Arkansas Sales Tax Rates

Total Range for 2024

6.5% – 11.5%

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Why do you need to collect sales tax in Arkansas?

If you’re selling goods and services in Arkansas then sales tax might apply! To determine your obligation, you need to understand “nexus,” which ties businesses to states for tax purposes.

Two types of nexus exist:

  1. Physical Nexus: Having a physical presence, like an office, warehouse, or employees in Arkansas, triggers this type. If you do, you likely need to collect sales tax.
  2. Economic Nexus: This kicks in when your sales within Arkansas exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.

In Arkansas, there is also a transaction threshold of 200, which means that even if your sales aren’t over $100,000 if you’ve sold more than 200 items then you still need to pay sales tax.

Is what you’re selling taxable in Arkansas?

Now that you’ve grasped the basics of Arkansas’s sales tax and nexus thresholds, let’s delve into whether your specific products or services are taxable.

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How to register for sales tax in Arkansas

Arkansas uses a seller’s permit, also known as a Revenue Receipt Tax (RRT) license, for businesses selling taxable goods or services.  You can register for this license online or by mail.

Online Registration (Recommended):

This is the quickest and most convenient method:

  1. Visit the Arkansas Taxpayer Access Point (ATAP) website: https://atap.arkansas.gov/
  2. Click on “Sign up” and follow the prompts to create an account.
  3. Once your account is created, navigate to the section for registering for a new RRT license.
  4. Provide the required information.

Mail-in Registration:

If online registration isn’t feasible, you can use the mail-in method:

  1. Download the Revenue Receipt Tax Application (Form ET-1) from the Arkansas Department of Finance and Administration (DFA) website: https://www.dfa.arkansas.gov/ (search for “Revenue Receipt Tax Application” or Form ET-1)
  2. Complete the application form carefully and accurately.
  3. Mail the completed form with any required documentation (mentioned on the form) to the address provided by the DFA.

Additional Information:

  • Once you register, you might need to apply for an RRT license account number for each physical location where you conduct taxable sales.
  • The Arkansas DFA will typically process your application and mail your RRT license within a few weeks.

How to collect sales tax in Arkansas

In Arkansas, collecting sales tax comes down to this:

  1. Know what’s taxable: Check the DFA website for details (mentioned earlier).
  2. Charge the right rate: The base rate is 6.5%, but local rates might apply (check with your local finance department).
  3. Collect from customers: Use your point-of-sale system or add it manually.
  4. Keep good records: Track sales, tax collected, and exemptions.
  5. File & Pay: Submit returns (monthly, quarterly, or annually) and collected tax to the DFA (online or by mail).

Example:

You run a clothing store in Little Rock, Arkansas. A customer purchases a jacket for $50. Little Rock has a local sales tax rate of 2% on top of the state’s 6.5% rate. Here’s the calculation:

  • Local tax amount = $50 (item price) * 2% (local rate) = $1
  • Total sales tax = $1 (local tax) + 6.5% (state rate) * $50 (item price) = $3.75
  • Final price = $50 (item price) + $3.75 (sales tax) = $53.75

FAQs

Do you have a physical nexus in Arkansas?

In Arkansas, having a physical nexus determines whether you’re obligated to collect and remit sales tax on sales to Arkansas residents. Here’s how to understand if you have a physical nexus in Arkansas:

  • Physical Presence: Owning or leasing office or retail space, a warehouse, or any other real property in Arkansas establishes physical nexus.
  • Inventory Storage: Storing products within Arkansas, even through a fulfillment service like Amazon FBA, can create a physical nexus.
  • Employees or Representatives: Having employees or sales representatives who regularly solicit sales in Arkansas (even if they don’t live there) might trigger physical nexus.
Do you have an economic nexus in Arkansas?

Arkansas, like many states, also has economic nexus laws. This means exceeding a certain sales threshold within the state (currently $100,000 annual gross receipts or 200 or more transactions) can create nexus, even without a physical presence.

What is use tax in Arkansas?

 Use tax applies to tangible personal property purchased from out-of-state vendors for storage, use, or consumption within Arkansas.  If the seller doesn’t collect sales tax at the time of purchase (because they lack a physical presence in Arkansas), the responsibility to pay use tax falls on the Arkansas purchaser.

The use tax rate in Arkansas is the same as the combined sales tax rate for your location.

Do you need a seller/reseller permit?

In Arkansas, a seller’s permit, also known as a Revenue Receipt Tax (RRT) license, is required for businesses that sell taxable goods or services within the state.

Here’s a breakdown of why you might need an RRT license and how it relates to resale certificates:

Who Needs an RRT License:

  • Businesses that sell taxable goods in Arkansas, such as clothing, electronics, furniture, and most other tangible personal property.
  • Businesses that provide taxable services, such as car repairs, software installation fees directly tied to the software sale, or cleaning services (excluding some exempt services like haircuts).
How to get a sales tax permit/license in Arkansas?

To obtain a sales tax permit/license in Arkansas, you’ll need to acquire an RRT license. Here’s a breakdown of the process:

  1. Online registration (recommended) via Arkansas Taxpayer Access Point (ATAP).
  2. Mail-in registration using the Revenue Receipt Tax Application (Form ET-1) from the Arkansas Department of Finance and Administration (DFA) website.
When are Arkansas’s Returns Due?

Arkansas sales tax returns are due by the 20th of the month following the reporting period. This applies regardless of whether you file monthly, quarterly, or annually.

Here’s a breakdown for clarity:

  • Monthly Filers: If your business makes a significant amount of taxable sales, you’ll likely be classified as a monthly filer. Your return and tax payment would be due on the 20th of the month following each calendar month.
  • Quarterly Filers: Businesses with a moderate amount of taxable sales might be categorized as quarterly filers. Your returns and tax payments would then be due on the 20th of the month following the end of each quarter (March 20th, June 20th, September 20th, and December 20th).
  • Annual Filers: Businesses with a very low volume of taxable sales may qualify for annual filing. Your return and tax payment would be due on January 20th of the following year.
Filing sales tax in Arkansas

Filing sales taxes in Arkansas involves three main steps. Here’s a breakdown of the process:

  1. Before You File:
  • Get an RRT license (your sales tax permit).
  • Know your filing frequency (monthly, quarterly, or annual).
  1. Gather Info:
  • Keep good sales records (sales amount, tax collected, exemptions).
  • Find your combined sales tax rate (state + local).
  1. File & Pay:
  • Submit your return (electronically or by mail) by the 20th of the following month.
  • Use your records and tax rate to calculate the tax owed.
  • Pay your sales tax (electronically or by check) along with the return.
Is anyone exempt from sales tax in Arkansas?

In Arkansas, sales tax exemptions are applied in a few different ways:

  • Exempt Entities: Certain entities are entirely exempt from paying sales tax on all purchases. This includes:
    • State and local governments
    • Public schools and some non-profit organizations (must qualify for exemption)
    • Certain religious organizations
  • Exempt Items:  Specific items are exempt from sales tax regardless of who purchases them. Examples include:
    • Prescription drugs and medical equipment
    • Groceries (excluding prepared food)
    • Educational materials (textbooks, etc.)
    • Farm equipment for agricultural use
  • Exempt Use: Sometimes, the intended use of an item determines if it’s exempt. For instance, manufacturing equipment used in production might be exempt, while the same equipment purchased for personal use would be taxable.

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