things like janitorial services and any service involved in producing tangible personal property. Examples of goods that are taxed include groceries, prepared food, clothing, medicines, fuel, and machinery. Some exemptions include:
- Medical devices
- Downloaded software
- Food and merchandise from vending machines
- Digital products
- Newspapers
Shipping and handling charges are taxable assuming the item being shipped is taxable, but not otherwise, and regardless of how it’s listed on the invoice or receipt.
Arkansas State Sales Tax Holiday
Arkansas has a state sales tax holiday on the first Saturday and Sunday in August. During this period, school supplies, art supplies, clothing, and instructional materials are free of state and local sales taxes. All retailers and other sellers are required to participate in this event.
Registration and Filing
In order to begin collecting sales tax on purchases made by your Arkansas customers, you first need to register your business with the state. This can be done online, by mail, or in person at your local Arkansas Department of Finance office. There is a $50 fee to register, and no matter how you choose to submit your registration, the actual filing of your returns must be done online.
Because Arkansas is a member of the Streamlined Sales and Use Tax Agreement (SSUTA), you can register through that website for an Arkansas sales tax permit at the same time that you register to collect sales tax in all of the other states that are party to the agreement. If you’re only interested in registering in Arkansas at this time, however, you can go through the online Arkansas Taxpayer Access Point.
Due Dates and Penalties
Depending on the volume of taxable sales you’ve made or expected to make in the state and so your estimated annual sales tax liability, you will be assigned a filing frequency at the time of registration. This may be monthly, quarterly, or annually, and regardless of the frequency, returns and payments will be due on the 20th of the month following the close of the period in question.
Monthly Due Dates
| Period | Due Date |
|---|---|
| January | February 20 |
| February | March 20 |
| March | April 20 |
| April | May 20 |
| May | June 20 |
| June | July 20 |
| July | August 20 |
| August | September 20 |
| September | October 20 |
| October | November 20 |
| November | December 20 |
| December | January 20 |
Quarterly Due Dates
| Period | Due Date |
|---|---|
| January – March (Q1) | April 20 |
| April – June (Q2) | July 20 |
| July – September (Q3) | October 20 |
| October – December (Q4) | January 20 |
For those taxpayers filing annually, returns and payments are due on January 20th of the following year. If the 20th of any month falls on a weekend or holiday, returns and payments will be considered timely if they’re received by the next business day. Zero returns are required in Arkansas, and a penalty of 5% of the tax due will be assessed for late payments, as well as for payments not made through electronic funds transfer (EFT).
Resources
Arkansas State Sales Tax Software
When you’re making sales to customers across Arkansas and possibly other states as well, there are a lot of elements to keep track of. You need to know when to add sales tax onto the purchase price of an item, what rate to use, who to remit your payments to, and how frequently to file. All of the regulations surrounding these issues vary from one state to another, and so keeping track of all of your taxable sales and sales tax returns, especially if you’re selling in multiple states, can become a real burden.
Fortunately, the TaxTools tax calculator can help you streamline these processes and significantly ease your administrative burden. TaxTools is software specifically designed to keep track of the various state and local regulations surrounding the collection of sales tax, and it can seamlessly integrate with your eCommerce platform. Through TaxTools, you can view and print reports of taxable sales with location information, file state, and local sales tax returns, keep track of filing deadlines, and much more. It’s a huge asset, especially if you make sales into multiple states regularly, and it can greatly improve the overall efficiency of your business processes.
So if you’re ready to learn more about the advantages TaxTools provides, click here or sign up for a free trial today.
Last updated December 2023