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“The sales tax for businesses in Arkansas is 6.5%”

What Does The Sales Tax For Business in Arkansas Mean?

Arkansas has a sales tax that is based on gross receipts. The gross receipts tax applies to sales of tangible personal property or services to contractors, as well as sales to customers or users.

The leasing or rental of tangible personal property is included in Arkansas’ definition of sale. The tax is calculated on the basis of the lessor’s rental or lease payments. A rental vehicle tax is applied instead of a gross receipts tax on gross receipts arising from rentals of licensed motor vehicles leased for 30 days or less. Diesel trucks rented or leased for business shipping, as well as farm machinery or equipment rented or leased for a commercial purpose, are exempt from the rental vehicle tax. The tax does not apply to trucks fueled by gasoline or diesel that are rented or leased for residential moving or shipment.

How Much Is The Sales Tax For Businesses in Arkansas?

Fort Smith, Arkansas’s minimum combined 2022 sales tax rate is 9.5 percent. There are three types of sales tax: state, county, and city. The current sales tax rate in Arkansas is 6.5 percent. The county takes 1% of the sales tax. Sales taxes in Fort Smith are 2 percent.

Arkansas Sales Tax Threshold Limit
6.5% $100,000 economic sales threshold limit and 200 transaction threshold limit

Read More: Kansas Sales Tax For Businesses 2022: A Complete Guide

Do You Need To Collect Arkansas Sales Tax For Your Ecommerce Business?

If you have a nexus in Arkansas, you must collect sales tax. The nexus between a seller and a state can be classified as either physical or economic. An entity has a physical nexus in a state if it is present or has activity there that justifies paying sales tax. The goal of establishing economic nexus with a state is to pass its economic threshold in terms of income or transactions.

Hence, Arkansas’s business sales tax is all about this. Now, the question arises: what types of goods and services are taxable under Arkansas sales tax? Let’s see.

Alan Chen

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By the end of this Strategy Session, you will have a clear understanding of the next steps you can take for your business to take advantage of the tax deductions you are missing out on.

What Type of Goods and Services Are Taxable Under Arkansas Sales Tax?

The first step in sales tax compliance is determining if the products or services your company offers are taxable in Arkansas.

Traditional Goods and Services

Physical items, such as furniture, home appliances, and automobiles, are all subject to sales tax in Arkansas.

The state of Arkansas offers a 1.5 percent discount on grocery purchases.

Digital Goods and Services

The term “digital good” refers to anything that is offered electronically, such as music purchased on iTunes or movies purchased on Amazon.

Businesses in Arkansas are not required to collect sales tax on digital goods or services.

Arkansas, however, is an exception to this rule. Businesses are required to collect sales tax on pre-written computer software sold online.

Therefore, if you are dealing in any of these goods and services, you are subject to pay tax under Arkansas sales tax. Now let’s move on to see the tax collecting and tax filing procedure under Arkansas sales tax.

Tax Collection

As soon as you get your seller’s permit and start your business, you’ll need to determine how much sales tax to charge your clients. The proper collection of sales tax is crucial for business owners to avoid fines and costly audits.

When calculating sales tax, you must account for the following types of purchases:

  • Store Sales- Sales tax calculation for traditional businesses selling goods or services on-site is easy: sales are taxed at the rate determined by the location of the business.
  • In-State Sales- Arkansas has a policy known as origin-based sales taxation. This means that long-distance sales in Arkansas are taxed based on the seller’s address. Regulations for sales taxes collected by the state, county, and city are included here.
  • Out-of-state Sales- Businesses with nexus in other states are only required to pay sales tax on out-of-state transactions. As a result of physical presence in another state, a company is said to have a “nexus.”

Tax Filing

You’re ready to file your sales tax return now that you’ve applied for your Arkansas seller’s permit and learned how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines and make sure to meet all filing dates.

Businesses in Arkansas are required to file sales tax returns and make payments online.

How often do you need to file sales tax in Arkansas?

The amount of sales tax your company earns determines how often you must file.

  • Annual filing- If your company receives less than $25 in sales tax per month, you must file returns on an annual basis.
  • Quarterly filing- If your company receives between $25 and $100 in sales tax every month, you should file quarterly returns.
  • Monthly filing- If your company collects more than $100 in sales tax every month, you must file returns on a monthly basis.

What Happens If You Fail To File The Tax Return Before The Due Date?

Filing Deadline

Unless it is a weekend or federal holiday, all Arkansas sales tax return deadlines fall on the first day 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 advanced to the next working day.

Penalty

Arkansas assesses a late filing penalty of 5% every month or partial month, up to a maximum of 35% of the tax stated on the tax return. The late payment penalty will not be levied if the taxpayer has received a late filing penalty.

Arkansas additionally imposes a late payment penalty of 5% each month, up to 35 percent of the unpaid tax. The late filing penalty will not be levied if the taxpayer has been assessed a late payment penalty.

Need Assistance With Arkansas Sales Tax

Please do not hesitate to contact us if you require any assistance with the Arkansas Sales Tax in 2022. FreeCashFlow is a tax and accounting firm based in Los Angeles, California, with over 20 years of experience and the greatest level of honesty. We provide the finest possible assistance with your tax and accounting difficulties.

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