Sales tax is a tax paid by consumers on the purchase of goods and services. It is collected by the seller and remitted to the state and local tax authorities. In Arkansas, the state sales tax rate is 6.5% and local jurisdictions can levy up to an additional 3.5% in sales tax. This means the total sales tax rate in Arkansas can be as high as 10%. Understanding how Arkansas sales tax is calculated, what is exempt, and how it is administered is important for businesses and consumers to remain compliant.
Arkansas Sales Tax Calculator
To calculate the sales tax for a purchase in Arkansas, the tax rate is applied to the purchase price. You can use our Arkansas Sales Tax Calculator to calculate sales tax for Arkansas. Just select the county and enter purchase price and calculate results.
Arkansas Sales Tax Calculator
Arkansas Sales Tax Calculator
If the purchase was made in a different city or county with a higher 10% total sales tax rate, the calculations would be:
- Purchase Price: $100
- Sales Tax Rate: 10%
- Sales Tax Calculation: $100 x 0.10 = $10
- Total Price = $100 + $10 = $110
Here the $10 sales tax is calculated by applying the 10% tax rate to the $100 purchase price. This demonstrates how the total sales tax amount due will vary across Arkansas depending on the specific local sales tax rates in effect for the purchase location.
Sales Tax Exemptions in Arkansas
While Arkansas sales tax applies to most transactions, there are some exemptions provided under state law. Understanding sales tax exemptions is important for businesses to charge tax properly and for consumers to avoid paying unnecessary tax. Some notable exemptions from Arkansas sales tax include:
- Food and food ingredients – Food and food ingredients purchased for home consumption are exempt from Arkansas sales tax. This includes groceries and ingredients used to prepare meals at home. However, prepared food meant for immediate consumption is still considered taxable.
- Prescription drugs – Prescription drugs and over-the-counter medications with a prescription are exempt from sales tax in Arkansas.
- Manufacturing machinery – Industrial machinery and equipment purchased and used for manufacturing, processing and mining activities qualify for a sales tax exemption.
- Agricultural machinery and equipment – Farm equipment and machinery used in agriculture or horticulture is exempt from Arkansas sales tax.
- Aircraft sales – The sale of aircraft repair parts and maintenance services for aircraft are exempt from sales tax. However, purchases of actual aircraft are still taxable.
- Nonprofits – Qualified tax-exempt nonprofit organizations can apply for exemption from paying sales tax on certain eligible purchases. There is an application process to receive exempt status.
- Utilities – Most utility expenses such as water, gas, electric bills are exempt from Arkansas sales tax. However, cable TV and internet services are still considered taxable.
- Trade-ins – When trading in an old item and applying its value towards a new purchase, sales tax is only charged on the difference in Arkansas.
- Medical devices – Prescribed prosthetic devices, durable medical equipment and mobility enhancing equipment are exempt by law.
Staying up to date on qualifying exemptions under Arkansas sales tax codes can help businesses properly apply tax to transactions and let consumers know when they qualify to avoid paying tax.
Administration of Arkansas Sales Tax
The administration and collection of Arkansas sales tax is handled by the Arkansas Department of Finance and Administration. This state agency oversees sales tax policies, procedures and enforcement across Arkansas.
Some key aspects of how Arkansas sales tax is administered:
- Sales tax licenses – Any business engaged in selling taxable goods or services in Arkansas must register for a sales tax license with the Department of Finance and Administration. This allows the state to track and monitor tax remittances.
- Filing and remittances – Sales tax is remitted to the state on a monthly, quarterly or annual basis depending on the volume of a business’s taxable sales. Returns must be filed by the 20th day of the month following each tax period end.
- Penalties and interest – Late payment of taxes owed or failure to file required returns can incur penalties of 5% plus interest charges based on what is owed. There are also steeper criminal penalties for intentionally attempting to evade paying taxes due.
- Tax rate databases – The state provides address-based tax rate lookup databases for sellers to precisely determine the proper combined state and local tax rates to charge based on the buyer’s delivery address.
- Audits – The Department of Finance and Administration regularly conducts sales and use tax audits of businesses to verify compliance and appropriate remittance.
- Taxpayer rights – There is a taxpayer bill of rights that provides processes for appeals, settlements, payment plans and other procedures available to taxpayers facing compliance actions.
Consulting with an accountant or tax professional is advisable for Arkansas businesses to optimize sales tax compliance and avoid issues with nonpayment penalties or audits. Proper calculation, collecting eligible exemptions, and remitting on time are essential requirements for retailers.
Conclusion
Arkansas has a statewide sales tax rate of 6.5%, with local jurisdictions adding up to an extra 3.5% for maximum possible rates between 6.5% and 10% based on location. Proper calculation, applying exemptions, registration, timely filing and remittance are essential for businesses to remain compliant. Consumers can also benefit from knowing eligible exemptions. Working with an accountant can help optimize sales tax processes and avoid non-compliance penalties or problems.
