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Arkansas Sales Tax Guide

By Cristina Garza

Home of WalMart, the 25th state in the union, and the only state to have an official cooking vessel (dutch oven), Arkansas is the next focus of our ongoing series of comprehensive State Sales Tax Guides.

At Accountingprose we take pride in painstakingly handling the daily dollar details so our small business clients can focus on the parts of their business they’re expert in. For businesses that have to collect and remit sales tax, we now offer some of what we’ve learned in helping our clients comply with state

After reading this guide, you will know:

  • How to contact the Arkansas Department of Finance and Administration
  • How to be prepared for your call with the Arkansas Department of Finance and Administration
  • When to charge sales tax in Arkansas
  • What goods and products are taxable in Arkansas
  • When you establish a sales tax nexus with the state of Arkansas, and the nuances of various thresholds
  • How to register for a sales tax license in Arkansas
  • How to collect sales tax in Arkansas
  • How to file and pay sales tax in Arkansas

Our Arkansas Sales Tax Guide will help you find peace of mind that your Arkansas sales tax liabilities are well handled.

If you have any other questions to help you navigate your way through Arkansas sales tax, we are always here for you.

 

 

Arkansas Sales Tax Contacts

 

Arkansas Sales Tax Contacts

✅ Do you need to contact the Arkansas Department of Finance and Administration?

✅ Unsure if you should call them or contact them through their website?

✅ Do you wonder what information you need handy before you contact them?

If you answered “Yes” to any of these questions, you’re in exactly the right place!

You may contact the Arkansas Department of Finance and Administration by calling 501-682-7104 or via their website. Arkansas doesn’t have any locations you can visit for help.

There are three pieces of information that you should have on hand before you contact the Arkansas Department of Finance and Administration. They are:

  • Taxpayer Name
  • EIN
  • Sales & Use Tax ID Number (don’t worry, EIN will suffice if this number is misplaced)

If you are calling on behalf of someone else, or having someone else call on behalf of your business, you need to have one more piece of information:

 

Why?

If you do not have this, they will simply not be permitted to talk to you. This document authorizes the tax authorities in Arkansas to discuss a business’ taxes with someone other than the owner.

If you have any more questions, please feel free to contact us so we can assist you with your sales tax needs.

 

 

 

Sales Tax Registration in Arkansas

 

Arkansas Sales Tax Registration

Unsure whether you have to register for a sales tax license in the state of Arkansas?

Do you sell tangible items or taxable services in Arkansas?

If you replied “Yes,” congratulations! :) You get to register for an Arkansas sales tax account (if you’re unsure if your services are taxable, read on)!

Though it may sound like a load of work, it’s really not that massive of an undertaking, and in Arkansas you only need to do it once. That’s right! No need, ever, to renew an Arkansas tax permit.

The registration process is a breeze💨

so long as you are adequately prepared.

We will walk you through it right now!

You will find out more information on:

  • What information is needed
  • How and where to register
  • Cost
  • Other requirements such as a Tax ID or other agencies you may need to register with.

As our clients frequently ask about these topics, we are going to give you all the relevant information we often pass on to them.

So, let’s get to it!

 

 

What information do I need to register for an Arkansas sales tax license?

Great question! Critical to prepare before beginning this process! You get a cookie 🍪 :)

Have this information handy before you sign up for Arkansas Sales Tax Account:

  • Type of Organization
  • Business Name
  • Business Address - Physical + Mailing
  • Specific products being sold or services offered
  • Owner/Partner/Corp. Officer Full Name, Title, FEIN, SSN, Address, Phone Number
  • If business was acquired, Prior Business/Owner Name, Address, Date of Acquisition
  • Estimated amount of tax collected
  • First day of sales
  • Type of Sales (Retail, Wholesale, Charitable, Retailers)
  • Closest NAICS code for your business

 

 

How do I register to collect sales tax in Arkansas?

There are two ways, only one of which we actually suggest. The old school way for those truly committed to a paperful business is to fill out form ar1r (PDF) by following these instructions (PDF) and mail it in to the Arkansa DFA at:

 

Arkansas Combined Registration

PO Box 8123

Little Rock, AR 72203-8123

 

Or! You could do what all our clients do: Take the far easier and more modern route and simply apply online at the easy-to-use ATAP website. We strongly suggest utilizing this option!

 

 

What if I just need to update my information?

Any changes to the business can be made via the ATAP website with exception to a change in the type of corporation [i.e. from LLC to C corp or sole proprietor to LLC]. If changing the type of business, an entirely new tax permit is required.

 

 

How much does it cost to register for an Arkansas sales tax license?

The state of Arkansas charges a one time $50 fee for registering a new business.

 

 

Do I need a Federal Tax Id Number or EIN to register for an Arkansas sales tax license?

Yes, as with most states you will definitely need an EIN.

No need to worry if you don’t have one yet! We’ve got your back.

You can register for a Federal EIN in minutes right here.

 

 

Which additional agencies in Arkansas do I need to register with?

Because each business is different, you may have to contact the Arkansas Department of Finance and Administration to verify which, if any, additional government agencies you are required to register with.

Some potential agencies include:

But this is obviously a non-exhaustive list and it’s important to make sure your business meets all the regulatory requirements for its particular industry.

 

*****

 

You’re now ready to go!

You are now prepared to register for your sales tax license:

  • You know how to register for a sales tax, preferably online at the ATAP site.
  • You know what information you need to have accessible for the registration process.
  • You know what fees to expect ($50, one time).
  • You know you need a tax ID or EIN, and where to get one.
  • You know you will need to determine what other agencies you may also have to register with.

Registering for your sales tax license will be smooth as long as you are prepared. We suggest keeping all the necessary information organized in one place. You should have it saved in hard-copy and soft-copy. And do take advantage of the resources available online and through your tax professional.

 

 

 

 

 

Arkansas Sales Tax FAQ

By now, you have likely contacted the Arkansas Department of Finance and Administration and perhaps registered for a sales tax license. Having now finished the application process, you will need to know when you are required to collect sales taxes. It is quite common for new business owners to have questions about this.

To know that, we should discuss the basics of taxable goods in the state of Arkansas by looking at some frequently asked questions from our clients. These will help us illustrate the nuances of when a business needs to charge sales taxes in Arkansas, and when a business doesn’t need to.

 

 

What products are considered taxable in Arkansas?

Taxable

  • Goods - All tangible products, unusually including groceries[at a special rate of 0.125%]
  • Services - Many services are taxed in Arkansas. A non-exhaustive list of examples:
    • Dues & fees paid to health spas, health clubs, and fitness clubs
    • Pet grooming and kennel services
    • Lawncare and landscaping services

 

 

 

The bottom line is …

If you are selling a product or service that does not qualify for an exemption, you must charge sales tax.

 

 

Is Arkansas an origin or destination sales tax state?

Arkansas is Destination-Based Sales Tax State.

This means that you charge the local sales tax rates according to the buyer’s shipping address (where the product is received by the buyer).

 

 

Protip: Charge Arkansas sales tax based on the location of the buyer.

 

To make managing your tax responsibilities easier, you can use an eCommerce or point of sale software to appropriately charge sales tax by customer location. If you do not collect sales tax when you were supposed to, you risk under or over collecting sales tax- both scenarios can result in fines and fees imposed on your business by the state.

 

What creates sales tax nexus in Arkansas?

  

Sales Tax Nexus in Arkansas

 

 

There are three ways a business can create nexus in Arkansas.

  • If a business has a physical presence in Arkansas such as an office, warehouse, or employee
  • If independent contractors/salespeople are soliciting business in the state
  • If an out of state business makes $100,000 a year in sales or completes 200 or more separate transactions in the state.

 

Does Amazon have fulfillment centers in Arkansas?

Arkansas doesn’t have any Amazon fulfillment centers at this time, though there are plans to build one in Little Rock soon.

When this happens, people who sell through Amazon will need to take careful stock [pun always intended :p] of where their inventory is located. We can help you with this process of identifying where your products are stored and what are the resulting tax implications.

We often use A2X + Wherestock to find out where our clients’ inventory is currently being held by Amazon across the country. This helps us determine what our clients need to do to be in compliance with all applicable state tax laws.

 

 

Does Arkansas have economic nexus?

Yes, but it kicks into gear July 1, 2019. At that time, even companies with no physical presence in Arkansas must collect and remit Arkansas state and local sales tax if it has:

  • $100,000 or more in gross sales in the state, including exempt sales; or
  • 200 transactions selling tangible personal property or services delivered into the state.

Meeting one of these two standards establishes an economic nexus in the state of Arkansas.

 

 

Does Arkansas have click-through nexus?

Yessiree! Arkansas is one of only a handful of states requiring that affiliate marketers pay sales tax. If you are an affiliate marketer or selling goods on behalf of someone else in Arkansas, we suggest consulting with a tax professional to ensure you’re meeting your regulatory requirements.

 

 

Is Arkansas a streamlined sales tax state?

Yes! Arkansas is a full member of Streamlined Sales Tax.

If you are planning on taking advantage of the Streamlined Sales Tax as a business, it is recommended you use a Certified Service Provider though businesses may opt to register themselves without a CSP. Ultimately the aim of streamlined sales tax is to simplify payment to multiple different states of sales and use tax. It isn’t required that you utilize them, but it can significantly reduce complexity to do so.

 

*****

It’s time to wrap it up.

Knowing if your products are considered taxable goods and knowing if you reached any thresholds to establish a sales tax nexus with the state of Arkansas is essential to effectively managing your business’ tax obligations.

Remember:

Keep this guide handy to help you determine when to charge a buyer sales tax, so you and your business can be better-equipped to prevent negative tax implications such as paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in Arkansas.

 

Having this information accessible will help you handle your tax needs more efficiently in less time.

  

 

Collecting Sales Tax in Arkansas

 

Collecting Sales Tax In Arkansas

Once you recognize your business has established a sales tax nexus with the state, you may have some questions about how to go about collecting sales taxes.

Many clients ask the following four questions:

  • How do I collect Arkansas sales tax?
  • Who is eligible for Arkansas sales tax exemptions?
  • What should I do if my customer is exempt from sales tax in Arkansas?
  • What happens if I lose an Arkansas sales tax exemption certificate?

After reading this, you will be better equipped to collect Arkansas sales taxes.

 

How do I collect Arkansas sales tax?

Because Arkansas is a Destination-Based Sales Tax State, you collect Arkansas sales taxes if the buyer’s address is within the state of Arkansas.

What happens if you sell your products within a store you own? You collect the sales tax for your location directly via your POS system.

What happens if you sell your products online? For in state sales, you charge the local tax of the recipient address [your PoS or sales system should be configured to do this for you]. While there is no law in Arkansas requiring that you pay use taxes in other states, their state laws may require such. Utilizing the Streamlined Sales Tax program may reduce the complexity for those states which participate.

 

What are the current Arkansas sales tax rates?

As of May 2019, 6.5% But! Sales Tax Rates change all of the time-- and may vary by what is being sold! It's best to check out the Arkansas Department of Finance and Administration site here to be sure you’re up to date.

 

 

What items are exempt from Arkansas sales tax?

The following goods and services are generally exempt from sales taxes in Arkansas:

  • Newspapers
  • Raw materials from farming, sold directly
  • Prescription drugs
  • Medical devices
  • Industrial machinery
  • Motor vehicles [fewer than 6/year]

 

 

Who is eligible for Arkansas sales tax exemptions?

Now that you know what is exempt, you will also want to learn who is exempt from sales taxes. This depends on the buyer: (1) what kind of buyer they are, and (2) how they intend on using the goods. A common example is the wholesale buyer who buys goods with the intention of reselling them.

More --but not all-- examples of an exempt buyer may include:

  • Specific non-profits, schools, religious or government organizations (though not federal employees absent organizational backing).
  • General Contractors
  • Purchases made with food stamps (WIC)
  • Service providers working for a retailer who will charge a customer tax

Altogether, to determine who is exempt, you have to consider the type of buyer and the buyer’s intention for purchasing the goods. This document contains the entire list which is too specific and lengthy for us to reproduce in its entirety here.

 

 

What should I do if my customer is exempt from sales tax in Arkansas?

When you do business with buyer who is exempt from paying sales taxes, you do not have to worry about filling out any paperwork because that is the buyer’s responsibility. However, you as the retailer must collect --and retain-- the Arkansas sales tax exemption certificate (PDF) from the buyer. Be sure to keep this on file so you can justify any tax-exempt sales in the case of an audit. If you lose the certificate or fail to obtain a copy, you risk having to pay the outstanding taxes yourself.

On the other hand, you will want to read the information I provide in the next question.

 

 

What happens if I lose an Arkansas sales tax exemption certificate?

This is a really great question. Basically, don’t do it! :D If you lose the certificate, you can be liable for charges as serious as fraud. If you aren’t able to prove the validity of tax-exempt sales, the best case scenario is are fines and penalties.

Luckily there is no reason to worry if you are working with us. We will be sure to keep your sales tax exemption certificates safe and sound in our shared Box.com account.

 

Does Arkansas have a sales tax holiday?

Yes, Arkansas has a tax holiday starting on the first Saturday of August and ending the following Sunday. In 2019 it starts August 3rd and ends August 4th. During the tax holiday, certain clothing and school supplies are exempt from sales tax. The Arkansas DFA makes an itemized list as well as a Retailer FAQ available if you have any further questions about the tax holiday.

 

*****

 

Now you know more than you probably wanted to about Arkansas Sales Tax! :) Hopefully you should feel prepared to collect the required sales taxes from who you need to and for what you need to. Once again, remember to document anytime you do business with a buyer who has a certificate of exemption. Being prepared and organized makes collecting and sales tax and filing a return in Arkansas easy, as well as answering to any potential audits.

 

 

 

 

Filing and Paying Sales Tax in Arkansas

 

Filing and Paying Sales Tax in Arkansas

It is time to talk about filing and paying your sales taxes in Arkansas. In this section, we are going to cover the following frequently asked questions from our clients:

  • When is Arkansas sales tax due?
  • What are the Arkansas sales tax thresholds?
  • What if an Arkansas sales tax filing date falls on a weekend or holiday?
  • How do I file an Arkansas Sales Tax Return?
  • How do I correct an Arkansas sales tax return?
  • What happens if I don’t collect sales tax?
  • What happens if I file or pay my sales tax return late?
  • Do I need to file a return if I don’t collect any sales tax in Arkansas?
  • If I close my business, do I need to file a final sales tax return?
  • Does the Arkansas Department of Finance and Administration offer a discount for filing on time?

By the time you finish reading this, you will feel confident enough to file and pay your Arkansas sales tax.

 

 

When is Arkansas sales tax due?

Monthly returns are due the 20th day of the month following the reporting period.

 

 

What are the Arkansas sales tax thresholds?

There are three thresholds you need to know about.

  1. Monthly Liability Threshold: $100.01 plus sales tax liability
  2. Quarterly Liability Threshold: $25.01-$100.00 in sales tax liability
  3. Annual Liability Threshold: $0-$25.00 in sales tax liability

Keep in mind that businesses that pay more than $20,000 annually in state sales tax must pay by Electronic Funds Transfer (EFT). Payment via EFT is due the 20th day of the month following the reporting period.

 

Not sure how to determine your tax filing frequency?

You can review your eCommerce or Point of Sale Software to see the volume of sales you have generated.

Don't worry though! The state will let you know when your due dates change. :)

Watch your mail for a letter from the State of Arkansas so that you don't miss any deadlines.

 

What if an Arkansas sales tax filing date falls on a weekend or holiday?

As you can see on the Arkansas DFA website, it simply falls on the next business day. But remember, filing early is always better than risk being late.

 

 

How do I file an Arkansas sales tax return?

By Paper [why tho?]: Call 501-682-7104 and request form ET-1. Complete based on instructions (PDF) and return by mail.

 

Electronic: File form by using the ATAP website; remit return and payment online

 

 

How do I correct an Arkansas sales tax return?

Once submitted, you can only amend a return online at the ATAP website.

 

 

What happens if I don’t collect sales tax?

If sales tax was not collected but should have been, the business is still responsible for the tax due. To prevent having to pay yourself for taxes due by the customer, you should ensure that all sales tax collection information is set up in each Point of Sale system. Attempting to contact customers after the point of sale is often not possible.

 

Protip: You still owe The Arkansas Department of Finance and Administration for sales taxes if you did not collect them from the buyer.

 

 

What happens if I file or pay my sales tax return late?

You always have to pay the piper-- best is early, better is on time, but if you are late? You’ll be penalized! 10% interest is charged on underpayments or late payments. The penalties for late payments:

Late Filing Penalty - 5% of the tax due for each month that return goes unfiled, not to exceed 35% of the total tax due

Late Payment Penalty - 5% of the tax due for each month that it remains unpaid, not to exceed 35% of the total tax due

 

 

Do I need to file a return if I don’t collect any sales tax in Arkansas?

While many states require registered businesses with zero tax liability to still file a report, Arkansas has no such requirement.

 

 

If I close my business, do I need to file a final sales tax return?

Yes indeed! If closing a business, you’ll need to fill out form ar20 (PDF) to let the Arkansas Department of Finance and Administration know.

 

 

Does the Arkansas Department of Finance and Administration offer a discount for filing on time?

Yes! In Arkansas, you get to retain 2% of collected sales tax (to a maximum of $1,000 per month) as a bonus for paying before the sales tax deadline.

 

*****

 

Now that we covered all our bases for filing and paying sales taxes in the state of Arkansas, you should feel more at ease about the process.

Some things to remember:

  • Due dates are important! If anything, we say file and pay your taxes early (such as before a holiday).
  • Determine what payment plan you must follow based on how much sales tax you collect.
  • You can file and pay your taxes, and even amend a return electronically or by mail.
  • Do not forget to collect sales taxes from your buyers or to obtain a copy of their exemption certificate. If you fail to do either of these, you (not the buyer) are liable to pay the sales tax to the state of Arkansas.
  • Late fees will be applied for filing a tax return late and paying your taxes late.
  • If you collect no sales tax, you don’t need to file a return.
  • You need to file a “Final Sales Tax” when you close your business.

Let’s leave the good news for last (we know you will remember this).

  • There is a discount for filing your tax return early.

 

Now, you are ready to file and pay your sales tax in Arkansas. If you have any more questions, feel free to contact us.

 


 

 

Please note: This blog is for informational purposes only and the information is accurate as of 05.29.2019. If you want legal advice on sales tax law for your business, please contact a Sales and Use Tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog may be out date by the time you review it.

Last Updated: 05.29.2019