What Qualifies for Arkansas Sales Tax Exemptions?

In Arkansas, the state imposes a sales tax on the gross receipts from sales of tangible personal property and certain services. The standard statewide rate is 6.5%, though local taxes can increase the total rate. However, Arkansas law provides specific exemptions that relieve certain goods, services, and buyers from the sales tax obligation. These exemptions are established to reduce the cost of certain goods or support the work of charitable organizations.

Exemptions Based on Product or Service

Certain goods and services are exempt from Arkansas sales tax based on their type, regardless of who makes the purchase. These exemptions often apply to necessities or are meant to support state industries.

An exemption exists for food and food ingredients, which are taxed at a reduced state rate of 0.125%. This does not cover prepared food, candy, soft drinks, alcoholic beverages, and dietary supplements, which are taxed at the full rate. Effective January 1, 2026, the state sales tax on eligible food will be eliminated, though local sales taxes will still apply.

Medical items also receive exemptions. Prescription drugs sold by licensed pharmacists or physicians are exempt, as is prescribed oxygen. Other exempt items, including their repair and replacement parts, must be sold to a patient under a physician’s prescription for home use. These include:

• Durable medical equipment
• Mobility-enhancing equipment
• Prosthetic devices

The state also provides exemptions for its agricultural and manufacturing sectors. New and used farm machinery used for the commercial production of food or fiber is exempt, and a Farmer Sales Tax Identification Card is used for verification. Machinery and equipment purchased for a new manufacturing facility or to replace existing equipment used directly in manufacturing are also exempt from state sales tax.

Exemptions for Specific Buyers and Uses

Arkansas law also grants sales tax exemptions based on the purchaser’s identity or the item’s intended use. Qualification depends on the buyer’s status and providing proper documentation.

A common exemption is for the sale for resale. When a business buys inventory it intends to resell, it can do so without paying sales tax. To qualify, the buyer must give the seller a valid resale certificate that includes their sales tax permit number.

Qualifying nonprofit organizations can make purchases tax-free. An organization’s 501(c)(3) status is not an automatic exemption; it must be recognized as a “charitable organization” under state law. Sales made directly to governmental agencies, including the U.S. government, the State of Arkansas, and its political subdivisions like cities and public schools, are also exempt.

For some businesses, a Direct Pay Permit offers an alternative. This permit, from the Arkansas Department of Finance and Administration, allows a company to purchase items tax-free from vendors. The permit holder then self-assesses and remits the appropriate use tax directly to the state on any taxable items they consume.

Claiming an Exemption

Claiming a sales tax exemption requires the buyer to provide the seller with a completed Arkansas Certificate of Exemption, Form ST-391, at the time of purchase. This form can be downloaded from the Department of Finance and Administration’s website.

The buyer must provide their name and address, sales tax permit number if applicable, and the seller’s information. The form also requires a description of the property and the specific reason for the exemption, such as for resale or agricultural use.

The seller must accept the certificate in good faith, believing the claim is legitimate. Sellers should review the form for completeness and plausibility before accepting it.

Both the buyer and seller must keep a copy of the certificate for their records. This documentation proves why sales tax was not collected and must be available for state audits for several years.