Arkansas, famed for its stunning Ozark Mountains and thriving agriculture, is more than just a natural gem of the South. With its growing business hubs and bustling trade, understanding sales tax in Arkansas is essential for businesses and consumers alike.
This guide breaks down everything you need to know about Arkansas’s sales tax, from determining the right sales tax rates to understanding exemptions and filing processes. By the end of this comprehensive guide, you’ll be equipped to handle Arkansas’s sales tax with confidence and ease.
Sales Tax Nexus in Arkansas
When a business creates either a physical or economic nexus, it is required to collect sales tax in Arkansas.
Physical Nexus
A physical nexus means having a significant physical presence or engaging in enough activities within a state to require the collection and payment of sales tax. The factors that determine a physical nexus in Arkansas include:
- Physical Location: This includes having an office, a place for distribution, sales, or showcasing products, a warehouse or storage facility, or any other place where you conduct business.
- Inventory in the State: This covers situations where you store your products within the state, even if it’s done through a third-party fulfillment center or 3PL (like Amazon FBA) or an online marketplace.
- Employees, independent contractors, agents, or other representatives operating on your behalf.
To stay informed about the current criteria for establishing a physical sales tax nexus in Arkansas, take a look at the official regulations available right
here!
Economic Nexus
States have established regulations to collect sales tax from out-of-state sellers who meet certain revenue and/or transaction thresholds. This rule is known as economic nexus.
Beginning July 1, 2019, the threshold for economic nexus in Arkansas is $100,000 in gross revenue
or 200 transactions in the previous or current calendar year’s sales.
While the nexus criteria mentioned above generally apply to most businesses, additional methods exist for establishing economic sales tax nexus. To access a comprehensive list of these rules, please refer to the
governing laws for economic sales tax nexus requirements in Arkansas.
Arkansas Sales Tax on Goods and Services
One of the first things you need to know is whether the goods you’re selling or services you’re offering are taxable in Arkansas.
Tangible Products
Almost all goods are taxable in Arkansas, including:
- Cosmetics
- Electronics
- Clothing – Clothing is taxable, but certain items are tax-free during the back-to-school holiday in August.
- Furniture
- Jewelry
- Home Goods
- Groceries – Arkansas reduces the food sales tax rate to 0.125% effective January 1, 2019. Additionally, as of March 2025, there are proposals to eliminate the remaining grocery tax, but these have not yet been enacted
- Textbooks – Taxable, but school instructional materials are tax-free during the back-to-school holiday in early August.
The goods that are exempt from sales tax are:
- Diapers – Children’s and adult diapers used for bladder or bowel control issues.
- Feminine Hygiene Products (i.e. pads, tampons, panty liners, sanitary napkins, and menstrual cups)
- Prescription Medications
- Medical Devices
- Energy-efficient Appliances – Energy-efficient appliances in Arkansas are tax-free, with rebates and credits offered.
- Agricultural Supplies: Seeds, fertilizers, and machinery used directly in farming are exempt.
Services
In Arkansas, the majority of service-based transactions, such as information services and employment services, are not subject to sales tax.
However, there are specific situations where certain services are taxable. For instance, taxable services are:
- Accommodations (lodging) provided to transient guests
- Boat storage and docking
- Car Washes Cleaning or janitorial work
- Printing
Software as a Service (SaaS)/Digital Products
SaaS is not taxable in the state of Arkansas.
Digital products (i.e., ebooks, downloadable video content, mobile apps) are
taxable when sold to end users for permanent or temporary use
.
Shipping/Handling
Shipping and handling charges in the state of Arkansas are taxable. Freight charges are taxed if tied to taxable goods unless billed by a carrier or for non-taxable goods.
Sales Tax Permits and Licenses in Arkansas
Now that you’ve got a handle on when sales tax nexus applies and which products are taxable in Arkansas, the next important step is getting your Arkansas Seller’s Permit, also known as a sales tax permit.
Seller’s Permit
You can register for a Louisiana Direct Marketer Permit online through the
Arkansas Taxpayer Access Point (ATAP) or follow our detailed
step-by-step guide for assistance.
Ensure you have specific information on hand when registering for a seller’s permit, including, but not limited to:
- Business Identification Information (name, address, phone number, email address)
- Business Entity Structure (sole proprietorship, partnership, corporation, LLC, etc.)
- Federal Employer Identification Number (EIN or FEIN)
- Owner/Partner/Officer Information
- Business Activity Details (description of products or services sold, sales volume, date of the first sale or the expected date to start dates)
- NAICS code
Registration fee
There is a
$50 fee to register for a sales tax permit for businesses with a physical presence in the state and free for out-of-state/remote sellers with no physical presence.
Renewal
In Arkansas, you don’t have to renew your sales tax permit.
Resale Certificate
A resale certificate is a document that allows businesses to buy products without paying sales tax on them as long as they plan to resell those items to customers, who will then pay the tax. As a seller, you can also accept resale certificates from others looking to buy for resale.
In Arkansas, sellers use resale certificates to buy goods from their suppliers that they intend to resell. The issuance of the certificates is always done in good faith that the seller would report tax on the final sale of the items.
You can fill out the Arkansas Exemption Certificate (Form ST 391) provided by Arkansas after you receive your sales tax permit. You can also fill out the Streamlined Sales and Use Tax Certificate of Exemption if you would like to get
sales tax exemption for multiple states simultaneously. If you don’t want the hassle of registering, sign up for our all-inclusive service that includes sales tax registration.
Streamlined Sales Tax (SST)
The Streamlined Sales Tax (SST) is an initiative to simplify and standardize sales tax regulations across multiple states. Arkansas is a party to this program, meaning it follows the uniform rules and definitions established by SST.
Check with the Arkansas Revenue Services for the most current information on Arkansas’s participation in the Streamlined Sales Tax initiative.
Calculating and Collecting Sales Tax in Arkansas
Sales Tax Computation
In Arkansas, sales tax isn’t just one simple rate; it’s a combination of state and local taxes. To figure out the total sales tax for your calculation, you’ll need to add up the rates for the state, county, and city (if applicable) where your transaction occurs.
Here’s an example. Suppose an out-of-state seller satisfies the economic nexus criteria in Arkansas and sells to a customer in Little Rock, AR, with a ZIP code of 72201. In that case, the seller has to charge the customer a total sales tax, which can be broken down as follows:
 |
SALES TAX FORMULA |
RATE |
| State: |
Arkansas |
6.50% |
| County: |
Pulaski |
1.00% |
| District: |
Second District |
0.00% |
| City: |
Little Rock |
1.13% |
| Combined Sales Tax Rate = |
8.63% |
|
Origin-based vs. Destination-Based
When making in-state sales, it is important to determine if you are located in an origin-based state or destination-based state to figure out what rate to charge for sales tax.
Arkansas is a destination-based state, meaning sales tax is determined based on the buyer’s location. That means for a Arkansas-based seller, sales tax is generally based on the location of the buyer when selling within the state.
For out-of-state or remote sellers, the sales tax rate is always determined by the buyer’s location. For instance, if you’re selling a product from Mississippi to a customer in Aberdeen, Arkansas, where you have nexus, you’d apply Aberdeen’s sales tax rate to that sale.
To make life easier, consider using sales tax software or consulting a tax professional, like TaxHero, to ensure accurate tax calculations and collections. Understanding these tax rules helps you stay compliant, whether you’re in-state or out-of-state.
Filing and Remitting Sales Tax Returns in Arkansas
The next step after collection is filing and remitting your Arkansas sales tax returns. Filing and remittance can vary in frequency, typically monthly, quarterly, or annually.
- Monthly Returns: If your total sales tax liability exceeds $100 in any given month, you are required to file and remit your sales tax every month.
- Quarterly Returns: If your average tax liability for the previous fiscal year (July 1 – June 30) does not exceed $100 per month.
- Annual Returns: If your average tax liability for the previous fiscal year does not exceed $25 per month.
It’s crucial to keep accurate records of your sales and tax collections and adhere to the filing schedule set by the state to remain compliant with Arkansas’s sales tax regulations.
Due Dates
In Arkansas, the due date falls on the
20th day of the following month. For instance, sales tax collected in January is due by February 20th for monthly filers.
However, if this day is a holiday, weekend, or in the rare occurrence of a natural disaster, the deadline is typically extended to the next business day. For instance, if you’re a monthly filer and filing sales tax for the month of April, and the May 20th deadline falls on a holiday or weekend, you’ll have until May 21st, the following business day, to submit.
Monthly Prepayments
Businesses with a notable sales tax liability may need to make monthly prepayments ahead of their monthly return filings. The specifics of these prepayments depend on the business’s prior year’s tax liabilities.
Arkansas Pre-pay Sales Tax on a Vehicle lets vehicle buyers pay sales tax before titling or registering, avoiding penalties while awaiting dealership paperwork. Dealers can also use it to pay a customer’s sales tax.
Filing Sales Tax Returns
To file your sales tax return for Arkansas, a few options are available:
- File online through the Arkansas Taxpayer Access Point (ATAP).
- File by mail – You can file and pay using Form ET-1 by mail. Contact the Arkansas Department of Finance and Administration at 501-682-7104 to request the form.
- File with TaxHero – Let TaxHero take care of it so you don’t have to worry about missing a payment or return.
Timely Filing Discount
Some states offer businesses a discount for collecting, filing, and remitting sales tax on time as an incentive to process sales taxes promptly. Since July 2019, the DFA has provided a 2% discount for timely filings, capped at $1,000 monthly. Local jurisdictions may also offer a 2% discount, up to $4,000 per city or county.
Sales Tax Holiday
Currently, for 2024-2025, here is the planned sales tax holiday in Arkansas:
| DATE |
TYPE |
ELIGIBLE MERCHANDISE |
| August 2-5, 2025 |
Back-to-School Sales Tax Holiday |
Various school-related items, including:
- Clothing and footwear ($100/item or less)
- Clothing accessories and equipment ($50/item or less)
- School supplies
|
|
Arkansas Sales Tax Penalties
Like in most states, sales tax is a big part of how Arkansas generates revenue. Thus, maintaining compliance with sales tax regulations is of utmost importance. Failure to do so can lead to consequences and sales tax penalties. Therefore, it is crucial always to ensure you are up-to-date in filing, collecting, and remitting sales tax to the state.
Here are the specific penalties or non-compliance with sales tax regulations in Arkansas:
- Interest on Unpaid Taxes: Charged at 10% per year from the original due date (April 15th for most taxpayers) until payment is made. The same rate applies to underpayments.
- Failure to File: 5% of the tax owed per month or part of a month late. Maximum penalty: 35% of the tax owed.
- Failure to Pay: 1% of the unpaid taxes per month or part of a month late. Maximum penalty: 35% of the unpaid taxes.
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