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PrintSales and Use Taxes in Arkansas
In Arkansas, the gross receipts (sales) tax is a tax based on the gross proceeds or gross receipts from sales. Sales of tangible personal property or services to contractors and sales to consumers or users are generally subject to the gross receipts tax. This gross receipts (sales) tax is on the seller, not the buyer.
Sales and use tax rate. Beginning March 1, 2004, the Arkansas state sales and use tax rate is 6 percent (formerly 5.125 percent) of the sales price on the state level. Local governments in Arkansas are allowed to assess an additional local sales and use tax. Some Arkansas local taxes are administered by the local governments, so be sure to check with your local government officials to find out the rules that will apply in your area.
Starting July 1, 2004, the following services are subject to the Arkansas gross receipts (sales) tax:
- wrecker and towing
- collection and disposal of solid wastes
- cleaning parking lots and gutters
- dry cleaning and laundry
- industrial laundry
- mini-warehouse and self-storage rental
- body piercing, tattooing, and electrolysis
- pest control
- security and alarm monitoring
- boat storage and docking fees
- furnishing camping spaces or trailer spaces at public or privately owned campgrounds, except federal campgrounds, on less than a month-to-month basis
- locksmith; and
- pet grooming and kennel
Beginning July 1, 2007, the Arkansas state sales and use tax rate on food and food ingredients is reduced from 6 to 3 percent. Food and food ingredients continue to be subject to any applicable local sales and use tax.
For purposes of the above, the term food and food ingredients is defined as substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. Food and food ingredients does not include alcoholic beverages, tobacco, dietary supplements, or prepared food. These items are therefore not covered by the new 3 percent state rate.
Tax-exempt items. Arkansas includes many specific items that are exempt from sales tax — for example, newspapers and gasoline or motor fuel (note that a separate excise tax applies to such fuel). You'll want to check and see if you or items you sell are exempt from the tax.
Responsibility for paying sales tax. In Arkansas the gross receipts (sales) tax is imposed on the retailer or other person conducting the business. The retailer or other person is responsible for paying the tax to the Arkansas Department of Finance and Administration, but may (or may not) pass the tax on to the consumer. Losses or expenses are not deductible, but bad debts may be deducted from the total amount upon which the tax is calculated for any report.
Use tax. Arkansas use tax is imposed on the privilege of storing, using, distributing or consuming tangible personal property (including computer software). A compensating tax is imposed on tangible personal property purchased by public transportation carriers, railroads, public pipe line carriers, airline carriers, telephone and telegraph companies, gas, water and electric power companies, and financial institutions. There are many exceptions to the use tax, including property on which sales tax has been paid or which is exempt from sales tax.
Responsibility for collecting use tax. The Arkansas compensating (use) tax is collected from every person in Arkansas for the privilege of storing, using, consuming or distributing any article of tangible personal property in this state. There are several exceptions to the use tax, including property on which sales tax has been paid or which is exempt from sales tax.
Obtaining tax permits in Arkansas. Every person receiving gross proceeds of sales upon which the sales tax is imposed must obtain a gross receipts tax permit for each business location. The permit is obtained from the Department of Finance and Administration. A non-refundable fee of $50 is required for an Arkansas gross receipts tax permit.
Leases. Arkansas' definition of sale includes the lease or rental of tangible personal property. The tax is paid on the basis of rental or lease payments made to the lessor. Instead of the gross receipts tax, a rental vehicle tax is imposed on the gross receipts derived from rentals of licensed motor vehicles leased for 30 days or less. The rental vehicle tax does not apply to diesel trucks rented or leased for commercial shipping, or farm machinery or equipment rented or leased for a commercial purpose. The tax also does not apply to gasoline or diesel powered trucks rented or leased for residential moving or shipping.
The following discussions address additional sales and use tax issues that many small business owners face:
