RATE OF SALES TAX:
6.50%
LOCAL & COUNTY MAXIMUM RATES:
5.125%
What Are the Taxable Goods and Services?
The first step in sales tax compliance is determining if the items or services your firm offers are taxable in Arkansas.
Traditional Products and Services
Physical property, such as furniture, household appliances, and automobiles, is subject to sales tax in Arkansas.
Arkansas levies a reduced rate of 1.5% on grocery purchases.
Some Arkansas services are subject to sales tax. View this PDF from the Arkansas Department of Finance and Administration for a complete list of taxable services.
In addition, the Arkansas Department of Finance and Administration has released a detailed reference on sales tax exemptions and exclusions.
Digital Products and Services
A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.
Businesses in Arkansas are not required to collect sales tax on the sale of digital products or services.
Arkansas, however, has one exemption to this prohibition. Businesses are required to collect sales tax on pre-written computer software offered online.
How to Apply for Arkansas Sales Tax
If you’ve decided that you must charge sales tax on part or all of the items and services your company offers, the next step is to apply for a seller’s licence.
This enables your company to collect sales tax on behalf of the municipal and state governments.
You will need the following information to register:
ITIN or SSN number
Identification information for a business
Type of business entity
Your company’s nature
All firms must have a North American Industrial Classification System (NAICS) designation. You may do an NAICS Code Lookup to locate the NAICS Code for LLC that corresponds to your industry.
A Resale Certificate might help you save money.
When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.
Sales Tax Collection
After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.
When computing sales tax, consider the following types of transactions:
Store Sales Shipping In-State Sales Outside-of-State Sales
Retail Sales
For conventional company owners who sell products or services on-site, calculating sales tax is simple: all sales are taxed at the rate determined by the store’s location.
Here’s an illustration of how this situation may look:
In Rogers, Arkansas, Mary owns and operates a bookshop. Because books are taxable in Arkansas, Mary charges her clients a flat-rate sales tax of 9.5% on all purchases. This includes Arkansas’s 6.5% sales tax, Benton County’s 1% sales tax, and Mary’s local district tax rate of 2%.
Sales inside the state
The state of Arkansas has a scheme known as origin-based sales taxation. This implies that long-distance transactions inside Arkansas are taxed based on the seller’s address. This regulation applies to sales taxes levied by the state, county, and city.
Consider the following scenario:
From his home in Fort Smith, Arkansas, Steve operates his own eBay company selling gadgets. A buyer from Springdale, Arkansas discovers Steve’s eBay website and buys a $350 set of headphones. Steve calculates the sales tax for this transaction using Arkansas’s 6.5% tax rate, plus 1.25% for Washington County and 2% for Springdale’s municipal tax rate. The total cost is $384.13 ($34.13 sales tax) at a total sales tax rate of 9.75%.
Out-of-State Purchases
Arkansas firms must only pay sales tax on out-of-state sales if they have a presence in other states.
Nexus indicates that the company has a physical presence in another state.
Common nexus types include:
A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.
Submit Your Sales Tax Return
You’re ready to submit your sales tax return now that you’ve obtained your Arkansas seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.
How to File a Claim
Businesses in Arkansas are required to file sales tax forms and make sales tax payments online.
How Frequently Should You File?
The frequency with which you must submit is determined by the total amount of sales tax collected by your firm.
Annual filing: If your company receives less than $25 in sales tax each month, you must submit returns on an annual basis.
Quarterly filing: If your company collects between $25 and $100 in sales tax every month, you need submit quarterly reports.
Monthly filing: If your company receives more than $100 in sales tax every month, you must submit returns on a monthly basis.
Deadlines for Filing
All Arkansas sales tax return dates are on the first of the month, with a deadline of the 20th of the given month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day. The following are the filing deadlines for this year:
Penalties for Filing Late
Arkansas assesses a late filing penalty of 5% every month or partial month, with a maximum penalty of 35% of the tax stated on the tax return. If the taxpayer has been awarded a late filing penalty, the late payment penalty will not be imposed.
Arkansas additionally imposes a late payment penalty of 5% each month, up to 35% of the unpaid tax. If the taxpayer has been allocated a late payment penalty, the late filing penalty will not be imposed.