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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

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

  • Posted by Brett on July 8, 2018 11:48am:

    If I run a self employed delivery service (I.e. groceries) do I collect sales tax?

    • Posted by Author photo of B.J. Pritchettbjpritchett on July 8, 2018 4:01pm:

      At this time a delivery service such as described in the question (i.e. groceries) is NOT a taxable service. Please note any purchases you make from out-of-state for use in your business or personal life will be subject to the Individual Consumer Use Tax.

      To pay individual consumer use tax please go to the following link:
      https://www.dfa.arkansas.gov/images/uploads/exciseTaxOffice/cu1.pdf

      Hope this provides you guidance.

    • Posted by Author photo of B.J. Pritchettbjpritchett on July 8, 2018 4:01pm:

      At this time a delivery service such as described in the question (i.e. groceries) is NOT a taxable service. Please note any purchases you make from out-of-state for use in your business or personal life will be subject to the Individual Consumer Use Tax.

      To pay individual consumer use tax please go to the following link:
      https://www.dfa.arkansas.gov/images/uploads/exciseTaxOffice/cu1.pdf

      Hope this provides you guidance.

  • Posted by Sara on July 4, 2018 6:13pm:

    I’m wanting to start a life coaching and hypnotherapy business. If I give no tangible product and conduct sessions over the phone or in person, is paying sales tax required? Alternately if I DID give Video or audio recording of the sessions as a complimentary (free) gift, would that make the entire session taxable?

    • Posted by Author photo of B.J. Pritchettbjpritchett on July 5, 2018 8:06am:

      Thank you for your question.

      At this time life coaching and hypnotherapy services are NOT subject to taxation.

      If you provide a video or audio recording of the sessions as a complimentary (free) gift, the purchaser (you) of the video or audio CD-Rom, DVD, Flash Drive, etc. would have to pay tax on the initial purchase of the materials.

      You would also want to review all of your purchase invoices from out-of-state vendors for legally paid Arkansas State and Local Tax. If the out-of-state vendor did not charge Arkansas tax, you as the purchaser will have to pay a "Consumer Use Tax" directly to the state of Arkansas.

      To pay individual consumer use tax please go to the following link:
      https://www.dfa.arkansas.gov/images/uploads/exciseTaxOffice/cu1.pdf

      Hope this provides you guidance.

  • Posted by Ginger on July 1, 2018 10:50am:

    My husband is starting a mechanic shop and I’m trying to list items on QuickBooks correctly. I’m having an issue with the taxes. State and county combined is 11%. Do we charge customers tax for my husbands labor and services? I read a post that said we can only charge tax for items we’ve bought to use in the vehicle repair, but sometimes the customer will be bringing their own parts and my husband will install said part.

    • Posted by Author photo of B.J. Pritchettbjpritchett on July 1, 2018 12:50pm:

      ANSWER:
      I'm not sure where you received your information of "only charge tax for items you've bought to use in the vehicle repair".
      Arkansas has an in-state repair labor rule - Arkansas Rule GR-9. Labor on motors or machinery of any kind will be subject to tax unless the customer provides a resale exemption certificate.

      Here's a cheat sheet I developed that may help you:

      CHEAT SHEET: GR-9 – TAXABLE Repair Service Rule:
      Column A Column B
      (Type of Service) (Type of Object)
      Addition Aircraft
      Alteration Batteries
      Cleaning Bicycles
      Initial Installation Boats
      Refinishing Carpet
      Repair Clocks
      Replacement Electrical appliances
      Electrical
      devices
      Engineering instruments
      Farm Implements
      Farm Machinery
      Flooring in Existing Buildings
      Furniture
      Jewelry
      Locks in Existing Buildings
      Machinery of all kinds (See GR-55)
      Mechanical Equipment
      Mechanical Tools
      Medical Instruments
      Motors – All kinds
      Motor vehicles
      Office Equipment
      Office Machinery
      Parking Lots (CLEANING ONLY)
      Radio
      Sheet Metal
      Shoes
      Shop Equipment
      Surgical Instruments
      Television
      Tin Metal
      Tires
      Upholstery
      Watches
      A + B = TAXABLE
      For a transaction to be taxable, it must consist of one of the types of services listed in Column A and must be performed on one of the objects listed in Column B.

      I would also advise to separately state the state tax from the county and city taxes. This way if any of those tax rates change it will be easier on you at the end of the month to total and make sure the correct tax rate is charged.

      The Arkansas Sales and Use Tax School holds a seminar which you may be interested in attending.
      July 19 - Beginners Basic Course - Embassy Suites - Rogers, Arkansas
      September 27 - Beginners Basic Course - Hot Springs Convention Center - Hot Springs, Arkansas
      Registration forms can be found at: www.salesusetax.com

      • Posted by Ginger on July 2, 2018 10:38am:

        I replied yesterday, but it never showed up.
        Thank you for your quick response. I’ve read the tax rules and I’ve done more research. We’ll be filing for a tax permit after we get our LLC and EIN.

        • Posted by Author photo of B.J. Pritchettbjpritchett on July 2, 2018 11:07am:

          Excellent - let me know if you need any assistance or have any questions regarding filling out the application form

      • Posted by Ginger on July 1, 2018 1:19pm:

        Thank you for your quick response. So, I should go ahead and register under the Gross Receipts Tax Law as a vendor? I’m just trying to make sure my husband new business venture is set up properly and legally. Again, thank you.

  • Posted by Ruty on June 14, 2018 8:35am:

    We have business in Arkansas, we have leased a tangible equipment to a customer who was taxable in Arkansas. The delivery will take place on 6/15/2018. On 07/02/2018 the Customer will be acquired by a tax exempt company. Is this transaction taxable? Would a situation like this count as resale? What are the tax implications? Essentially we are trying to determine whether to charge tax on this order.

    • Posted by Author photo of B.J. Pritchettbjpritchett on June 14, 2018 8:46am:

      YOUR QUESTION:
      We have business in Arkansas, we have leased a tangible equipment to a customer who was taxable in Arkansas. The delivery will take place on 6/15/2018. On 07/02/2018 the Customer will be acquired by a tax exempt company. Is this transaction taxable?
      ANSWER:
      Since the delivery/receipt of the tangible personal property – equipment will be delivered prior to the acquisition; the transaction will be taxable UNLESS an exemption exists currently.

      Would a situation like this count as resale?
      ANSWER:
      Arkansas DFA would definitely try to tax it, but I would use the Isolated Sales Exemption as the reason the seller does not have to collect and remit tax as (my assumption), they are not in the business of selling this equipment.
      What are the tax implications? Essentially we are trying to determine whether to charge tax on this order.
      ANSWER:
      Since the delivery/receipt of the tangible personal property – equipment will be delivered prior to the acquisition; the transaction will be taxable UNLESS an exemption exists currently.

  • Posted by James on June 14, 2018 7:03am:

    If I were to purchase a dental office in the state of Arkansas, would I have to pay sales tax on the hard assets (furniture, fixtures, medical equipment, etc.)?

    • Posted by Author photo of B.J. Pritchettbjpritchett on June 14, 2018 7:52am:

      Your question asked:
      If I were to purchase a dental office in the state of Arkansas, would I have to pay sales tax on the hard assets (furniture, fixtures, medical equipment, etc.)?

      ANSWER:
      The purchase of any tangible personal property is subject to tax unless an exemption exists. In your instance all assets are subject to State and Local Taxes.

      If you purchased a dental office in Arkansas, I hope you only purchased the Fixed Assets and not the liabilities. And if you purchased the Fixed Assets that were already in Arkansas, you should ask the prior owner for proof that Arkansas tax was paid on all the Fixed Assets. If the prior owner does not have the invoices, request a formal certified (notary) statement stating all Federal, State and Local Taxes have been paid by ____________. Prior owner will pay all Federal, State and Local Taxes due.

      There is a Local Ceiling Cap which can be self-recovered under Arkansas ET-179A form for which the purchaser must file the form with a copy of the invoice to recover local taxes paid to vendor over $2,500.00.
      Go to website:
      http://staging-dfa-site.ark.org/images/uploads/exciseTaxOffice/LocalTaxRebateClaimForm.pdf

      If you have any other questions, please ask additional questions.

      I am not an attorney and I do not provide attorney services.

  • Posted by Gail on June 12, 2018 11:32am:

    Also what is the amount of sales tax that should be charged if memberships are to be charged. Thank you.

    • Posted by Author photo of B.J. Pritchettbjpritchett on June 12, 2018 1:19pm:

      Arkansas State Tax Rate is 6.50%
      The local tax rate would be for city/county taxes. These vary so go to this local tax rate web site and put in your physical address and it will tell you the state and local taxes due at your delivery site:
      https://www.dfa.arkansas.gov/sales-and-use-tax-section-local-tax-lookup-tools/

      Hope this helps you!

  • Posted by Gail on June 12, 2018 11:32am:

    I am charged a monthly membership fee to belong to a company out of Utah called Chalk Couture. For the membership fee I am able to be a designer affiliated with the company. I also receive a monthly stencil that is mine. They charge me sales tax. Do we pay sales tax on memberships like this? Thanks in advance for your response.

    • Posted by Author photo of B.J. Pritchettbjpritchett on June 12, 2018 1:17pm:

      Thank you for the question.

      Arkansas Rule GR-11 deals with memberships:
      GR-11. SALES OF TICKETS, DUES, OR FEES:
      A. The gross receipts or gross proceeds derived from all sales of tickets or admissions to places of amusement, or to athletic, entertainment or recreational events are subject to the tax. Fees for the privilege of having access to or the use of amusement, entertainment, athletic, or recreational facilities are subject to the tax; except such sales by municipalities are exempt. All admissions or fees paid for the privilege of having access to places of amusement, or to athletic, entertainment or recreational events are subject to tax, regardless of whether the fee charged is called a “membership” and allows access for one or more times, or for a fixed period of time. Tickets or admissions purchased by members for the purpose of having access to special entertainment events, even though these events may be held on a regular basis, are also subject to the tax regardless of who collects the fees for the ticket or admission.
      B. Membership dues which are paid on a regular basis by members of a club solely for the privilege of membership are not subject to the tax, unless the dues are taxable as provided by GR-11(A) or GR-11(C).
      C. Dues and membership fees to health spas, health clubs, and fitness clubs and dues and membership fees to a private club, within the meaning of Ark. Code Ann. § 3-9-202(10), which holds any permit from the Alcoholic Beverage Control Board are subject to the tax.
      1. If a club is a non-profit charitable organization, dues and membership fees are not subject to tax. (See GR-26.)
      2. The gross receipts derived from any service provided by or through a health spa, health club, fitness club, or private club are not taxable unless the service is a specifically enumerated taxable service.
      3. As specifically provided in Ark. Code Ann. § 26-52-301(6)(B)(ii), the gross proceeds derived by a private club from the charges to members for the preparation and serving of mixed drinks or for the cooling and serving of beer and wine are subject to sales tax and any supplemental taxes.

      The membership fee does not appear to be a taxable fee in Arkansas(GR-11.B.); however, the company provides you a stencil which is tangible personal property and is subject to tax unless an exemption exists. If the company gives the stencil to you for free, the company must pay tax on the stencil. The company may be recovering the tax on the stencil and not the membership fee.

  • Posted by Aaron on June 10, 2018 7:15pm:

    I recently started a professional window cleaning company in Arkansas. I'm confused on rather I need to charge sales tax or not. Will it be easier to file a 1040 at the end of the year. what do you suggest in this situation? do I charge sale tax being that window cleaning falls under janitorial service, or no?

    • Posted by Author photo of B.J. Pritchettbjpritchett on June 11, 2018 5:57am:

      Thank you for your question:

      I recently started a professional window cleaning company in Arkansas. I'm confused on whether I need to charge sales tax or not. Do I charge sale tax being that window cleaning falls under janitorial service, or no?

      ANSWER:
      Arkansas taxes cleaning services on the interior or exterior of any building. The Source in the Arkansas Rules is:
      GR-9.4. SERVICES SUBJECT TO TAX – CLEANING:
      A. Gross receipts tax applies to the service of providing cleaning or janitorial work. Ark. Code Ann. § 26-52-301(3)(D)(i). For purposes of this rule, cleaning services are defined as services to rid the interior or exterior of any building, dwelling, or other structure of dirt, impurities, or extraneous matter. Generally, the service of cleaning streets, sidewalks, driveways, or other areas that are not part of the interior or exterior of a building is not taxable. However, see GR-9.7 regarding the taxable service of cleaning parking lots and gutters.

      As a new business, you must register with the state of Arkansas and begin collection and remittance. To apply for a permit, please go to:
      https://www.dfa.arkansas.gov/images/uploads/exciseTaxOffice/ar1r.pdf

      Your Next Question is:
      Will it be easier to file a 1040 at the end of the year what do you suggest in this situation?

      ANSWER:
      Please note you should contact your CPA firm to address this question. Some people use:
      a limited liability company, or
      a sole proprietorship, or
      a corporation

      Please contact your CPA firm to address this question.

  • Posted by Doug on May 16, 2018 8:20pm:

    I purchased a business that goes back 50 years. It is a water tank exchange business. I have owned it for 7 years. When we bought the business it had several hundred used exchange tanks. They are filled with resin and are designed to remove impurities in water as well as helping eliminate hard water out of mostly water wells. We hook up the tanks to the customers water well and their plumbing. Please note that this is all non-mechanical equipment. It is not mechanical like todays electric water softeners. The tanks are switched out approximately once per month. The tanks are then hauled back to our facility, emptied, cleaned, deionized, refilled, loaded up and hauled out to the next customer. This is done over and over again every day of every month. This is simply a storage tank that contains resin that needs to be cleaned and replenished once per month. In 50 plus years the business has never charged tax on the monthly fee for the exchange tanks. Usually around $50 per month. In almost every State in the US this is non taxable. Do you think it is in Arkansas as well?

    • Posted by Author photo of B.J. Pritchettbjpritchett on May 17, 2018 6:07am:

      Thank you for asking the question.

      The state of Arkansas would view your tank exchange as a rental or lease of tangible personal property, which is part of the definition of a "Sale" in Arkansas. And if the exchange is for LESS than 30 days there is a "Short Term Rental Tax of 1%" due.

      Source: Arkansas Rule GR-3. M. SALE.
      1. “Sale” means any transaction resulting in the transfer of either the title or possession, for a valuable consideration, of tangible personal property or taxable services regardless of the manner, method, instrumentality, or device by which such transfer is accomplished. Sale includes the exchange, barter, lease, or rental of tangible personal property or taxable services, or the sale, exchanging, or other disposition of admissions, dues, or fees to clubs, places of amusement,
      or recreational or athletic events or for the privilege of having access to or the use of amusement, athletic, or entertainment facilities.
      2. Sale does not include the transfer of title to a vehicle by the vehicle owner to an insurance company as a result of the settlement of a claim for damages to the vehicle.
      3. In the case of leases or rentals of tangible personal property, including motor vehicles and trailers, for less than thirty (30) days, the tax shall be paid on the basis of rental or lease payments made to the lessor of such tangible personal property during the term of the lease or rental regardless of whether Arkansas gross receipts or compensating use tax was paid by the lessor at the time of the
      purchase of the tangible personal property. In the case of leases or rentals of tangible personal property, including motor vehicles and trailers, thirty (30) days or more, the tax shall be paid on the basis of rental or lease payments made to the lessor of such tangible personal property during the term of the lease or rental unless Arkansas gross receipts or compensating use tax was paid at the
      time of purchase of the tangible personal property. (See GR-20.)

      Since you have not paid or collected the tax from the customer, you should get a third party to file a "Voluntary Disclosure Agreement" with the state of Arkansas and start charging and collecting tax.

      You should also write on your invoices "Customer is liable for all Federal, State and Local Taxes Due." This would allow you in the future to go back to all of your customers and collect and remit tax. If your invoices did not have this language prior to now, they would not have to pay the tax as the state of Arkansas holds the in-state vendor liable for all taxes due. In other words the in-state vendor is the "taxpayer".

  • Posted by Duncan on April 28, 2018 2:49pm:

    Thank you for your kind answers. Are accounting, bookkeeping, payroll and tax preparation service providers required to collect and remit Gross Receipts Tax in Arkansas?

    • Posted by Author photo of B.J. Pritchettbjpritchett on April 28, 2018 6:13pm:

      Arkansas does not currently impose a sales or use tax on Accounting, Bookkeeping, Payroll or Tax Preparation Services. However, I would not be surprised if the Arkansas legislature tries to tax these services in the next legislative session (2019). Always review the new laws when the legislative sessions (odd years) meets again.

  • Posted by maria on April 9, 2018 10:20am:

    My company is selling raw materials to a Canadian customer, but we are drop shipping to a fabricator in Arkansas. Are raw materials exempt or should we be charging AR sales tax? After the fabrication is complete the product will be sent to Canada. However, the title passes when we drop ship it to AR.

    • Posted by Author photo of B.J. Pritchettbjpritchett on April 9, 2018 11:51am:

      The customer may supply their registration number from Canada. If you are selling the customer raw materials, the raw materials would be exempt from Arkansas tax; however, it must be supported with an exemption certificate. I trust your company is not the entity of fabrication - is this true? If true, you must receive some documentation from the customer exempting the transaction and showing that it is an interstate transaction. Have the customer provide information regarding the drop ship to the other entity, i.e. bill of lading, freight bill, etc.).

    • Posted by Author photo of B.J. Pritchettbjpritchett on April 9, 2018 11:05am:

      Maria,

      Your question was:
      My company is selling raw materials to a Canadian customer, but we are drop shipping to a fabricator in Arkansas. Are raw materials exempt or should we be charging AR sales tax? After the fabrication is complete the product will be sent to Canada. However, the title passes when we drop ship it to AR.

      ANSWER:
      If your company is selling raw materials to a company in Canada, you need to receive an exemption certificate from that customer. This will provide you with the ability to not tax the transaction as it is NOT an Arkansas sale. Your customer will fill in the second blank line that states "I hereby certify that I either hold or am the authorized representative of the holder of Arkansas Sales/Use Tax Permit Number __________________________ or that I am a nonresident purchaser or the authorized representative thereof and hold a similar permit issued by the State of _____________________Number ______________ that this is a current and valid permit number; and that I am exempt from sales and use tax on the tangible personal property purchased from ___________________________________

      Make sure your invoice shows "Sold To" and "Ship To" as your Customer in CANADA. In the body of the invoice indicate the "Drop Shipment for Canadian Customer".

      Keep the exemption certificate FOREVER!!

      • Posted by maria on April 9, 2018 11:31am:

        What if the customer is not registered in any U.S. state? Can they provide their Canadian registration number? Is there an exemption certificate for nonresidents (non U.S.). Is there a statute for this? Thank you.

  • Posted by Ashley on April 6, 2018 7:34am:

    Can a company in Arkansas legally charge you tax on payments you're making toward an existing service/product that has already been taxed in the beginning?

    • Posted by Author photo of B.J. Pritchettbjpritchett on April 8, 2018 12:21pm:

      Ashley, there is more to charging tax than on the face of the transaction. Arkansas has a Rule regarding secondhand tangible personal property:

      GR-50. EXEMPTIONS FROM TAX – SECONDHAND AND USED TANGIBLE PERSONAL PROPERTY:
      A. Gross receipts or gross proceeds derived from the sale of secondhand and used tangible personal property will be exempt only if both the following conditions listed below are met:

      1. Used property was traded-in to and accepted by the seller of tangible personal property as part of the purchase price of newly acquired tangible personal property. It is necessary that the gross receipts tax be collected and paid on the total consideration for the sale of the newly acquired tangible personal property in order to qualify for the exemption unless the sale of the newly acquired tangible personal property was otherwise exempt under other provisions of the
      Arkansas Gross Receipts Act; and

      2. a. Arkansas gross receipts tax was collected and paid on the total amount of consideration for the sale of the newly acquired tangible personal property without any deduction or credit for the value of the used tangible personal property; or.,
      Example: Seller of boats sells a new boat to a customer. The customer trades in his old boat and pays sales tax to seller on the full purchase price of the new boat without any deduction for the trade-in. When seller sells the traded-in used boat, he is not required to collect sales tax.
      b. The new personal property was originally exempt from tax under the provisions of the Arkansas Gross Receipts Act.
      Example: Seller of farm equipment sells a new tractor to a farmer. The farmer trades in his old tractor that was purchased tax exempt under the gross receipts tax exemption for farm equipment and machinery. When the seller sells the used tractor, he is not required to collect sales tax.

      B. The foregoing does not apply to transactions involving (i) used motor vehicles or trailers, (ii) used mobile homes, or (iii) used aircraft, but is applicable to boats, motors, appliances, etc. (See GR-13, GR-14, and GR-15.1.)

      C. Property purchased by a seller and not taken as a trade-in does not qualify for the exemption.
      Source: Ark. Code Ann. § 26-52-401(22)

      There are also rules for buy outs of leases and rentals. See Arkansas Rule GR-20 for those instances.

      Here is the link to the Arkansas Rules as currently published. The last 10 years of Arkansas laws has not been updated.
      https://www.dfa.arkansas.gov/images/uploads/revenuePolicyLegalOffice/et2008_3.pdf

  • Posted by Lisa on March 13, 2018 9:25am:

    I work for a general construction company in TX. We sometimes do new commerical construction AND remodel in AR. What are the tax rules I need to consider? The lady that normally does this is leaving and I'm getting into the tax side of things and want to make sure I understand and do everything correctly. Very easy to get confused...lots to consider when we do commercial new and remodel construction both. Should I be a Used Tax AND Gross Receipts Tax holder? I know I will need to report the tax on any material brought into the state that I don't pay the other state for (Used Tax). Do I need a Gross Receipts Tax number to bill the Owner Sales Tax? If I understand correctly remodeling is fully taxable. Do I issue a resale certificate to my subs and then bill the Owner for tax on both material and labor? Any help would be appreciated.

    • Posted by Author photo of B.J. Pritchettbjpritchett on March 13, 2018 11:57am:

      Thank you for your question regarding Arkansas Construction Contractors. Contractors who do commercial construction as well as remodeling in Arkansas must know the Arkansas Rule GR-21 is very complicated.

      The very first thing is there is a laundry list of Non-Taxable Services by a Contractor to Real Property.

      ARKANSAS RULE:
      GR-21.B. NON-TAXABLE SERVICES AND SALES. The following represents services which are not subject to sales tax:
      1. The initial installation, alteration, addition, cleaning (with exceptions noted in GR-21(C)(1)), refinishing, replacement, or repair of nonmechanical, passive or manually operated components of buildings or other improvements or structures affixed to real estate, including but not limited to the following: walls, ceilings, doors, locks, windows, glass, heat and air ducts, roofs, wiring, breakers, breaker boxes, electrical switches and receptacles, light fixtures, pipes, plumbing fixtures, fire and security alarms, intercoms, sprinkler systems, parking lots, fences, gates, fireplaces, and similar components which become a part of real estate after installation, are not taxable services. This means, generally, that services performed on non-mechanical components or fixtures within or on a building or other improvement to real estate are not taxable.
      2. First-time installation of mechanical or electrical equipment into a newly constructed or substantially modified building or other improvement to real estate is not a taxable service. For example, labor charges for the first-time installation of heating and air conditioning machinery and heating and air ducts into a newly constructed or substantially modified building are not taxable. The initial installation of mechanical or electrical equipment into an existing building is taxable. See GR-21(D) for tax liability on materials.
      3. First-time installation of carpeting or other flooring into a newly constructed or substantially modified building or other improvement to real estate is not a taxable service. The initial installation of carpet or other flooring in an existing building is taxable. See GR-21(D) for tax liability on materials.

      There is also a list of Taxable Services under Arkansas Rule 21.C.

      C. TAXABLE SERVICES. (See GR-9 through GR-9.17 for additional taxable services.)
      1. The services enumerated in Ark. Code Ann. § 26-52-301(3)(D) including the service of providing cleaning or janitorial work are taxable. The cleaning of the interior or exterior of any building or structure, including vents, ducts, windows, walls, ceilings, or floors, is a taxable service.
      2. The initial installation, alteration, addition, cleaning, refinishing, replacement and repair of motors, electrical appliances, machines, and other mechanical items are taxable. For example, initial installation in existing structures and the repair or replacement of dishwashers, stoves, ovens, refrigerators, heating and air conditioning units, garbage disposals, water heaters, ceiling fans, garage door motors, electric signs, washing machines, and dryers is taxable.
      3. The initial installation in existing buildings and the alteration, addition, cleaning, refinishing, replacement and repair of carpet and rugs remain taxable.
      4. The replacement or repair of elevators is a taxable service.

      The contractor will need a Gross Receipts/Consumer Use Tax Permit. The moment the contractor performs any work in Arkansas puts the contractor under the laws of the state of Arkansas.

      Your Comment of:
      I know I will need to report the tax on any materials brought into the state that I don’t pay the other state for (Used Tax).

      ANSWER:
      This may affect your business practice in Arkansas as a contractor who pays another state’s tax; you will need to pay the difference between the other state’s tax and Arkansas State and Local Tax due.
      If the tax is higher than the Arkansas State and Local Tax, no refund will be provided.
      Your Comment of:
      If I understand correctly remodeling is fully taxable.

      ANSWER:
      Not necessarily – see the laundry list of real property services/non-taxable services above. It all depends on what object is the Contractor working on Building or Machinery. If working on a Building is it New, Existing or Substantially Modified.
      a) New is easy – Contractor is liable for all taxes on Materials.
      b) Existing is difficult as flooring, locks and electrical devices are taxable services.
      c) Substantially modified building – very difficult as the state of Arkansas has not defined what the term substantially constitutes. If you move 2 or more walls, this could be a substantial modification to a building. If you gut the building and add more walls, it is a substantial modification and the contractor is liable for tax on all materials used in the substantial modification.

      Your comment of:
      Do I issue a resale certificate to my subs (sub-contractors) and then bill the Owner (Customer) for tax on both material and labor?

      If the transaction is a taxable service in Arkansas, then you may provide the sub-contractor with a sale for resale exemption certificate and impose the state and local taxes on the invoice to the customer.

      If the transaction is one of the listed Non-Taxable Services, the Sub-Contractor must pay tax on materials used in the Non-Taxable Service. In this case you would want a statement from the Sub-Contractor stating that all taxes on materials have been paid.

      Taxable Services can be found under Arkansas Rule GR-9:
      1. The service of initial installation, alteration, addition, cleaning, refinishing, replacement and repair of the following items of tangible personal property are subject to the tax: motor vehicles, aircraft, farm machinery and farm implements, motors of all kinds, tires, batteries, boats, electrical appliances, and electrical devices, furniture, rugs including carpets, flooring, upholstery, household appliances, television and radio, jewelry, watches, clocks, engineering instruments, medical instruments and surgical instruments, machinery of all kinds, bicycles, office machines, office equipment, shoes, tin and sheet metal, mechanical tools and shop equipment. (See also GR-9.17, GR-30, GR-38.2, and GR-57.)
      2. The tax applies to the enumerated services performed on the items listed in GR-9(A)(1) whether or not the items are affixed to real property.

      I would suggest attending the Arkansas Sales and Use Tax School held April 19 & 20 in Hot Springs, Arkansas. www.salesusetax.com
      There is a section on Contractors that would benefit your educational experience.

  • Posted by Lisa on March 13, 2018 9:22am:

    I work for a general construction company in TX. We sometimes do new commerical construction AND remodel in AR. What are the tax rules I need to consider? The lady that normally does this is leaving and I'm getting into the tax side of things and want to make sure I understand and do everything correctly. Very easy to get confused...lots to consider when we do commercial new and remodel construction both. Should I be a Used Tax AND Gross Receipts Tax holder? I know I will need to report the tax on any material brought into the state that I don't pay the other state for (Used Tax). Do I need a Gross Receipts Tax number to bill the Owner Sales Tax? If I understand correctly remodeling is fully taxable. Do I issue a resale certificate to my subs and then bill the Owner for tax on both material and labor? Any help would be appreciated.

  • Posted by Lisa on March 13, 2018 9:22am:

    I work for a general construction company in TX. We sometimes do new commerical construction AND remodel in AR. What are the tax rules I need to consider? The lady that normally does this is leaving and I'm getting into the tax side of things and want to make sure I understand and do everything correctly. Very easy to get confused...lots to consider when we do commercial new and remodel construction both. Should I be a Used Tax AND Gross Receipts Tax holder? I know I will need to report the tax on any material brought into the state that I don't pay the other state for (Used Tax). Do I need a Gross Receipts Tax number to bill the Owner Sales Tax? If I understand correctly remodeling is fully taxable. Do I issue a resale certificate to my subs and then bill the Owner for tax on both material and labor? Any help would be appreciated.

  • Posted by Lee on March 4, 2018 7:57pm:

    Hi, I just started giving classes on firearm safety training. Am I required to charge sales tax on these classes?

    • Posted by Author photo of B.J. Pritchettbjpritchett on March 5, 2018 8:14am:

      Firearm Safety Training is NOT a Taxable Service in Arkansas.

      However, if you sell tangible personal property to a customer, it IS SUBJECT TO TAX.
      Example: Books, Posters, Target Paper, etc.

      AND, to top everything off, if your business purchases items not for resale AND from out-of-state (such as Amazon purchases, Ebay purchases, etc.), AND you consume, use or store those purchases, you will owe Compensating (Consumer) Use Tax. You will self-assess and pay directly to the state of Arkansas.

      Arkansas Sales and Use Tax Permit Application:
      https://www.dfa.arkansas.gov/images/uploads/exciseTaxOffice/ar1r.pdf

  • Posted by Brenda on February 25, 2018 11:56am:

    Is sales tax calculated on the original price or the price after discounts, coupons and promotions are applied?

    • Posted by Author photo of B.J. Pritchettbjpritchett on February 26, 2018 6:33pm:

      The brief answer would be the total consideration for the value of the item received. If the invoice for tangible personal property or taxable services provides a 2% discount if the invoice is paid within 10 days, then the answer would be the "Net Price" as this would be the total consideration.

      If you are talking about tangible personal property or taxable services, you will need to read the following Arkansas Rule:
      GR-3. DEFINITIONS: For purposes of these rules, unless otherwise required by their context, the following definitions apply:

      H. GROSS RECEIPTS – GROSS PROCEEDS – SALES PRICE.

      1. “Gross receipts” or “gross proceeds” is synonymous with “sales price” and means the total amount of consideration, including cash, credit, property, and services, for which tangible personal property or services are sold, leased, or rented, valued in money, whether received in money or otherwise.

      Sales price includes consideration received by the seller from third parties as follows:
      a. The seller actually receives the consideration from a party other than the purchaser and the consideration is directly related to a price reduction or discount on the sale;
      b. The seller has an obligation to pass the price reduction or discount through to the purchaser;
      c. The amount of the consideration attributable to the sale is fixed and determinable by the seller at the time of the sale of the item to the purchaser; and
      d. One of the following criteria is met:
      (1) The purchaser presents a coupon, certificate, or other documentation to the seller to claim a price reduction or discount where the coupon, certificate, or documentation is authorized, distributed, or granted by a third party with the understanding that the third party will reimburse any seller to whom the coupon, certificate, or documentation is presented;
      (2) The purchaser identifies himself or herself to the seller as a member of a group or organization entitled to a price reduction or discount (a “preferred customer” card that is available to any patron does not constitute membership in such a group); or
      (3) The price reduction or discount is identified as a third party price reduction or discount on the invoice received by the purchaser or on a coupon, certificate, or other documentation presented by the purchaser. (See GR-18.)

      2. The following cannot be deducted from the sales price:
      a. The seller’s cost of the property sold;
      b. The cost of materials used, labor or service cost, interest, any loss, any cost of transportation to the seller, any tax imposed on the seller, and any other expense of the seller;
      c. Any charge by the seller for any service necessary to complete the sale, other than a delivery charge or an installation charge;
      d. Delivery charge;
      e. The value of exempt tangible personal property given to the purchaser, if taxable and exempt tangible personal property have been bundled together and sold by the seller as a single product or piece of merchandise (see the definition of “bundled transaction” in this rule and GR-93 for the treatment of bundled transactions); and
      f. Credit for any trade-in unless specifically provided by law.

      4. Sales price does not include the following:
      a. A discount including cash, term, or a coupon that is not reimbursed by a third party and that is allowed by a seller and taken by a purchaser on a sale;
      b. Interest, financing, or a carrying charge from credit extended on the sale of tangible personal property or services, if the amount is separately stated on the invoice, bill of sale, or similar document given to the purchaser; and
      c. Any tax legally imposed directly on the consumer that is separately stated on the invoice, bill of sale, or similar document given to the purchaser.

      This does not apply to automobiles as dealers will rebate, discount and confuse you about the Gross Receipts of the automobile - these are not discounts or rebates paid by a third party in place of the total consideration.

      Rely on the above Arkansas Rule to guide you to the total consideration.

  • Posted by Amanda on February 22, 2018 12:13am:

    Hello! I own a local towing company in arkansas, and all of our towing is done in the state of arkansas. My question is-do I have to keep track of every single city and transaction? Or Can I simply pull a report at the end of the month and report the amount brought in from the two counties I tow in? Do I HAVE to use the local listing to report the amount in every single city? Thank you

    • Posted by Author photo of B.J. Pritchettbjpritchett on February 22, 2018 10:04am:

      Welcome to the world of Local Taxes. To answer your first question - Yes you have to keep track of every single city and county tax and transaction. Because there are inside the city limits and outside the city limits, pulling from one report may overcharge your customers or not place the correct tax on the transaction. Yes I would use a local listing to report every city and county tax due. Here's a link to the local city/county tax listings:
      https://www.dfa.arkansas.gov/sales-and-use-tax-section-local-tax-lookup-tools/

      Note as you scroll down through the local tax web site - the last part will allow you to print out the city/county local taxes.

      When Arkansas passed the law requiring collection and remittance on towing services, I specifically requested examples as there are so many scenarios for towing services. I believe DFA did an excellent job of trying to address all scenarios.

      GR-9.5. SERVICES SUBJECT TO TAX – WRECKER AND TOWING SERVICES:
      A. The gross proceeds or gross receipts derived from wrecker and towing services are subject to state and local gross receipts taxes. The gross proceeds or gross receipts derived from wrecker and towing services include mileage fees and towing charges.

      B. DEFINITIONS.
      1. “Wrecker and towing services” means pushing, pulling, carrying, or hoisting any motor vehicle, vehicle, trailer, or semitrailer from an initial point of service to some other destination and includes the rendering, furnishing, or performing of any service on a damaged, disabled, immovable, or non-operable motor vehicle, vehicle, trailer, or semitrailer. Wrecker and towing services include hook-up fees charged for recovering a motor vehicle, vehicle, trailer, or semitrailer from locations such as a ditch, pond, hole, or median, prior to towing. Wrecker and
      towing services does not include the transportation of motor vehicles to or from a new or used car dealership for the purpose of placing the vehicles into inventory for sale or returning the vehicles to an automobile auction for sale.
      2. “Motor vehicle” means every vehicle subject to registration for use on the public roads and highways.
      3. “Vehicle” means every device in, upon, or by which any person or property is, or may be, transported or drawn upon a highway, excepting devices moved by human power or used exclusively upon stationary rails or tracks.
      4. “Trailer” means every vehicle with or without motive power designed for carrying persons or property and for being drawn by a motor vehicle and so constructed that no part of its weight rests upon the towing vehicle.
      5. “Semitrailer” means every vehicle with or without motive power designed for carrying persons or property and for being drawn by a motor vehicle and so constructed that some part of its weight and that of its load rests upon or is carried by another vehicle.

      C. LOCAL TAXES. For the purpose of determining the correct local gross receipts taxes to collect, the following guidelines shall apply:
      1. If the motor vehicle, vehicle, trailer, or semitrailer is towed from the location where the vehicle is picked up and delivered to a destination in Arkansas, the local taxes at the point of delivery or destination should be applied.
      2. If only wrecker services are provided and the motor vehicle, vehicle, trailer, or semitrailer is not towed from its location to another destination, the local taxes at the place where the motor vehicle, vehicle, trailer, or semitrailer is located should be applied.
      3. Examples.
      Example 1: J.T.’s car breaks down in Cabot, Arkansas. J.T. hires a towing service to tow the car into Little Rock, Pulaski County, Arkansas for repairs. The City of Little Rock and Pulaski County have a sales tax. The place of destination determines what tax is due. The Arkansas state sales tax, the City of Little Rock sales tax and the Pulaski County sales tax apply.
      Example 2: J.T.’s car breaks down in Ft. Smith, Arkansas. J.T. hires a towing service to tow the car into Oklahoma for repairs. Arkansas state and local sales tax does not apply.
      Example 3: J.T.’s car breaks down in Oklahoma, and J.T. hires a towing service to tow the car into Ft. Smith, Arkansas for repairs. Since J.T.’s car was delivered to a destination in Arkansas, the Arkansas state sales tax, the City of Fort Smith sales tax, and the Sebastian County sales tax should apply.
      Example 4: J.T. is traveling to his home in Texarkana, Texas and drives his car into a ditch in Little Rock, Arkansas where it becomes stuck in the mud. J.T. hires a wrecker service to pull his car from the ditch. J.T.’s car is not damaged, so it is not necessary to tow the car to a destination for repairs. The City of Little Rock and Pulaski County have a sales tax. The point of service determines what tax is due. The Arkansas state sales tax, the City of Little Rock sales tax, and the Pulaski County sales tax apply.

      D. PERSONS RESPONSIBLE FOR COLLECTING AND REMITTING THE TAX. The tax shall be collected and remitted by the seller of the wrecker or towing services. Wrecker and towing services may be purchased exempt as sales for resale by a person holding a retail permit and performing taxable repairs on a towed motor vehicle, vehicle, trailer, or semitrailer, if the charge for the wrecker and towing services and the applicable taxes are collected from the ultimate consumer by the person performing the repairs.
      Example: ABC Towing Company has a contract to tow motor vehicles to XYZ Repair Shop for repairs. XYZ Repair Shop holds a retail permit and charges its customer for repairs, the wrecker and towing services, and the applicable taxes. XYZ Repair Shop is entitled to claim the sale for resale exemption on the wrecker and towing services it purchased from ABC Towing Company since it is collecting the sales tax for the wrecker and towing services from its customer.

      E. AUTOMOBILE CLUBS OR INSURANCE COVERAGE. If wrecker and towing services are provided through an automobile club or association, motor club or similar organization, or an insurance company, the taxable charge is the amount invoiced to the club, association, or insurance company for the services plus the amount of any applicable deductible. The charge for an automobile club contract or insurance policy that provides for towing is not subject to tax.
      Example: XYZ Insurance Company pays J.T.’s Wrecker Service $30.00 toward the tow of a motor vehicle on behalf of John Doe. John Doe pays J.T.’s Wrecker Service an additional amount of $20.00 as a deductible. J.T.’s Wrecker Service should remit tax on the entire $50.00. XYZ Insurance Company does not collect tax on the premium paid by John Doe for insurance that provides for towing.
      Source: Ark. Code Ann. § 26-52-316

      Hope this provides you enough information to properly tax city and county transactions.

  • Posted by Chris on February 21, 2018 7:59am:

    Our fitness center does not have an ABC permit (nor do we need one). We collect sales tax on memberships. Is this required? Also, we have been collecting sales tax on personal training offered outside of the membership as well. It seems from one of your previous answers, that this is not necessary?

    • Posted by Author photo of B.J. Pritchettbjpritchett on February 22, 2018 9:49am:

      Let's address the sales tax on memberships to Health Clubs:
      Membership Fees to Healthclubs

      GR-11. SALES OF TICKETS, DUES, OR FEES:

      A. The gross receipts or gross proceeds derived from all sales of tickets or admissions to places of amusement, or to athletic, entertainment or recreational events are subject to the tax. Fees for the privilege of having access to or the use of amusement, entertainment, athletic, or recreational facilities are subject to the tax; except such sales by municipalities are exempt. All admissions or fees paid for the privilege of having access to places of amusement, or to athletic, entertainment or recreational events are subject to tax, regardless of whether the fee charged is called a “membership” and allows access for one or more times, or for a fixed period of time. Tickets or admissions purchased by members for the purpose of having access to special entertainment events, even though these events may be held on a regular basis, are also subject to the tax regardless of who collects the fees for the ticket or admission.

      B. Membership dues which are paid on a regular basis by members of a club solely for
      the privilege of membership are not subject to the tax, unless the dues are taxable as provided by GR-11(A) or GR-11(C).

      C. Dues and membership fees to health spas, health clubs, and fitness clubs and dues
      and membership fees to a private club, within the meaning of Ark. Code Ann. § 3-9-202(10), which holds any permit from the Alcoholic Beverage Control Board are subject to the tax.

      1. If a club is a non-profit charitable organization, dues and membership fees are not subject to tax. (See GR-26.)

      2. The gross receipts derived from any service provided by or through a health spa, health club, fitness club, or private club are not taxable unless the service is a specifically enumerated taxable service.

      3. As specifically provided in Ark. Code Ann. § 26-52-301(6)(B)(ii), the gross
      proceeds derived by a private club from the charges to members for the preparation and serving of mixed drinks or for the cooling and serving of beer and wine are subject to sales tax and any supplemental taxes.
      Source: Ark. Code Ann. § 26-52-301(5) and (6)

      Services must be specifically taxed in Arkansas. Training Services are not one of the specifically taxed services. No tax charge to customer.

      Let me know if you have additional facts that may change the answers above.

  • Posted by Kevin on February 16, 2018 10:06am:

    We sell and service hearing aids. In many states that we do business in, batteries and accessories associated with a hearing aid is deemed part of that hearing aid and therefore exempt from state tax. The AR statutes do not specifically address the taxability of batteries and accessories. What is your opinion? Thank you!

    • Posted by Author photo of B.J. Pritchettbjpritchett on February 16, 2018 11:16am:

      Arkansas provides guidance through Arkansas Rule GR-38.2. EXEMPTIONS FROM TAX – DURABLE MEDICAL EQUIPMENT, MOBILITY-ENHANCING EQUIPMENT, PROSTHETIC DEVICES, AND DISPOSABLE MEDICAL SUPPLIES:
      A. The gross receipts or gross proceeds derived from the rental, sale, or repair of the following items are exempt from tax if prescribed by a physician: durable medical equipment; mobility-enhancing equipment; disposable medical supplies; or a prosthetic device.
      B. This exemption shall only apply to durable medical equipment, mobility-enhancing equipment, disposable medical supplies, or a prosthetic device sold to a specific patient pursuant to a prescription written by a physician prior to sale.
      C. Physicians, hospitals, nursing homes, and long-term care facilities are considered consumers of all property and services which they purchase for use in the practice of their professions. Physicians, hospitals, nursing homes, and long-term care facilities are liable for the sales and use tax on their purchases unless the requirements of this exemption, or other applicable exemption, are satisfied.
      D. For the purpose of this rule, “physician” means a person licensed under Ark. Code Ann. § 17-95-401 et seq. and includes osteopathic physicians (D.O.). The term physician does not include chiropractors, podiatrists, dentists, optometrists, or physical therapists.
      H. PROSTHETIC DEVICE.
      1. “Prosthetic device” means a replacement, corrective, or supportive device, including repair and replacement parts for the device, worn in or on the body to:
      a. Artificially replace a missing portion of the body;
      b. Prevent or correct physical deformity or malfunction; or
      c. Support a weak or deformed portion of the body.
      2. Prosthetic device does not include corrective eyeglasses, contact lenses, or dental prostheses.
      3. Examples of prosthetic devices include, but are not limited to, the following items: abdominal belts; catheters; hearing aids; artificial limbs; insulin pumps; mastectomy surgical bras; and orthopedic shoes.
      4. Many prosthetic devices cannot be purchased directly by a patient. A prosthetic device that would be exempt if it could be purchased directly by the patient is exempt if the physician procures the device from the medical supplier on behalf of a specific patient. A prosthetic device that is purchased for use or consumption in the performance of nontaxable medical services or otherwise not purchased on behalf of a specific patient does not meet the requirements of Ark. Code Ann. § 26-52-433.

      Batteries are taxable under Arkansas Rule GR-3. DEFINITIONS: For purposes of these rules, unless otherwise required by their context, the following definitions apply:
      M. SALE.
      1. “Sale” means any transaction resulting in the transfer of either the title or possession, for a valuable consideration, of tangible personal property, specified digital products or taxable services regardless of the manner, method, instrumentality, or device by which such transfer is accomplished. Sale includes the exchange, barter, lease, or rental of tangible personal property or taxable services, or the sale, exchanging, or other disposition of admissions, dues, or fees to clubs, places of amusement, or recreational or athletic events or for the privilege of having access to or the use of amusement, athletic, or entertainment facilities.

      With the above rules cited, the batteries and accessories would be subject to tax. Only the hearing aids purchased from a physician will be exempt.

      Please let me know if you have any additional facts that would change this answer.

      • Posted by Kevin on February 16, 2018 11:32am:

        Many states consider batteries to be a part for the prosthetic device since it includes "repair and replacement part for the device". The device is not functional without the batteries. I think that would be a valid argument and one that has seen precedent established in other states. Thoughts?

  • Posted by Joe on February 11, 2018 7:08pm:

    I do the booking for a professional string quartet in Arkansas. We perform for weddings and special events all over the state of Arkansas. We do not have an office or central business location and our players are all 1099 contractors. Do we need to charge/pay sales tax for our services?

    • Posted by Author photo of B.J. Pritchettbjpritchett on February 16, 2018 11:19am:

      At present time a professional string quartet performing at weddings or special events is not considered a taxable service.

      If the law changes and specifically taxes your service, then you would need to register and begin collecting and remitting tax.

      Please let me know if you have any additional questions.

  • Posted by Robert on February 7, 2018 8:17am:

    Where would I be able to find an understandable definition of what constitutes a taxable service and/or taxable labor? I'm trying to figure out my legal standing with the work I do (animation, design, and video post-production). Before 2018 I was confident nothing I did was taxable, but now, depending on who I ask, I'm told either that *everything* is taxable, or that only the file I send to my clients at the end is taxable. And then on the other side of the fence, I have one client in particular who insists that nothing I do is taxable and they don't want to have to pay sales tax on my invoices. Who's right?

    • Posted by Author photo of B.J. Pritchettbjpritchett on February 7, 2018 11:08am:

      Since you have mentioned the work you perform is animation, design and video post-production, allow me to address what the LAW states at this time. The law clearly states all kinds of photography services are taxable. Beginning January 1, 2018, if you digitally download the video/movie/books or audio to your customer, the digital download is subject to tax.

      Do you provide your client with an end product? If the answer is yes - the transaction is taxable where ever the service is performed for local tax purposes. 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.

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

      For the one client that does not want you to charge sales tax on the invoice, since you are the vendor you will have to pay tax on the transaction. Arkansas allows you to embed the tax in the price of the product and then pay it to the state. Arkansas holds the vendor taxable - not the customer.

      I hope this answers your question.

      • Posted by Robert on February 7, 2018 11:17am:

        This is helping, thank you.

        I do provide an end product to my client. Also, I don't know if it matters, but usually I send several files throughout the project as drafts that they can provide feedback on, and then ultimately I send one or more files at the very end that I designate as the "final" product.

        As long as I make the charge for the file download separate from my charge for the work on my invoice, am I safe in only applying the tax percent to that file line item? And do I have discretion to set the cost of that line item however I see fit, even if it's very low compared to the labor/service charges?

        Thanks again!

        • Posted by Author photo of B.J. Pritchettbjpritchett on February 16, 2018 11:22am:

          There are so many variables in your last comment, I would need to see examples of your invoices that are giving you heartburn. Please note my email address for further discussions.

  • Posted by Alex on February 1, 2018 3:34pm:

    I have a client who is in the photography business. He mainly invoices for 3 separate services: a consultation, the actual shoot and the link to the finished product. I know that the shoot and, as of the beginning of the year, the digital media is taxable but what about the beginning consultation? There is nothing tangible or digital exchanged and, technically, that could be the extent of his work if his client doesn't wish to go in his direction.

    • Posted by Author photo of B.J. Pritchettbjpritchett on February 1, 2018 4:34pm:

      Arkansas is a Gross Receipts Tax State meaning that it is the total consideration for the value of the item received. The consultation is part of the total consideration and is subject to tax.

      The Arkansas Rule GR-10 is the source:
      GR-10. SERVICES SUBJECT TO TAX – PRINTING AND PHOTOGRAPHY,
      JOB PRINTERS, PRINTERS AS MANUFACTURERS:
      D. The tax applies to the service of photography of all kinds. State and local sales tax apply to photography services based on where the customer receives the service. The photography service, including the sitting, is received when the customer views the product of the service (i.e. proofs, pictures, etc.).

      I hope this answers your question to your satisfaction.

  • Posted by Nat on January 3, 2018 5:47pm:

    I have an at home business where I design and redecorate clothing par customer request. My question is, should I be collecting tax? I do not resale new clothing as is, I provide a service to my customers by recreating clothing, of course I pay tax for the original item.

    • Posted by Author photo of B.J. Pritchettbjpritchett on January 4, 2018 6:36am:

      Thank you for your question. The Arkansas Rules do address secondhand tangible personal property. The Arkansas Rules puts a high threshold on meeting the criteria to be able to claim the exemption. You must keep tedious detailed information about every piece of tangible personal property.

      The Arkansas Rule is:
      GR-50. EXEMPTIONS FROM TAX – SECONDHAND AND USED TANGIBLE PERSONAL PROPERTY:
      A. Gross receipts or gross proceeds derived from the sale of secondhand and used tangible personal property will be exempt only if both the following conditions listed below are met:
      1. Used property was traded-in to and accepted by the seller of tangible personal property as part of the purchase price of newly acquired tangible personal property. It is necessary that the gross receipts tax be collected and paid on the total consideration for the sale of the newly acquired tangible personal property in order to qualify for the exemption unless the sale of the newly acquired tangible personal property was otherwise exempt under other provisions of the
      Arkansas Gross Receipts Act; and
      2. a. Arkansas gross receipts tax was collected and paid on the total amount of consideration for the sale of the newly acquired tangible personal property without any deduction or credit for the value of the used tangible personal property; or.,
      Example: Seller of boats sells a new boat to a customer. The customer trades in his old boat and pays sales tax to seller on the full purchase price of the new boat without any deduction for the trade-in. When seller sells the traded-in used boat, he is not required to collect sales tax.
      b. The new personal property was originally exempt from tax under the provisions of the Arkansas Gross Receipts Act.
      Example: Seller of farm equipment sells a new tractor to a farmer. The farmer trades in his old tractor that was purchased tax exempt under the gross receipts tax exemption for farm equipment and machinery. When the seller sells the used tractor, he is not required to collect sales tax.
      B. The foregoing does not apply to transactions involving (i) used motor vehicles or trailers, (ii) used mobile homes, or (iii) used aircraft, but is applicable to boats, motors, appliances, etc. (See GR-13, GR-14, and GR-15.1.)
      C. Property purchased by a seller and not taken as a trade-in does not qualify for the exemption.
      Source: Ark. Code Ann. § 26-52-401(22)

      Based on the information you have when you receive a piece of clothing (tangible personal property), I would venture to say you do not have the documentation to meet the exemption threshold and would not qualify for the exemption.

      I would advise collecting the tax at the sale of clothing. I would also advise not paying tax on those items that will be sold to the customer such as thread, buttons, etc - items that would actually go to the customer with the sale.

  • Posted by William on December 18, 2017 5:35pm:

    Does an 1099 IT contractor need to charge sales tax for his Labor?.....what if he doesn't work directly for the end customer, but instead works for someone else that the end customers hire ?

    • Posted by Author photo of B.J. Pritchettbjpritchett on December 19, 2017 5:35am:

      First, you must understand that a 1099 is an Income Tax issue - the reporting of income to an entity.

      Second, Gross Receipts Tax (commonly referred to Sales Tax) is one of a multitude of Excise Taxes imposed by the State of Arkansas. A Contractor who works on Tangible Personal Property (such as machinery of all kinds, motors of all kinds, etc) must retain a Sale for Resale Permit from the State of Arkansas.

      In answer to your specific question - Contractors where multiple hats and it depends on what is the object the Contractor is wearing as to whether he charges his customer with tax or whether he is considered the end user or consumer. The easiest way to break it down is IF the Contractor is working on tangible personal property (something you can pick up and run away with), the Contractor charges tax to his customer. IF the Contractor is work on real property (the key is if it CANNOT be removed from the BUILDING/Structure without substantial damage to the Building/Structure) then the Contractor is liable for paying tax on materials and not on his labor. No tax is charged to the customer on their invoice; however, the Contractor must pay the Vendor tax on materials. Contractor should quote Real Property while embedding the tax in his quote to the customer. There are three exceptions to the Real Property issue - Flooring, Locks and Electrical Devices in EXISTING BUILDINGS!! These three exceptions should have the Contractor charging tax to their customer on the invoice.

      Hope this is helpful - if not come back to me.

  • Posted by Jim on December 16, 2017 5:33am:

    Is there to be a sales tax on equipment sold to a public school where the equipment is used solely by students for classes during school hours?

    For example would the school be charged sales taxes on playground equipment or volleyballs and other playground equipment or say bicycles used exclusively by students and teachers of classes.

    • Posted by Author photo of B.J. Pritchettbjpritchett on December 18, 2017 4:46am:

      While 59% of the taxes collected by the state of Arkansas goes to schools, there are very few specific exemptions for schools. In answering your question, I refer to the Arkansas Rule GR-35:
      GR-35. EXEMPTIONS FROM TAX – SCHOOLS:
      A. There is no general exemption that applies to all sales to school districts or public
      schools. There is no general exemption that applies to sales by school districts or
      public schools. However, there are certain specific exemptions that apply to schools
      and school districts that are addressed or referenced in this rule.
      78
      B. TEXTBOOKS AND INSTRUCTIONAL MATERIALS. For sales of textbooks and
      instructional materials see GR-69.
      C. SALES OF FOOD. Sales of food or food ingredients or prepared food in public,
      common, high school, or college cafeterias and lunchrooms that are operated
      primarily for teachers and pupils and not operated for profit or for the general public
      are exempt from sales tax. Any kindergarten, middle school, junior high school,
      high school, or college that operates a cafeteria or lunchroom primarily for teachers
      and pupils and not for the general public and that is not operated for profit is not
      required to collect tax on its sales of food or food ingredients or prepared food.
      D. PTA/PTO FUNDRAISING. For special rules pertaining to fundraising see GR-24.
      E. SCHOOL BUSES AND MOTOR VEHICLES. For sales of school buses or motor vehicles
      see GR-34.

      There is another exemption - Arkansas Rule GR-69 that refers to instructional materials; however, it does not extend to playground equipment or volleyballs or bicycles.

      GR-69. EXEMPTIONS FROM TAX – TEXTBOOKS AND OTHER INSTRUCTIONAL MATERIALS:
      A. The gross receipts or gross proceeds derived from the sale of textbooks, library books, and other instructional materials are exempt from tax if purchased by:
      1. An Arkansas school district or Arkansas public school that receives state funding;
      or
      2. The State of Arkansas for free distribution to Arkansas school districts or Arkansas public schools.
      B. The exemption will not apply unless the instructional materials are to be provided to the students free of charge. Private schools and public libraries are not entitled to the exemption.
      C. For purposes of the exemption, “instructional materials” means and includes the following:
      1. Traditional books, sheet music, and trade books in printed and bound forms;
      2. Activity-oriented educational programs that may include manipulatives;
      a. “Activity-oriented educational programs” are academic programs that incorporate hands-on learning strategies to enhance learning.
      b. “Manipulatives” are tools used in conjunction with an educational activity that allow the student to explore and learn through direct manipulation of physical objects.
      3. Hand-held calculators;
      4. Technology-based educational materials and electronic software that require the use of electronic equipment in order to be used in the learning process, e.g. software and software licenses;
      a. “Technology-based educational materials” does not include the equipment required to make use of these materials, e.g. computer hardware. Computer hardware is taxable.
      b. Only software actually used in the learning process qualifies for the exemption. Other software, such as software used for class preparation or administrative purposes, does not qualify for the exemption.
      5. Maps, globes, art supplies, workbooks, flash cards, educational blocks, educational models, manipulatives, and charts for classroom use; and
      6. Video tapes, DVDs, films, or cassettes containing instructional information designed to be presented to students as part of a course of study.
      D. “Instructional materials” does not include the following:
      1. Items purchased for use in interscholastic extracurricular activities;
      2. Items purchased for use in administration or maintenance of the school including, but not limited to, computer supplies; record keeping, evaluation, or testing supplies; general use furnishings, equipment, and supplies, including photographic or audio visual equipment; or other administrative or maintenance supplies even if these supplies are distributed free of charge to the students; and
      3. Construction materials or supplies.
      E. This exemption does not apply to colleges, universities, or other post-secondary education facilities.

      Other states provide a complete exemption but NOT Arkansas.

      If you have additional questions, please do not hesitate to contact me.

  • Posted by Michael on November 29, 2017 6:44pm:

    Hi-
    We work with contractors who regularly perform repairs and replacements of mechanical systems and their components (e.g., steam, HVAC, piping, etc) at commercial & industrial customer sites in Arkansas. Are those customers responsible for paying sales or use taxes on the labor and materials that the contractor charges them on for these improvement projects?

    • Posted by Author photo of B.J. Pritchettbjpritchett on November 30, 2017 8:31am:

      Depends. If the customer is a Direct Pay Permit holder, the items mentioned above (steam, HVAC, piping, etc.) are taxable repairs to tangible personal property (machinery of all kinds) to the customer. A Direct Pay Permit holder would be saddled with the tax liability to the state of Arkansas. If the customer is only a Consumer Use Tax Permit holder, the contractor is liable for charging the customer tax on the transaction. Arkansas Rule GR-9 addresses taxable repairs (labor and material) to specific objects of which machinery of all kinds is one of the listed items. The transactions are taxable and the contractor charges tax on the invoice to the customer. Arkansas Rule GR-21 addresses Non-Taxable Services by Contractors to Real Property Services on specific objects incorporated into Real Property with the exception of flooring, locks and electrical devices in Existing Buildings. While a light fixture is an electrical device, light fixtures are specifically listed as a Non-Taxable Services to Real Property and is not taxable to the customer. The Contractor must pay tax on materials incorporated into Real Property.

  • Posted by Russell on November 18, 2017 3:31pm:

    I have a home based dental equipment repair business. Dentists send their equipment and instruments to me for repair, I repair them and send them back. Do I charge sales tax for the total invoice? Freight also?
    Thank you

    • Posted by Author photo of B.J. Pritchettbjpritchett on November 18, 2017 5:54pm:

      If you are located in Arkansas and ONLY deal with in-state Dentists, then you would charge Arkansas Gross Receipts Tax on both the Repair (per Arkansas Rule GR-9) and the Freight (per Arkansas Rule GR-3 Total Consideration).

      If you are in Arkansas and are repairing out-of-state Dentist equipment and instruments, the Dentist ships it to you and you ship it back, if you have no nexus in other states (people or property), then you do not charge Arkansas tax (as it is not an Arkansas Transaction as you shipped it to the out-of-state Dentist).

      Thank you for your question.

  • Posted by lnail on October 15, 2017 4:49pm:

    I rent-to-own furniture, appliances, and electronics, typically on rental terms of 12 months or longer.

    Currently, I purchase the inventory tax-exempt and charge tax on every rental payment and also on the final payment where ownership of the inventory is then transferred to the customer.

    My question is: If I pay the sales tax on the inventory when I purchase it, is it legal for my to not charge my customers tax on their rental payments? I understand that on the final payment, where ownership is transferred, I will still need to charge and remit tax on it.

    • Posted by Author photo of B.J. Pritchettbjpritchett on October 16, 2017 6:16am:

      Thank you for your question.

      To reiterate your question:
      If I pay the sales tax (gross receipts tax) on the inventory when I purchase it, is it legal for me to not charge my customers tax on their rental payments?
      SHORT ANSWER is “YES”; however, there are stipulations in the law that must be followed in order to qualify as a “long term rental”.

      Arkansas provides an election on long term rentals. Arkansas defines long term as thirty (30) days or longer to a single consumer. Once the vendor has determined the tangible personal property will be “long term”, the vendor may pay the tax up front and not charge tax through the life-stream of the lease/rental. However, once the election is made, the vendor cannot use the tangible personal property in a short term rental. Tracking by serial number or some other identifiable device is advised.
      Caution: If the contractual terms of the lease/rental state, the lease/rental can be terminated in writing in 14 days, the long term lease/rental is not long term but is a short term lease/rental.

      Arkansas provides a guidance rule under:
      GR-20. LEASES AND RENTALS:
      A. GENERAL. Persons in the established business of leasing or renting articles of tangible personal property to consumers are sellers and must collect and remit tax upon the gross receipts or gross proceeds derived from the lease or rental of the property.
      B. DEFINITIONS.
      2. “Long-term lease” means a contract to rent or lease property for a term of thirty (30) days or longer to a single consumer.
      C. LONG-TERM LEASES OF TANGIBLE PERSONAL PROPERTY (Except for Motor Vehicles).
      1. For long-term leases of tangible personal property, except for motor vehicles, the lessor may either purchase the property tax-free as a sale for resale or pay Arkansas sales and use tax on the purchase. If the lessor purchases property intended for subsequent lease without paying Arkansas gross receipts or use tax, he must establish the requirements necessary for a sale-for-resale exemption. (See GR-53.) At the time of purchase, the lessor must elect to pay the tax on property intended for long term lease or purchase the property tax free as a sale for resale. This election may not be changed after the purchase.
      2. If the lessor of property paid Arkansas gross receipts or use tax on the purchase of the item, the lessor is not required to collect gross receipts tax on subsequent long-term leases of the property.
      3. Repair parts purchased by the lessor to keep the leased property in working order are taxable, unless the property was initially purchased exempt from tax as a sale for resale.
      4. See GR-38.2 for the exemption for leases of durable medical equipment, mobility-enhancing equipment, and prosthetic devices.
      Source: Ark. Code Ann. §§ 26-52-103; 26-63-301 et seq.

      I hope this helps you make an informed decision.

  • 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 Freddy on September 20, 2017 5:27pm:

      Thank you for replying. You have certainly clarified a lot. As for my company, I pay sales taxes on all the equipment or storage devices I might use to store both raw and finished advertising campaign digital data on which is then given to my clients. These storage devices or equipment are bought from stores such as Staples or the like. The advertising campaigns I develop use the short stories on national Tv some but most of the advertising product is in the form of digital data which goes to social media sites or websites via internet. These are short stories, ad campaigns and the like in which I use for brand marketing for my clients. I also manage social media sites as part of that same brand advertising for several companies. I developed, do the editing, artwork and handle all damage control, questions and more on all of these social media sites. Nothing is sold, there are no hard drives of content given to my clients which are based outside of Arkansas and only see the finished product when it comes live on social media sites. Are these sales taxable? Again, Thank you sincerely for your time.

      • Posted by Author photo of B.J. Pritchettbjpritchett on September 20, 2017 6:53pm:

        Based on the information you have provided, the electronic delivery of content is not a taxable service in Arkansas. However, in the 2017 legislative session, the state of Arkansas passed a law stating the following:
        SECTION 7. Arkansas Code § 26-52-103(13), concerning the definitions to be used under the Arkansas Gross Receipts Act of 1941, § 26-52-101 et seq., is amended to read as follows:
        (13)(A) “Gross receipts”, “gross proceeds”, or “sales price” means the total amount of consideration, including cash, credit, property, and services, for which tangible personal property, specified digital products, a digital code, or services are sold, leased, or rented, valued in money, whether received in money or otherwise, without any a deduction for the following:
        (i) The seller's cost of the property sold;
        (ii) The cost of materials used, labor or service cost, interest, any loss, any cost of transportation to the seller, any tax imposed on the seller, and any other expense of the seller;
        (iii) A charge by the seller for any service necessary to complete the sale, other than a delivery charge or an installation charge;
        (iv) Delivery charge;
        (v)(a) Installation charge.
        (b) Installation charges will shall not be included in the “gross receipts”, “gross proceeds”, or “sales price” if they are not a specifically taxable service under this chapter or the Arkansas Compensating Tax Act of 1949, § 26-53-101 et seq., and the installation charges have been separately stated on the invoice, billing, or similar document given to the purchaser; or
        (vi) Credit for any trade-in.
        (B) “Gross receipts”, “gross proceeds”, or “sales price” does not include:
        (i) A discount including cash, term, or a coupon that is not reimbursed by a third party and that is allowed by a seller and taken by a purchaser on a sale;
        (ii) An interest, financing, or a carrying charge from credit extended on the sale of tangible personal property, specified digital products, a digital code, or services, if the amount is separately stated on the invoice, bill of sale, or similar document given to the purchaser; and
        (iii) A tax legally imposed directly on the consumer that is separately stated on the invoice, bill of sale, or similar document given to the purchaser;
        SECTION 8. Arkansas Code § 26-52-103(19)(A) and (B), concerning the definition of “sale” to be used under the Arkansas Gross Receipts Act of 1941, § 26-52-101 et seq., are amended to read as follows:
        (19)(A) “Sale” means the transfer of either the title or possession, except in the case of a lease or rental for a valuable consideration, of tangible personal property, specified digital products, or a digital code regardless of the manner, method, instrumentality, or device by which the transfer is accomplished.
        (B) “Sale” includes the:
        (i) Exchange, barter, lease, or rental of tangible personal property, specified digital products, or a digital code; or
        (ii) Sale, exchange, or other disposition of admissions, dues, or fees to clubs, to places of amusement, or to recreational or athletic events or for the privilege of having access to or the use of amusement, athletic, or entertainment facilities.
        SECTION 9. Arkansas Code § 26-52-103(20) and (21), concerning the definitions to be used under the Arkansas Gross Receipts Act of 1941, § 26-52-101 et seq., are amended to read as follows:
        (20) “Seller” means a person making a sale, lease, or rental of tangible personal property, specified digital products, a digital code, or services.
        (21)(A) “Tangible personal property” means personal property that can be seen, weighed, measured, felt, or touched or that is in any other manner perceptible to the senses.
        (B) “Tangible personal property” includes electricity, water, gas, steam, and prewritten computer software;.
        (C) “Tangible personal property” does not include specified digital products or a digital code;

        If your client needs a digital code to access the advertising content, beginning January 1, 2018, the sale will be subject to taxation.

        I have recently requested examples from Arkansas DFA of what constitutes digital code. DFA's attorneys have not responded as yet, but I trust they will provide examples.

        Since the sale is not in Arkansas or delivered in Arkansas, Arkansas tax would not be due; however, if you have nexus with the state of delivery (even electronically delivered), the state of delivery may tax the transaction. You would then need to inquire in the states of electronic delivery as to the taxability.

    • 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.

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