As you may know, some states have higher tax rates than others because each state government has its own regulations. Sales tax in Arkansas is among the highest tax rates in the country, although other types of taxes in Arkansas may be among the lowest. This is the type of singularity that occurs in our country due to the autonomy of the states.
For example, while there are no inheritance taxes in Arkansas, sales tax is among the highest tax rates.
Depending on the county and city where you live, your sales tax may be higher or lower. Keep reading to understand how sales tax is handled in Arkansas.
How does Sales Tax work in Arkansas?
According to the official website of the Arkansas Department of Finance and Administration (DFA), the effective state sales tax in Arkansas is 6.5%; however, you may be wondering why you are levied with 11% in your city. Well, although the effective state sales tax is 6.5%, counties and cities collect their own sales taxes and consequently, the tax rate for businesses increases significantly.
What does this mean? This means that when calculating the amount, each merchant must pay for sales taxes and has to add up between the state tax rate, the county tax rate, and the city tax rate. This results in a relatively high amount compared to other states in our country.
Let’s explain it better with an example.
- If you live in Arkansas and you have a business, you already know that you must pay a minimum of 6.5% on your sales.
- But added to this, if you live in Cross County, you must include the tax rate of 3.00% in your calculation, and by now you will have 9.75% accumulated.
- Lastly, if the city where you live is Wynne, there’s an extra 1% of sales tax rate.
- Adding up all the rates, your total result will be 10.5%.
Since in Arkansas there are several cities and counties, on this page you can verify the rates in every city; it’s worth noting that the percentage shown on the page is the result of adding the state rate, county rate, and city rate.
However, this is not a strict rule as there are reductions to these rates. This means that (following the example), if you live in Wynne city you may pay a little less than 10.5% on your sales due to reductions on certain types of merchandise.
Regarding food, in Arkansas there is a State Reduced Food Tax of 1.25%, consequently, the state tax rate of 6.5% will be 5.25%. Foods that are intended for domestic consumption and that you can buy at a grocery store are levied with this reduced food tax. In the case of restaurants and prepared meals, they must pay the full sales tax rate (6.5%).
In addition, there are many other exemptions to sales tax in Arkansas. Among the best known are those of drugs prescribed by licensed pharmacists, sales and repairs of durable medical equipment (such as oxygen tanks), or sales of test strips to analyze the levels of sugar in human blood.
You need to know that despite sales tax in Arkansas may have one of the higher tax rates in our country, some various exemptions and reductions may decrease the impact on your pocket after paying these taxes.
Other examples might be the ones related to media exemptions, newspaper sales or sales, and rentals of advertising spaces in publications and newspapers that are exempt from paying sales tax in Arkansas.
What if I don’t pay Sales Taxes on time?
Just like any other tax liability, if you make a delayed payment or don’t file on time, you will be charged with penalties.
If you pay outside the date range, the late payment penalty is 5% of the tax due per month or fraction. The maximum is 35%.
The penalty for late filing is the same. 5% of the tax due per month or fraction and its maximum is also 35%.
Do I have to pay Sales Taxes in Arkansas if I’ve already paid taxes in another state?
If you have legally paid sales taxes on your items in another state, you can claim a reduction in Arkansas taxes. Reductions work in a simple way, the Department of Finance and Administration may reduce a reasonable amount from your Arkansas due tax.
In case the other state levied you with a lower tax rate, you’ll have to pay Arkansas the difference. You only need to subtract what you’ve already paid from your Arkansas sales tax. It’s worth noting this doesn’t apply to motor vehicles.
On the other hand, if you deliver merchandise to another state, you are not required to collect their sales tax under Arkansas Law. At any event, we recommend you to ask the Department of Revenue from the state where you deliver your merchandise if you are required to collect their taxes as a seller.
Co-founder of AllAboutCareers, one of the top sites for graduates, students and school leavers websites. I studied at the University of Essex. This is my site I talk about finance and help with administrative processes in the USA.