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New Arkansas Sales Tax Resource Launched!

author photo of B.J. Pritchett

I started my accounting career as a cost accountant for a manufacturer – and then later became the controller of a hospital. It was around this time that I noticed state auditors would arrive on-site around 9:30 a.m. - and go home at 3:30 p.m. And I thought to myself, I could do that job… and for 10 years I did. While I enjoyed my work as a Arkansas Senior Field Tax Auditor II, I eventually decided to expand my horizons and worked as a senior tax consultant and then as a state and local manager. In 1992, I started my own practice performing refund reviews, audit defense work and educational tax seminars in Arkansas.

I love what I do and I view this new "Arkansas State Sales Tax" blog as a means to share what I have learned over the years about Arkansas sales and use taxes. For my first post (which will follow shortly) I've written an overview of Arkansas' sales tax - which is BTW actually a gross receipts tax. I'll also explain a few interesting quirks...

If you have questions about Arkansas Sales and Use Taxes, I invite you to post a question or comment. 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

11 Responses to New Arkansas Sales Tax Resource Launched!

  • Posted by Joelle on September 28, 2018 3:36pm:

    We are a general contractor in AR and regularly buy product from out-of-state vendors. We pay all use taxes as required, but a recent vendor has us questioning our liability on their invoice. The invoice states "applicable use tax will be remitted to the State of Arkansas". We reached out to the company via email and received the following response: "we are the manufacturer of the materials. We remit use tax to the State of AR based on the cost of raw materials." I cannot find anything on DFA website about manufacturer's use tax so I called to ask about our liability. I was told that YES, we do owe the consumer use tax on the amount of the invoice. FWIW, the company produces automatic doors (I believe in TN) and installed them in our new-build in AR. I already have the invoice marked for payment of use tax, but I am curious to understand this manufacturer's raw material use tax. Will you shed some light on this? Thanks so much for your time.

    • Posted by Author photo of B.J. Pritchettbjpritchett on September 29, 2018 7:24am:

      Joelle:

      Glad to know you are paying your consumer use tax on your out-of-state purchases. As to FWIW, the company producing automatic doors and installs them in new buildings in AR, this company while located out-of-state has crossed the threshold of nexus with Arkansas when they make installation inside the state of Arkansas. This company should be set up as a Gross Receipts In-State Vendor as they are installing inside the state borders. FWIW may have likely and unintentionally signed up with the state of Arkansas as a Vendor Use Tax entity. FWIW may be wearing several hats: Manufacturer of Automatic Doors and as a Contractor installation of the Manufactured Product. As such they would be a Contractor in the state of Arkansas and bear the burden of paying Use Tax on Materials brought into the state of Arkansas and installation into New Buildings.

      You should probably ask FWIW if as a Sub-Contractor to Your Company, if they have paid the Arkansas Use Tax on the materials they used in the New Building. If they paid the Use Tax then, you do not pay the Use Tax on their bill to you.

      General Contractors should always have their Sub-Contractors sign a letter of tax liability stating "as the Sub-Contractor on XYZ Project, we have paid all sales and use taxes due."

      This would then shift the burden from the General Contractor to the rightful party the Sub-Contractor.

  • Posted by Jennifer on April 17, 2018 12:22pm:

    If a business orders in materials to be utilized in a construction project in a different state - where does the use tax actually need to be remitted? In Arkansas where the materials were received or in the other state where they were actually used in the building? Also, what is the benefit of having a tax exemption certificate when you must still remit use tax?

    • Posted by Author photo of B.J. Pritchettbjpritchett on April 17, 2018 12:39pm:

      Thank you for your question.

      Where ever title/possession of materials for a construction job occurs that state has the first use of the materials and as such tax is due at that time.

      The next issue you bring forth is that the construction job may take place in a different state than the state of title/possession. In this case you must know if tax was paid to the first state and only pay the difference if the tax rate is higher in the construction state. If it is lower you do not get a refund.

      You asked what is the benefit of having a tax exemption certificate when you must still remit use tax?

      The point would be to ensure you pay the correct state and local taxes due to the state where the construction project is performed.

      I hope this leads you to the answers you need.

  • Posted by pat on September 29, 2017 4:55am:

    If a plumber is installing a new water main line is the labor to me going to be taxed? This is are only source of water to the house. Also if the well is done can I take abandonment on my taxes?

    • Posted by Author photo of B.J. Pritchettbjpritchett on September 29, 2017 11:34am:

      Plumbers are considered to be construction contractors and are responsible for taxes when they purchase materials (tangible personal property) to use in contract jobs. If plumbers work on machinery & equipment, it would be a taxable transaction.

      In your instance laying a new water line, the contractor's labor is not subject to sales tax as it is a real property transaction.

      I have no idea what taxes you are talking about on abandonment of the well. Is this a business or an individual water line? If it is a business maybe there is some tax break for income taxes, but for individuals, none that I can think of.

  • Posted by Lee on August 26, 2017 8:57am:

    With regard to federal construction contracts, does Arkansas collect sales tax from prime contractors and subcontractors on items being purchased to fulfill the federal construction contract? If not, is there a form or other document that should be filled out and submitted to Department of Finance and Administration. An individual at DFA informed us that they will not collect sales tax from federal construction contractors but I am unable to locate documentation to confirm this.

    • Posted by Author photo of B.J. Pritchettbjpritchett on August 26, 2017 9:53am:

      Federal Contracts provide contractors with a lot of heartburn over exactly how to structure the contract with the United State Government.

      IF a Federal Contractor has a US Governmental Contract in which the language states "Contractor immediately sales goods to the United States Government (unaltered) at the time of purchase." Then as the Contractor you have made a "Sale for Resale" (Arkansas Rule GR-53).

      However, if the Contractor purchases all the materials going into a Government Contract, unless the item is transferred to the US Government in an identifiable form (nut, bolt, screw); the Contractor must pay tax on the items (consumables, supplies, etc.).

      Best to get a Sales/Use Tax Attorney to assist in the contractual language of the US Governmental Contract so as to avoid taxation.

  • Posted by Mona on June 28, 2017 6:17am:

    Are hotel rooms sold to foreigners exempt from tax in any way?
    ANSWER: Not to my knowledge, there are some states that will provide an exemption for specific groups but Arkansas does not exempt foreigners from state sales taxes.

  • Posted by Bud on June 29, 2015 1:56pm:

    Starting a "Digital Marketing Program" here in Arkansas, by purchasing the right to sell the CPNcard in Arkansas.. The company is based out of Georgia. AR Businesses can register for free to participate. Regional Developers, Businesses, Card Distributors, and fundraisers can sell the discount cards (plastic credit card size cards that are numbered) for $15 dollars each. The regional developers, businesses, card distributors, and fundraisers will earn money from the sell of the cards too.
    Who should pay the sales tax for Arkansas? The CPNcard company in Georgia, I own the terrority rights of Arkansas, or the individuals/businesses that actually sell the cards to the end user.

    • Posted by Author photo of B.J. PritchettB.J. Pritchett, CMI on June 29, 2015 3:10pm:

      Arkansas imposes a tax on the sale of tangible personal property. Arkansas law does not have a general exemption for fundraising. Generally, the taxability of fundraising activities depends on who is conducting the activity. For example, school organizations that conduct fundraising activities must pay tax on purchases for resale but do not have to collect tax on the sales of the items unless the students take orders for the vendor; exempt organizations may purchase items exempt from tax but are not specifically exempt from tax on sales made by the organizations; and charitable organizations that are not engaged in business for profit are not generally required to collect tax on sales they make unless they compete with for-profit businesses.
      Since the sale being made by your company is to regional developers, businesses, card distributors and fundraisers, it does not appear to be a valid sale for resale to a permitted business. The sale of the CPNcard in Arkansas would be subject to tax just like prepaid calling cards are subjected to tax.
      (ARKANSAS RULE 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.
      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.)
      Arkansas holds the vendor liable for the collection and remittance of tax.
      Other circumstances might change the answer provided but without additional information the transaction appears to be taxable.

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