Sales Tax Guide for Arkansas

What Is Taxable in Arkansas?

In Arkansas, sales tax is levied on most tangible personal property and certain services. However, some items are exempt, including prescription drugs, some groceries, and certain agricultural supplies.

If your business sells taxable goods or services, you are required to collect and remit sales tax. It is important to verify if additional use taxes apply when purchasing products from out of state.

Who Needs to Collect Sales Tax?

Businesses required to collect sales tax in Arkansas include:

• Retailers with a physical presence in Arkansas
• Online sellers that meet the state’s economic nexus threshold
• Service providers, depending on the type of service offered

Arkansas enforces an economic nexus threshold of $100,000 in sales or 200 transactions per year. Businesses exceeding this threshold, even without a physical presence in the state, must register and collect sales tax. Failing to comply can result in penalties and back taxes, which is why doola’s Bookkeeping service is beneficial for staying compliant and avoiding legal issues.

How to Register for a Sales Tax Permit in Arkansas

Registering for a sales tax permit in Arkansas involves these steps:

1. Gather required documentation: EIN, business license, and business specifics.
2. Visit the Arkansas Department of Finance and Administration website.
3. Complete the necessary online application forms.
4. Obtain your Sales Tax Permit and start collecting tax.

Collecting tax without a permit is illegal. Ensure you register before initiating taxable sales. You can access the online application through Arkansas’ Department of Finance and Administration’s website.

doola’s expert bookkeeping team can assist you, so you can focus on running and expanding your business without worrying about bureaucratic procedures.

How to Calculate Sales Tax in Arkansas

To properly calculate sales tax in Arkansas, follow these steps:

Step 1:
Identify the correct sales tax rate based on both your business location and that of the customer.

Step 2:
Collect the appropriate tax amount at the point of sale.

Step 3:
Keep precise records of all transactions.

Arkansas requires businesses to file sales tax returns either monthly, quarterly, or annually, which depends on the sales volume. Be aware of filing deadlines to avoid late fees.

Additionally, businesses must be aware of varied sales tax rates across different counties and municipalities, as some local areas impose supplemental taxes that must be included in your calculations.

Common Sales Tax Exemptions in Arkansas

Certain businesses and organizations in Arkansas are eligible for sales tax exemptions, including:

• Purchases for resale (requires a resale certificate)
• Sales to qualifying nonprofits
• Specific manufacturing and agricultural purchases

To utilize an exemption, proper exemption certificates must be used, and accurate records must be kept. Misusing exemption certificates can lead to audits and fines.

Remote Seller and Marketplace Sales Tax Rules in Arkansas

Arkansas has distinct sales tax rules for remote sellers and platforms such as Amazon, eBay, Shopify, and Etsy.

The economic nexus threshold is set at $100,000 in sales or 200 transactions per year. Businesses that exceed these thresholds are required to comply with Arkansas’s remote seller sales tax regulations.

What Triggers a Sales Tax Audit

The Arkansas Department of Finance and Administration may audit businesses for various reasons, such as missing or incorrect sales tax filings, frequent late payments, discrepancies between reported sales and actual revenue, and misuse of exemption certificates.

To lower the risk of an audit, maintain detailed records of sales, exemptions, and tax payments. Regular internal reviews can help ensure tax filings are accurate and up to date.

FAQs About Sales Tax in Arkansas

Common questions about Arkansas sales tax include:

Does Arkansas tax digital goods? 

Some digital products are taxable while others are not. Always verify with state guidelines.

Do out-of-state businesses need to collect Arkansas sales tax? 

If you exceed the $100,000 or 200-transaction threshold, then yes.

What happens if I overcharge or undercharge sales tax? 

You may need to refund customers or pay the discrepancy to the state. Keeping accurate records helps prevent such issues.

Are any services taxable in Arkansas? 

Certain services are taxable. Always consult current state regulations to confirm.

Stay Compliant With doola

Sales tax compliance need not be stressful. By staying informed and utilizing the right tools, businesses can avoid penalties and operate efficiently.

doola provides guidance and tools to ensure compliance, supporting businesses with financial solutions, tax guidance, and bookkeeping services.