Arkansas Sales Tax Guide 2024: Compliance, Rates, and Regulations for Businesses

Arkansas sales tax at a glance

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Arkansas sales tax rates & calculations in 2023

The Arkansas sales tax rate in 2023 is 6.5%. This comprises a base rate of 6.5% plus a mandatory local rate that varies by jurisdiction from 0% to 6.125%. Depending on the local sales tax jurisdiction, the total tax rate can be as high as 11.625%.

List of local sales tax rates in Arkansas

You can look up the full table of sales tax rates in each city and county in Arkansas here.

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FAQs

How do you calculate Arkansas sales tax?

To calculate Arkansas sales tax, you can use the following formula:

Sales tax = (6.5% + local rate) * purchase price

For instance, if the local rate is 5%, and the purchase price is $100, the sales tax would be $11.50.

What are the penalties for not paying Arkansas sales tax?

If you file late and owe money to the state, you may be subjected to a 5% monthly penalty up to a maximum of 35%. If your filing happens on time, but the payment goes beyond the due dates, you must pay a 1% monthly penalty up to a maximum of 35%. 

Is the Arkansas sales tax destination-based or origin-based?

Arkansas is a destination-based sales tax state. This means the buyer's location determines the sales tax rate. Origin-based states use the seller's location to determine sales tax.

Is Arkansas a streamlined sales tax state?

Arkansas is a full member of Streamlined Sales Tax State.

The Streamlined Sales Tax Project (SSTP) aims to simplify sales tax collection across states that adopt its Streamlined Sales and Use Tax Agreement (SSUTA), and Arkansas still needs to join the SSTP or implement the SSUTA.

Sales tax nexus table in Arkansas

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FAQs

Do I need an Arkansas seller's permit if I’m only a wholesaler?

Yes, wholesalers in Arkansas need a wholesale license if they only sell to other businesses. The wholesaler is responsible for collecting and remitting sales tax.

Do I need an Arkansas seller's permit if I only sell temporarily in the state?

Yes, any seller that has nexus in Arkansas needs a sales tax permit, even if selling in the state temporarily such as at trade shows or festivals. The temporary seller must collect and remit Arkansas sales tax.

What are the exemptions from sales tax in Arkansas

Some common sales tax exemptions in Arkansas include:

• Purchases made with food stamps
• Prescription drugs and insulin
• Specific agricultural equipment and supplies

FAQs

Are groceries taxable in Arkansas?

Yes, groceries are taxed at 0.125% in Arkansas. A bill to eliminate this tax was introduced but has yet to pass. 

Is clothing taxable in Arkansas?

Clothing is taxable in Arkansas unless it qualifies as exempt work safety apparel.

Are digital products taxable in Arkansas?

Yes, digital products like music, movies, ebooks, and software are generally taxable in Arkansas.

Is software-as-a-service (SaaS) taxable in Arkansas?

While digital products are taxable, Arkansas does not tax SaaS businesses as of Nov 2023.  

Are services taxable in Arkansas?

Services are generally not taxable in Arkansas and only taxed if they’re legally stated as being taxable. 

Excise taxes in Arkansas (alcohol, tobacco, gasoline, fuel, marijuana)

Arkansas levies excise taxes on alcohol, tobacco, gasoline, diesel, and medical marijuana.

Food and beverage tax in Arkansas

Arkansas does not have a general sales tax on food and beverages. However, there are excise taxes on some specific items:

• Liquor: $2.50 per gallon
• Wine: $0.75 per gallon
• Beer: $0.23 - $0.77 per gallon, depending on the alcohol content

Remote sellers in Arkansas

Remote sellers with no physical presence in Arkansas must register and collect Arkansas sales tax if they meet the $100,000 or 200 transactions economic nexus threshold. The South Dakota vs. Wayfair ruling has impacted many states that now observe this economic threshold. 

Prepaid sales tax rates for fuel products in Arkansas

Arkansas has the following prepaid tax rates on fuel:

• Gasoline: $0.247 per gallon
• Diesel: $0.285 per gallon
• LPG: $0.165 per gallon

See prepaid tax rates for all fuel types here.

Discretionary taxes in Arkansas (local sales taxes)

In addition to state sales tax, there are local city and county sales taxes levied in Arkansas. Local sales tax rates range from 0% to 5.125%, depending on jurisdiction. See a complete list of Arkansas local sales tax rates here.

Collecting sales tax in Arkansas

Let's look at the steps to collect and remit sales tax in Arkansas properly.

How to collect sales tax in Arkansas if you are not based in Arkansas (Out-of-State)

Even if you do not have a physical presence in Arkansas, you likely need to register with the Department of Finance and Administration (DFA) if you make over $100,000 in sales or 200 transactions in the state. 

This is known as economic nexus.

You can voluntarily register to collect and remit Arkansas sales tax even if you fall below the thresholds.

There are five common ways to reach nexus in Arkansas:

• Having a physical location in Arkansas, like an office, warehouse, distribution center, etc.
• Having representatives, agents, or contractors working in Arkansas.
• Owning or leasing property in Arkansas.
• Making over $100,000 in sales or 200 transactions delivered to Arkansas customers.
• Facilitating over $100,000 in sales via an Arkansas-based marketplace.

Register for an Arkansas seller's permit online through the DFA website. Once registered, you must collect and remit sales tax on sales delivered into the state, even if you do not have a physical Arkansas presence.

Should you collect sales tax on shipping charges in Arkansas?

Yes, sellers must collect Arkansas sales tax on shipping charges. If the product being shipped is taxable, the shipping charge is also taxable.

Some things to note about taxing shipping charges:

• The complete delivery charge is subject to sales tax if you ship both taxable and nontaxable items in the same shipment.
• It does not matter if shipping is free or if you charge a separate shipping fee. Any delivery charges related to taxable products are taxable.
• If you ship a nontaxable product, the shipping charge is not taxed.

Filing and paying sales taxes in Arkansas

All registered sellers must file Arkansas sales tax returns, even if no tax was collected during the period. Returns can be filed online through the DFA website or mailed in.

Payment must be submitted with the return. Arkansas accepts payment by check, money order, credit card, or electronic funds transfer (EFT).

Sales tax return filing schedule and due dates in Arkansas

Arkansas assigns a filing frequency of monthly, quarterly, or annually based on a seller's anticipated taxable sales volume.

The following due dates apply to Arkansas sales tax returns:

Monthly: Returns and payments are due by the 20th of the next month. For example, January sales tax is due by February 20.

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Quarterly: Returns and payment are due by the 20th of the month following the end of the quarter.

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Annual: The annual return for the entire calendar year is due January 20 of the following year.

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Filing penalties in Arkansas

Late filing penalties in Arkansas are 5% of the tax due for each month the return is late, up to a maximum of 35%. If you file on time but pay after the due date, the penalties are 1% of the owed taxes every month up to 35%. 

For returns filed more than 30 days late, there is a minimum $50 penalty, even if no tax is due.

When are returns due in Arkansas?

Arkansas sales tax returns are due by the 20th day of the month following the reporting period end date.

For example, if the reporting period ends March 31, the return is due by April 20.

FAQs

What are the Arkansas sales tax due dates?

Arkansas sales tax due dates are the 20th of the month following the end of the reporting period. Due dates vary based on assigned filing frequency.

I didn’t collect any Arkansas sales tax during this period. Do I still need to file a return?

Yes, every registered seller must file a $0 return even if they did not collect sales tax for that period.

Can I get an extension on filing my Arkansas sales tax return?

Taxpayers who do not file a federal extension can file an Arkansas extension using Form AR1055 before the filing due date of April 15th

Can I amend an Arkansas sales tax return?

You can file an amended return in Arkansas easily via the ATAP home. You must pay any additional tax due, plus interest and penalties.

What is the penalty for filing and paying Arkansas sales tax late?

The late filing penalty is 5% of unpaid monthly tax up to a maximum of 35%. There is also a $50 minimum penalty for returns filed over 30 days late.

Audit & appeals process in Arkansas

The audit & appeals process is a series of steps a business must go through if they are audited by the Arkansas Department of Finance and Administration (DFA). The process begins with the auditor contacting the company to schedule an audit.

The auditor will then review the business's records and tax returns to determine if sales tax was not paid. If the auditor finds any discrepancies, they will report their findings.

The business then has the opportunity to appeal the findings. The company can appeal to the Arkansas Tax Appeals Commission if the appeal is denied.

Arkansas sales tax audit process

The Arkansas sales tax audit process consists of the following key steps:

1. The Arkansas Department of Finance and Administration auditor will contact the business by phone or letter to schedule the sales tax audit. They will propose potential dates and request availability to perform the audit on-site.
2. Before the audit, it is recommended that the business gather and organize all sales tax records, including sales invoices, bank statements, tax returns, exemption certificates, accounting records, point of sale data, and any other information relevant to tax compliance. 
3. The auditor will visit the business location on the scheduled date(s) to perform the sales tax audit. This involves thoroughly reviewing the business's sales tax records, bookkeeping, invoices, bank deposits, and other documentation to verify that the correct sales tax was collected and remitted. The on-site audit may take multiple days, depending on the business size.
4. Once the on-site audit is complete, the auditor will compile their findings into a detailed report. This outlines any discrepancies discovered between the business's filed sales tax returns and the amounts that should have been remitted based on the business's records. Common audit findings include unreported taxable sales, improper exemptions, and mathematical errors.
5. If the business disagrees with the audit findings, they have 30 days to file a written appeal with the Department of Finance and Administration. This involves providing documentation to contest the audit results, such as invoices, exemption certificates, or bookkeeping records that may not have been considered initially. If the appeal to the DFA is unsuccessful, the business can further appeal to the Arkansas Tax Appeals Commission.

What to expect during the audit?

During a standard sales tax audit in Arkansas, the business should expect the auditor to review thoroughly:

• Detailed sales invoices showing transaction dates, customer names, items purchased, quantities, sales prices, tax charged, etc. This verifies whether tax was charged adequately on taxable sales.
• Bank statements, deposit slips, and other financial records to match reported gross sales and tax collected to bank deposits. This helps identify any unreported taxable sales.
• Past sales tax returns to compare against the business's actual sales records. The auditor verifies that the amounts reported match the business's books.
• Blanket resale certificates and customer exemption certificates to validate any non-taxed sales. Lack of proper credentials results in tax assessments.
• Bookkeeping ledgers, accounting software data, journals, etc., providing overall sales summaries.
• Point of sale system data, reports, and sales summaries to cross-reference with tax return reporting.

The auditor thoroughly compares, verifies, and cross-checks this information to identify discrepancies, suggesting sales tax was collected but not properly reported and remitted.

After the audit – Appealing the results

If a business disagrees with the audit results, it can contest the findings by filing an appeal with the DFA within 30 days. Challenging audit findings in Arkansas helps you:

• Provide additional documentation not reviewed initially
• Correct any errors made by the auditor
• Reduce penalties and interest

Sales tax registration in Arkansas

Here are the steps for registering for sales tax in Arkansas:

How to register for sales tax in Arkansas?

Registering for an Arkansas seller's permit involves applying to the Department of Finance and Administration (DFA) online or by mail. Go to the DFA website and locate the seller's permit registration page. 

• Provide essential business information, including the legal name, physical and mailing addresses, email, phone number, and website.
• Provide bank account information, including routing and account numbers, where you will deposit any sales tax collected.
• List all business owners' and corporate officers' names, Social Security Numbers, and contact details.
• Review the application carefully and electronically sign and submit. Paper applications must be printed, signed, and mailed in.

Once successfully registered, you will receive a welcome packet by mail containing your Arkansas seller's permit number. Now, you can legally collect and remit sales tax in Arkansas. 

Registration requirements for online sellers in Arkansas

Online sellers must register for an Arkansas seller's permit if they:

• Have over $100,000 in sales or 200 transactions in Arkansas
• Use an Arkansas-based marketplace facilitator
• Have a physical presence in the state

Cost of registration for an Arkansas sales tax license

There is a $50 fee to register for an Arkansas seller's permit. The state does not charge an application fee.

Agencies to register within Arkansas

To register for a seller's permit in Arkansas, visit the state Department of Finance and Administration website at https://www.dfa.arkansas.gov/.

More Information & Contacts

For sales tax filing and appeals in Arkansas, contact:

• Authority Name: Arkansas Department of Finance and Administration
• Phone number: (501) 682-7104
• Website: https://www.dfa.arkansas.gov/

There you have it—a comprehensive guide on Arkansas' sales tax laws. Need help filing taxes for your ecommerce store? Get a demo with Numeral now.