How to Calculate Sales Tax in Arkansas

Sales tax in Arkansas is a consumption tax applied to the sale of goods and certain services within the state. It funds various state and local government services and public infrastructure. Businesses are responsible for collecting this tax from customers and remitting it to the state.

Arkansas Sales Tax Rates

Sales tax in Arkansas includes a statewide rate and various local rates. The state sales tax rate is 6.5%. This state rate combines with taxes levied by counties, cities, and special districts, causing the total sales tax to vary by location. Local sales tax rates can range from 0.25% to 5.125%, resulting in combined rates as high as 11.625% in some areas.

Determining the correct local rate depends on the point of sale or the delivery location. Businesses often need to use online lookup tools or resources provided by the Arkansas Department of Finance and Administration (DFA) to identify the precise combined rate for a given address. These resources allow searches by address or ZIP code to ensure accurate rate application.

What Sales Are Taxable

In Arkansas, sales tax applies to the retail sale of tangible personal property and certain services.

Taxable services include certain repair services, short-term rentals of accommodations, utility services like natural gas, electricity, and water, and various types of cleaning and landscaping services.

Arkansas law provides exemptions that reduce the taxable base. Common exemptions include most groceries, prescription drugs, certain agricultural supplies, and specific manufacturing equipment. Sales for resale are also exempt, provided the purchaser holds a valid sales tax permit and provides proper documentation.

Steps for Calculating Sales Tax

Calculating sales tax involves identifying the correct rate for the transaction’s location. First, determine the combined state and local sales tax rate applicable to the specific address where the sale occurs or goods are delivered. This combined rate includes the 6.5% state tax plus any relevant city, county, or special district taxes.

Next, identify the total taxable sales amount for the transaction. This amount excludes any items or services that are specifically exempt from sales tax, such as qualified groceries or items purchased for resale. After determining the taxable amount and the combined sales tax rate, apply the formula: Taxable Sales Amount × Combined Sales Tax Rate = Sales Tax Due. For example, if a taxable item costs $100 and the combined sales tax rate is 9%, the sales tax due would be $9.00 ($100 × 0.09).

If a transaction involves both taxable and exempt items, only the taxable portion is used. For instance, a $200 purchase with $150 in taxable items and $50 in exempt items would only have tax calculated on the $150 taxable amount. Rounding rules require that amounts of tax less than one-half cent are rounded down, while amounts of one-half cent or more are rounded up to the nearest cent.

Filing and Paying Sales Tax

Once sales tax has been collected, businesses must file returns and remit the collected funds to the state. The filing frequency (monthly, quarterly, or annually) is assigned by the state based on the business’s sales volume or anticipated sales tax liability. For example, businesses collecting more than $200 in sales tax per month file monthly, while those collecting less may file quarterly or annually.

Sales tax returns are due on the 20th day of the month following the reporting period. If this due date falls on a weekend or holiday, the deadline is extended to the next business day. The primary method for filing and paying sales tax in Arkansas is through the Arkansas Taxpayer Access Point (ATAP), an online portal designed to streamline the process.

Businesses must report their total sales, taxable sales, and the total tax collected through the ATAP system. Electronic payment options are available within ATAP, allowing for efficient remittance of funds. Even if no sales tax was collected, businesses with an active sales tax permit are required to file a “zero tax filing” to remain compliant.