Sales and Use Taxes
The Arkansas sales tax is 6.0 percent of the gross receipts from the sales of tangible personal property and certain selected services. The tax is paid by the consumer at the point of final sale and is computed on the total consideration received without any deduction for expenses. "Sale" includes the lease or rental of tangible personal property.
Taxable services include sales of gas, water, electricity, telephone and telegraph service and repair services.
The Arkansas compensating use tax of 6.0 percent is levied on tangible personal property purchased from outside the state of Arkansas for use, storage, or consumption within the state of Arkansas.
Exemptions from Sales and Use Taxes
- For office sector businesses, all 1-800 calls
- Property that becomes a recognizable, integral part of property manufactured, compounded, processed or assembled for resale
- Machinery and equipment used directly in manufacturing that are purchased for a new manufacturing facility or to replace existing machinery and equipment. Machinery and equipment required by Arkansas law to be purchased for air or water pollution control are also exempt.
- Catalysts, chemicals, reagents and solutions that are consumed or used in producing, manufacturing, fabricating, processing, or finishing articles of commerce at manufacturing or processing plants or facilities; and/or to prevent or reduce air, water and other contamination
The term "used directly" includes molds and dies that determine the physical characteristics of the finished product or its packaging materials; testing equipment to measure the quality of the finished product; computers and related peripheral equipment that directly control or measure the manufacturing process; machinery and equipment that produce steam, electricity or chemical catalysts; and solutions that are essential to the manufacturing process but are consumed during the course of the manufacturing process and do not become necessary and integral parts of the finished product.
In addition to those operations commonly understood within their ordinary meaning, the term "manufacturing" includes mining; quarrying; refining; the extracting of oil and gas; cotton ginning; the drying of rice; soybeans and other grains; the manufacturing of feed; the processing of poultry; the processing of eggs and livestock; the hatching of poultry; printing of all kinds; the processing of metal into grades and bales for further processing; and the rebuilding or re-manufacturing of used parts and retreading of tires for automobiles, trucks and other mobile equipment powered by electrical or internal combustion engines or motors, provided that the rebuilt or remanufactured parts or retreaded tires are not sold directly to the consumer but are sold for resale.
Specific exemptions include the following:
- Sales of gas produced from biomass in a facility meeting federal eligibility requirements and sold to an entity for the purpose of generating steam, hot air or electricity to be sold to the gas producer
- Electricity used in the production of aluminum metal by the electrolytic reduction process
- Barges, towboats and vessels of at least 50-ton load displacement
- Feedstuffs used in livestock production, including poultry
- Agricultural chemicals used in the commercial production of agricultural products
- Sewer and sanitation charges
- Sales of any item of new or used farm equipment or machinery
- Sales of aircraft manufactured or substantially completed in Arkansas and sold to a purchaser outside the state
- Chemicals, nutrients and other ingredients used in the commercial production of yeast
- Natural gas used as fuel in the process of manufacturing glass
- Waste fuel used for manufacturing
- Forms which are consumed or destroyed during the manufacture of the item for which the form was built
- Repair or maintenance services performed on railroad cars, parts, or equipment brought into the state only to be repaired, refurbished, modified or converted
- Sale of newspapers and publications; sale of advertising space in newspapers and publications; and billboard advertising services
- Steel mills locating in the state between January 1, 2001 - December 31, 2006, and expending more than $200 million are exempt from sales tax on natural gas and electricity used in the steel-making process.
Subject to specific conditions, sales and use tax credits are offered through certain incentives, which are described in the "Incentives" section of this website.
Local Sales and Use Taxes
In addition to the state sales and use tax, local sales and use taxes may be levied by each city or county. Local taxes have a cap of $25.00 per each 1 percent of tax assessed per "single transaction." The definition of "single transaction" is determined by each local taxing jurisdiction. These taxes are collected by the state and distributed to the cities and counties each month.
