Sales Tax Fundamentals
Get up to speed on the basics of sales tax
Arkansas Sales Tax Tips for Online Sellers
byNovember 1, 2020
This blog post may now be out of date. For our most up-to-date info on Arkansas sales tax, check out our “Arkansas Sales Tax Guide for Businesses.”
Do you sell items to people in Arkansas or operate out of the state itself? Then you may have wondered how sales tax works there – is it the same as other states or entirely different? Do you have to worry about sales tax if your business is out of the state? We’ll try to clear up your basic Arkansas sales tax questions in this post.
You’re an online seller, but don’t live in Arkansas
Congratulations! As long as you don’t have sales tax nexus in Arkansas (see below), then you don’t have to worry about collecting and remitting sales tax in the state. Now you can get back to running your business!
You live in and/or operate a business in Arkansas
If this is you, then you must register for an Arkansas sales tax permit and comply with all applicable laws. Since Arkansas is a destination-based sales tax state, it’s all about where your customer lives. There are many different local (county, city, etc.) sales tax rates you’ll have to contend with.
Let’s say your business operates out of Little Rock and you sell to someone in Fort Smith. You don’t take Little Rock’s tax rates into account, only Fort Smith’s. Figure out which city and county your seller lives in and calculate sales tax based off of that local rate. Where your business is does not matter at all. Use TaxJar’s handy Sales Tax Calculator to quickly lookup local sales tax rates.
If you are an online seller, live out-of-state, and use a fulfillment service (like FBA)
First up, there are no Amazon fulfillment centers in Arkansas as of this writing, so FBA will not create nexus for you in Arkansas.
But if you do have some kind of presence in Arkansas, you may be wondering if this creates sales tax nexus. Here’s what the state has to say about being “Engaged in business” in Arkansas:
ENGAGE IN BUSINESS. “Engage in business” means any local activity regularly and persistently pursued by any seller or vendor through agents, employees, or representatives with the object of gain, profit, or advantage and that results in a sale, delivery, or the transfer of the physical position of any tangible personal property by the vendor to the vendee at or from any point within Arkansas, whether from warehouse, store, office, storage point, rolling store, motor vehicle, delivery conveyance, or by any method or device under the control of the seller effecting such a local delivery without regard to the terms of sale with respect to point of acceptance of the order, point of payment, or any other condition.
From this reading, it appears that Arkansas has a fairly broad definition of what constitutes “sales tax nexus.” If you’re unsure whether you have sales tax nexus in Arkansas, consult an accountant. Also, find out more about states that come after you if you don’t collect sales tax.
Collecting the correct sales tax rate
To get down to the basics: how much sales tax do you collect from your buyers? Since the basic rate is 6.5%, start there – but don’t forget to take their local tax rates into account. Their city might have one addition and the county might have another. Unfortunately, it’s up to you to check everything. (Check out our free guide “How to Collect Sales Tax on Amazon” if you need help getting started.)
Also, make sure to take shipping charges into account as well. The state of Arkansas considers shipping to be taxable.
Summing It Up: Arkansas is a destination-based sales tax state
Basically, if you operate or sell within Arkansas state you have to take into consideration where your buyer lives. How much you charge for sales tax depends on where the item is shipped. While there is a basic rate of 6.5% for non-food purchases, there are over 300 local Arkansas tax rates you must consider.
If you live outside the state, you only worry about sales tax if you have nexus within the state with the above criteria. If you don’t fit into any of the criteria, you don’t have to worry about sales tax…yet!
Do you have experience selling in Arkansas? Questions about Arkansas sales tax? Comment below to get the discussion going!