Arkansas Excise Tax: Rates, Filing, and Exemptions

An excise tax is a levy applied to specific goods, services, or activities within Arkansas. These are indirect taxes, where the producer or seller pays the tax to the state and includes the cost in the final price paid by the consumer. Unlike a general sales tax that applies broadly, an excise tax targets a narrow list of products. The revenue from these taxes often funds specific state projects related to the taxed item, such as road maintenance funded by fuel taxes.

Taxable Goods and Services

A variety of goods and activities are subject to excise taxes in Arkansas, with rates that are distinct to each category. The state levies these taxes on products ranging from motor fuels and tobacco to natural resources.

Motor Fuels

For the period of October 1, 2024, through September 30, 2025, the total excise tax rate for gasoline is $0.247 per gallon, and the rate for clear diesel fuel is $0.285 per gallon. These rates combine a motor fuel tax and a wholesale tax. A Petroleum Environmental Assurance Fee of $0.003 per gallon is also added, which licensed distributors and suppliers must collect. For alternative fuels like liquefied petroleum gas (LPG), the rate is $0.165 per gallon.

Tobacco Products

Tobacco products other than cigarettes are taxed at 68% of the manufacturer’s invoiced selling price before any discounts, levied on the first purchaser within the state. For premium cigars costing more than $0.7576 each, the tax is $0.50 per cigar plus 2% of the manufacturer’s invoiced selling price. Vaping products are not subject to a special excise tax in Arkansas.

Alcoholic Beverages

The state imposes per-gallon excise taxes on alcoholic beverages, with rates varying by type. The tax is $2.50 per gallon for liquor and other spirits and $0.75 per gallon for wine. Beer is taxed at $7.50 per 31-gallon barrel, equivalent to about $0.24 per gallon, while malt liquor is taxed at $0.20 per gallon.

Severance Taxes

Arkansas levies a severance tax on the extraction of non-renewable natural resources. The tax on oil is 5% of its market value at the point of severance, but a lower rate of 4% applies for wells producing ten barrels or less per day. Natural gas is taxed at 5% of its market value, but rates of 1.25% or 1.5% can apply for classifications like new discovery or high-cost gas. Other taxed resources include brine at $2.75 per 1,000 barrels and timber.

Other Miscellaneous Taxes

Other products also carry an excise tax. Medical marijuana sales from a cultivator to a dispensary are subject to a 4% special privilege tax on the gross proceeds, which is separate from the sales tax paid by the patient. A rim removal fee is charged when a tire is removed from a rim during a replacement tire sale, costing $3.00 for a new tire and $1.00 for a used one.

Business Registration Requirements

Before selling products subject to excise tax, a business must register with the Department of Finance and Administration (DFA). The primary document is the Arkansas Combined Business Tax Registration Form (AR-1R). This form consolidates registration for various business taxes, including excise, withholding, and sales and use taxes.

To register, a business must provide its Federal Employer Identification Number (FEIN), though sole proprietors may use a Social Security Number. The legal business name, any trade name (DBA), physical location, and mailing address are also required. Information about business owners, partners, or corporate officers, including names, addresses, and Social Security Numbers, must be supplied.

On Form AR-1R, a business must indicate which excise taxes it will collect by selecting the appropriate permits. For example, a business selling tobacco must check the box for a tobacco license, while a gas station needs a motor fuel tax permit. The completed form can be mailed or submitted through the state’s online portals.

Filing and Paying Arkansas Excise Taxes

After registering, a business must file returns and remit collected taxes regularly. Most businesses must file excise tax returns monthly. The returns and payments are due by a specific date in the month following the collection period, such as the 20th or 25th, depending on the tax.

The primary method for filing and payment is through the Arkansas Taxpayer Access Point (ATAP), the state’s online portal. The system provides electronic forms where users enter gross sales, calculate the tax due, and schedule a payment from a bank account. Upon submission, ATAP generates a confirmation receipt as proof of filing.

While online filing is the preferred method, paper forms are available for most excise taxes. Businesses filing by mail must use the correct form and send it with a check for the tax amount due. The mailed return must be postmarked by the deadline to the address specified by the DFA.

Available Exemptions and Credits

Certain transactions and uses of taxable goods may be exempt from Arkansas excise tax, but these exemptions are specific and require documentation. They are designed to prevent tax pyramiding, where a tax is applied multiple times to the same product, and to support specific industries or public functions.

A common exemption applies to motor fuels sold for non-highway uses, such as gasoline and diesel for agricultural equipment. Sales of motor fuel to federal, state, and local governments for official use are also exempt. To claim this exemption, the seller must obtain and keep a signed exemption certificate from the purchaser.

For alcohol and tobacco, exemptions are available for sales between licensed entities. For instance, a sale of tobacco products from one licensed wholesaler to another is not taxed. Similarly, transfers of alcoholic beverages between a manufacturer and a licensed distributor may be exempt, ensuring the tax is applied only once.