The place to find business sales tax information

— as well as solutions, services and jobs!

Arkansas Sales Tax - or Gross Receipts Tax?

author photo of B.J. Pritchett

So let's start with Arkansas sales tax basics... First of all, Arkansas does not actually impose a sales tax. It imposes a gross receipts tax. The Arkansas Gross Receipts Tax is imposed on the total consideration for the value of the item/service received including any item/service associated with the taxable item/service such as freight, handling, insurance, surcharges, etc. If the freight, handling, insurance, surcharges are listed on the vendor’s invoice and are associated with the taxable item/service, these will all be subjected to the Arkansas Gross Receipts Tax.

Arkansas’ Gross Receipts Tax is commonly referred to a sales tax; however, be assured it is a gross receipts tax. It is also considered a “trust tax”. The state of Arkansas trusts the vendor to collect and remit the tax to the state on a monthly, quarterly or annual basis depending on the amount of tax reported during the year.

Arkansas Gross Receipts Tax: Some Interesting Quirks

* Arkansas is one of only a handful of states that allows the embedding of the sales tax into the price of the product. In other words, the vendor can charge a set price which includes the tax. If you’ve ever seen those commercials on television with the vendor stating “we’ll pay your sales tax for you” – in Arkansas, the vendor will pay the tax – of course, it may already be embedded in the price of the item/service.

* Arkansas also does not require a separate line item on the invoice for tax. Since the vendor can embed the tax in the price of the product, a customer would never see a separate line item for tax. It is not required by Arkansas law.

* The Gross Receipts Tax holds the vendor as the “taxpayer” in the state of Arkansas – not the customer/consumer. The taxpayer in the state is the vendor (who is entrusted to collect and remit the tax). If the vendor does not charge the tax to the customer, the vendor is held liable for the Gross Receipts Tax.

As you can tell from the above information, you certainly do not want to assume you understand Arkansas sales and use taxes. Knowing who is liable for the tax is the first step in knowing whether to pay the tax to the vendor or directly to the state of Arkansas. My next blog will discuss Arkansas Compensating Use Tax and who is liable for that tax.

If you have questions about Arkansas sales and use taxes, I invite you to post a question or comment below. Of course, don’t be surprised if I ask you five questions in return as knowing the facts always helps to identify the correct tax decision.

About the Author: B.J. Pritchett, CMI, is the owner of Pritchett Sales & Use Tax Consulting and the Arkansas Sales and Use Tax School based in Hot Springs National Park, Arkansas. Learn more about her by visiting her author bio page.

Comments or questions may be submitted by using the on-page "Comment" feature, subject to disclaimer at bottom of page. Additional contact options (and Consultation Requests) are also available on B.J.'s associated Firm Profile page.

Other recent “Arkansas (AR)” posts by B.J. Pritchett, CMI:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.

Comments

19 Responses to Arkansas Sales Tax - or Gross Receipts Tax?

  • Posted by Freddy on September 14, 2017 7:48pm:

    I am a field producer and advertising consultant for several outdoor product manufacturers. I am involved from the very start of an advertising campaign with several product manufacturers and help them build brand recognition. 99% of these product manufacturers are out of state and literally all the work takes place out of the state of Arkansas. I even deliver the finished product out of state, invoice while out of state while finishing field productions so I don't forget anything. I do however, do a lot of editing and graphic designing or building of the material field produced at my office in Arkansas. Yet, I know editing material or data is not taxable. My questions are of several levels. All of the work, I perform is 100% based on an advertising campaign goal set forth thru sit downs. However, I do not bill for sit downs. Such as a lot of carpenters give free-estimates I offer free sit downs to hopefully acquire more job opportunities thus opening more doors. Even though, I do not charge for sit downs can the state of Arkansas dictate a sales tax for such? I list no such sit downs on invoices. Does the state of Arkansas have any legal right to mandate sales tax on services out of state as mentioned above?
    From my understanding of Arkansas Sales Tax law, any material produced, edited, shot or supplied for the intent to meet advertising campaign goals is sales tax exempt. Thank you sincerely for your time,

    • Posted by Author photo of B.J. Pritchettbjpritchett on September 16, 2017 9:11am:

      The state of Arkansas views advertising consultant much like they view Contractors working on Real Property – the Contractor is liable for all taxes on materials used in New Building construction. Likewise in your case, any tangible personal property (material) you consume, use or store to create your body of work will be subject to tax.

      The Arkansas Rule governing advertisement as described is sourced to:
      GR-46. NON-TAXABLE ADVERTISING SERVICES:
      A. DEFINITIONS.
      1. “Advertising agency” means a business which provides comprehensive, professional advertising services including, but not limited to, artwork, concepting, designing and any other creative services necessary to create, plan and implement an advertising scheme.
      2. “Advertising services” mean those professional services provided by an advertising agency when designing and implementing an advertising campaign for a customer.
      B. 1. Advertising services shall not be subject to gross receipts tax.
      2. Advertising agencies must pay the Arkansas gross receipts or use tax on all property and taxable services which they purchase or consume in providing advertising services.
      3. The sale of caps, pencils, mugs, shirts or any other item of tangible personal property which contains the name, logo, picture or other message designed by the purchaser is subject to the gross receipts tax if the sale is made by a retail business engaged in the sale of advertising materials.
      Source: Ark. Code Ann. § 26-52-401(13)

      Arkansas does not tax all services. Services must be specifically taxed under Arkansas law.

      Your last statement:
      From my understanding of Arkansas Sales Tax law, any material produced, edited, shot or supplied for the intent to meet advertising campaign goals is sales tax exempt.

      The statement is inaccurate as to claim an exemption, the exemption must exist in the law and it does not. However, the service to your customer is a Non-Taxable Service as the Advertising Campaign must pay tax on the purchase of materials used in the advertising campaign. Refer to the Arkansas Rule/Statute above.

      If the Advertising Campaign sells tangible personal property to customers such as mugs, caps, shirts, etc., then and only then will you need to register and receive a sales tax permit for the collection and remittance of Arkansas sales tax.

  • Posted by Debbie on September 14, 2017 1:28pm:

    My company is in Louisiana. We are shipping lighting supplies to a University in Arkansas. We do not have nexus in Arkansas. Do we collect and report Sales Tax or does the University report the sales tax?

    • Posted by Author photo of B.J. Pritchettbjpritchett on September 16, 2017 8:52am:

      ANSWER: If you have No Nexus (people or property in LA), then you do not owe AR tax on the transaction.

      I would suggest informing your customer, "Customer is liable for all Federal, State and Local Taxes Due. Customer may owe Compensating Use Tax on the transaction."

      Be sure to indicate on the invoice the "Ship To" address in Arkansas.

      The University in Arkansas has the tax obligation.

  • Posted by Scott on August 9, 2017 8:04am:

    I am a freelance photographer, web designer and consultant.

    1 -Do I charge tax for photo sessions? Is this all types? I specialize in real estate and family portrait photography. I deliver the photos by digital link and do not charge a sitting fee. It is one fee for the entire session.

    2-Do I charge tax on web site creations?

    3-Do I charge tax on consultations? (Business or marketing consults)

    Thanks for all the great information!

    • Posted by Author photo of B.J. Pritchettbjpritchett on August 9, 2017 3:32pm:

      Hello Scott!

      Let me first start this dialogue of what the law states and how DFA has been interpreting this law. The law clearly states that all kinds of photography services are taxable. However, if you digitally download the photos to your customer and state such on your invoice - the digital download is not subject to tax.
      Do you charge tax for photo sessions? The answer is yes - where ever the photo service is performed. If it is a lump sum, the entire price is subject to Arkansas tax as total consideration for the value of the taxable service performed.
      Do I charge tax on web site creations? No, at this time a web site creation is not subject to Arkansas tax.
      Do I charge tax on consultations? That depends on what you deliver to your customer. If it is tangible personal property (pictures), then everything to create, design and deliver the TPP is subject to Arkansas tax.

      Please do not forget to report your Compensating Use Tax on out-of-state purchases for your own consumption, use or storage in Arkansas.

  • Posted by Jay on July 27, 2017 10:36am:

    Are personal weight training services provided by a health club subject to Sales tax in Arkansas?

    • Posted by Author photo of B.J. Pritchettbjpritchett on July 27, 2017 11:28am:

      If the health club does not have an Alcohol Beverage Control (ABC) permit, the personal weight training services are NOT TAXABLE. However, if the health club has and ABC permit, the personal weight training services WILL BE TAXABLE.

  • Posted by Chey on May 18, 2017 11:47am:

    Hi BJ,

    We are in the fire and flood restoration business. We are trying to figure a couple things out.
    1. When there is a fire or flood and we are replacing the floors and flooring to repair the damage from water or fire damage, are we to impose a sales tax for the material and labor of the job to the customer?

    2. Are people who have flood/fire damage subject to taxing versus a person that is repairing flooring just for the remodel?

    FYI: During restoration, we sometimes have to cut about 4 foot of the sheet rock around the place and pull carpet, drying mechanisms, and replacement of flooring.

    Answer to Question #1:
    Source: Arkansas Rule GR-21 states the replacement of flooring in an existing building is subject to tax both materials and labor.

    Answer to Question #2:
    No, refer to Source in Question #1 – they treat everybody who has an existing building the same!

    Answer to FYI:
    In reference to the FYI, your company needs to separately state the sheetrock from the rest of the invoice (materials and labor). No tax collected from customer on sheet rock labor – your company would need to pay tax on the materials (and any up charge on those materials). Pulling Carpet is not a taxable service (be sure to separately state on invoice). Drying Mechanisms are not taxable to the customer – be sure to pay tax on your own equipment or rental of equipment and separately state. Replacement of Flooring is taxable under Arkansas Rule GR-21.

  • Posted by ronnie on March 20, 2017 1:13pm:

    do we pay taxes on labor

    • Posted by Author photo of B.J. Pritchettbjpritchett on March 20, 2017 1:46pm:

      This depends on whether you are a contractor or a customer of labor performed and on what objects this labor is performed on. If you are a contractor working on erecting buildings (real property), as the contractor you will pay tax on all your materials. There is a Non-Taxable Service list of real property repairs on which the contractor will not charge tax to the customer as the contractor will pay tax on the tangible personal property purchased to be incorporated into the building. If the contractor performs a Non-Taxable Service addition to, alteration, cleaning, installation, refinish, repair or replacement of: Breakers, Breaker Boxes, Ceilings, Doors, Electrical Switches, Fences, Fire Alarms, Fireplaces, Floors (New Buildings ONLY), Gates, Glass, Heat and Air Ducts, Intercoms, Light Fixtures, Locks (New Buildings ONLY), Parking Lots (except Cleaning Taxable), Pipes, Plumbing Fixtures, Receptacles, Roofs, Security Alarms, Sprinkler Systems, Walls, Windows, Wiring

      However, if you are a contractor performing a Taxable Service on the addition to, alteration, cleaning, installation, refinish, repair or replacement of: Aircraft, Batteries, Carpet, Electrical appliances, Electrical devices, Engineering instruments, Farm Machinery & Implements, Flooring in Existing Buildings, Furniture, Locks in Existing Buildings, Machinery of all kinds (See GR-55), Mechanical Tools & Equipment, Medical Instruments, Motors – All kinds, Motor vehicles, Office Machines & Equipment, Parking Lots (CLEANING ONLY), Radio, Sheet Metal, Shoes, Shop Equipment, Surgical Instruments, Television, Tin Metal, Tires
      You may purchase your items tax free as you will collect tax on the taxable service.
      Please contact me if you need more information.

  • Posted by Buddy on December 2, 2016 7:55am:

    I already pay the USE tax to the state for items that are not for resale ordered off the internet, but if I purchase a tool from a local vendor and I am not charged tax by the vendor, what is the proper way to pay the tax amount to the state?

    Buddy,
    Sorry for the delay in response to your question. The state of Arkansas is a Gross Receipts state which means the IN-STATE VENDOR is liable for the collection and remittance of Gross Receipts/Sales tax. The customer is NOT the taxpayer. So if you purchased the item from an IN-STATE VENDOR, it is not your problem to deal with the collection and remittance of tax.

  • Posted by Joseph on November 21, 2016 11:06am:

    The City of Litle Rock asked us to bid a job we were awarded the bid and assumed the City was tax exempt . We billed the city with a statement saying the total bill was tax exempt and taxes were not included. We used a commercial carrier and contract labor to install. This is the only work done in Arkansas have we caused nexus?

    ANSWER:
    Sorry for the delay in response to your question. YES, your company has created Nexus with the state of Arkansas. Whenever anyone enters the state of Arkansas and installs, trains or delivers tangible personal property - the company creates Nexus.

  • Posted by Nathan on September 21, 2016 5:21am:

    Does a contractor offering services such as drywall, concrete, paving, etc. have to pay this gross receipts tax also on the services? Thanks!

    ANSWER:
    A Contractor under Arkansas Rule GR-21 must pay tax on all materials used in Real Property repairs except for locks, flooring and electrical devices in EXISTING BUILDINGS. Make sure when you are ordering items from out of state to be used in Arkansas that you pay the Compensating Use Tax. In-State Purchases are the Vendor's tax liability and the Vendor should collect and remit the tax - not the customer unless you provided the Vendor with an erroneous Exemption Certificate.

  • Posted by Connie on January 20, 2016 2:01pm:

    I need to clarify whether or not to charge a customer sales tax on outgoing freight. It was explained to me that incoming freight, shipping and handling were taxable, while outgoing freight was neither taxable or allowed a mark-up. What is your opinion?

    • Posted by Author photo of B.J. Pritchettbjpritchett on July 13, 2016 1:08pm:

      Arkansas does not provide a deduction for incoming freight as that generally is part of the cost of goods for producing an article of commerce. The tax would be collected when the article of commerce is sold.
      Arkansas is a Gross Receipts tax state and as such if the freight (outgoing to the customer) is listed on the vendor's invoice along with the item or separately billed for a taxable item, the freight is considered part of the total consideration for the item purchased or taxable service rendered.

  • Posted by Author photo of B.J. Pritchettbjpritchett on November 6, 2015 7:38pm:

    I'm sorry for the delay in response to your question regarding prepaid wireless service in Arkansas. GR-7.2. PREPAID CALLING SERVICE AND PREPAID WIRELESS CALLING SERVICE:
    A. Sales of a prepaid calling service, a prepaid wireless calling service, or the recharge of a prepaid calling service or a prepaid wireless calling service are subject to gross
    receipts tax.
    B. DEFINITIONS.
    1. “Prepaid calling service” means the right to access exclusively a telecommunications service, which must be paid for in advance and which enables the origination of calls using an access number or authorization code,
    whether manually or electronically dialed, and that is sold in predetermined units or dollars of which the number declines with use in a known amount.
    2. “Prepaid telephone calling card” or “prepaid authorization number” mean the exclusive purchase of telephone or telecommunications services, paid for in
    advance, which enables the origination of calls using an access number or authorization code, whether manually or electronically dialed.
    3. “Prepaid wireless calling service” means a telecommunications service that provides the right to utilize a mobile wireless service as well as other non-telecommunications services, including the download of a digital product delivered electronically, content, and ancillary services, which must be paid for in advance and that is sold in predetermined units of dollars of which the number declines with use in a known amount.
    4. “Recharge” means the purchase of additional telephone or telecommunications services for a previously purchased prepaid calling service or prepaid wireless calling service.
    C. SOURCING.
    1. If the sale or recharge of a prepaid calling service or a prepaid wireless calling service takes place at the retail vendor’s place of business, then the sale is sourced to that business location and the applicable local sales tax rate is that of the business location.
    2. If the sale or recharge of a prepaid calling service or a prepaid wireless calling service does not take place at the retail vendor’s place of business, then the sale is sourced to the first of the following addresses that is known to the seller in accordance with Ark. Code Ann. § 26-52-521(b):
    a. The location indicated by instructions for delivery to the purchaser (or donee);
    b. The address of the purchaser;
    c. The billing address of the purchaser; or
    d. The address from which the tangible personal property was shipped or from which the service was provided, disregarding for these purposes any location that merely provided the digital transfer of the product sold. In the case of a sale of prepaid wireless calling service, the location associated with the mobile telephone number may be used.
    3. A prepaid calling service or a prepaid wireless calling service sold through a vending device is taxed as any other good sold through a vending device.

    For the appropriate local tax you will need the physical address as Arkansas has over 300 city/county local taxes. Once you know the physical address you will need to look it up on the Arkansas Local Tax Lookup Tool located on the internet at: http://www.arkansas.gov/dfa/excise_tax_v2/st_zip.html

    Arkansas' State Rate is 6.5% and there are multiple local tax rates.

    If you need additional assistance, please contact me.

  • Posted by Jill on October 25, 2015 4:23pm:

    I am researching the taxation of prepaid wireless service in Arkansas. Can you confirm how the sale of a TracFone or Virgin Mobile handset or prepaid card sold through, for example Radio Shack or a mom and pop gas station is taxed for purpose of GRT ? And can you confirm that the rate is the same in every location in Arkansas (i.e. city or county)?

    • Posted by BJ on January 20, 2016 2:40pm:

      Sorry for the delay in response - the bounce over to my email did not happen and I will check into that issue. In the meantime, in answer to your questions allow me to start with each question:
      1) Can you confirm how the sale of a TracFone or Virgin Mobile handset or prepaid card sold through, for example Radio Shack or a mom and pop gas station is taxed for purpose of GRT ?
      ANSWER:
      a) Tax is imposed at the point of sale for the TracFone or Virgin Mobile Handset. For future billing, if the telecommunications company that provides the service has a bill to address - this will be the address that the state and local tax will be imposed.
      b) The prepaid card is taxed at the time and location of where the prepaid card is purchased and the state and local tax is imposed upon purchase.
      2) And can you confirm that the rate is the same in every location in Arkansas (i.e. city or county)?
      ANSWER: Unfortunately, the city and county tax rates vary and change on a quarterly basis. The state rate is consistent and is 6.5% as of July 1, 2013.

Submit a comment or question - only your first name will appear

Disclaimer:

Access to any portion of SalesTaxSupport.com is contingent upon your acceptance of our Terms of Use. This Web Site and content provided by STS Publishing, LLC and its third party content providers, including, but not limited to information, documents, forms, comments, advice and opinions, is for informational purposes only, and is not a substitute for professional advice, nor does the use of this Web Site constitute a professional-client relationship. The Web-Site also includes advertisements, directory listings, job postings and links to third party web sites, all of which are provided for your convenience only and in no way constitute a referral, endorsement, or warranty by SalesTaxSupport.com of any product or service provided by such third parties. All content is provided “as is” with no guarantee regarding accuracy, suitability, or timeliness. Your reliance on any content accessed on or through the Web Site, or on any product or service provider is strictly at your own risk.