The Arkansas sales tax is 6.5% of the gross receipts from the sales of tangible personal property and certain selected services. “Sale” includes the lease or rental of tangible personal property.
Taxable services include sales of gas, water, electricity, most solid waste disposal, telephone and prepaid telecommunications and repair services. Repair and replacement parts for manufacturing machinery are generally taxable. However, one percentage point of sales and use taxes may be refunded for purchases of machinery and equipment or replacement parts purchased to modify, replace, or repair manufacturing machinery and equipment. Additional discretionary refunds are available through AEDC's Replacement and Repair of Manufacturing Machinery and Equipment Sales and Use Tax Refund Program.
The Arkansas compensating use tax of 6.5% is levied on tangible personal property purchased from outside the state of Arkansas for use, storage or consumption within the state of Arkansas.
Exemptions from Sales and Use Taxes
- Any interstate or international private communications service and any interstate or international 800 or 900 service
- Property that becomes a recognizable, integral part of property manufactured, compounded, processed or assembled for resale
- Machinery and equipment used directly in manufacturing that was purchased for a new manufacturing facility or to replace existing machinery and equipment
- Machinery and equipment required by Arkansas law to be purchased for air or water pollution control or for removal of sulfur pollutants from refined petroleum
- Catalysts, chemicals, reagents and solutions that are consumed or used in producing, manufacturing, fabricating, processing or finishing articles of commerce at manufacturing or processing plants or facilities; and/or to prevent or reduce air, water and other contamination
- Sewer services
- Electricity, liquified petroleum gas and natural gas used (and separately metered) for qualifying agricultural structures and qualifying aquaculture and horticulture equipment and for commercial grain drying and storage
- Gas produced from biomass in a facility meeting federal eligibility requirements and sold to an entity for the purpose of generating steam, hot air or electricity to be sold to the gas producer
- Dental appliances sold by or to dentists or other professionals
- Electricity used in the production of aluminum metal by the electrolytic reduction process
- Electricity used in the chlor-alkali manufacturing process
- Feedstuffs and medicines used in livestock production, including poultry for commercial production in Arkansas
- Agricultural chemicals, fertilizer and limestone used in the commercial production of agricultural products
- Timber harvesting equipment
- New or used farm equipment or machinery
- Natural gas used as fuel in the process of manufacturing glass
- Forms which are consumed or destroyed during the manufacture of the item for which the form was built
- Repair or maintenance services performed on railroad cars, parts or equipment brought into the state only to be repaired, refurbished, modified or converted
- New aircraft manufactured or substantially completed in Arkansas for use exclusively by the purchaser outside of Arkansas
- Natural gas and electricity used in the manufacture of new motor vehicle tires
- Products used for baling, packaging, tying, wrapping or sealing animal feed products
- Certain parts and services to incorporate the parts or other tangible personal property into commercial jet aircraft components and subcomponents
Local Sales and Use Taxes
In addition to the state sales and use tax, local sales use taxes may be levied by each city or county. However, businesses may apply to the Arkansas Department of Finance and Administration for a refund of local taxes. “Single transaction” means any sale of tangible personal property or taxable service reflected in a single invoice, receipt or statement for which an aggregate sales or use tax amount has been reported or remitted to the state for a single, local taxing jurisdiction. These taxes are collected by the state and distributed to the cities and counties each month.
Sales Tax Reduction
Energy (electricity and natural gas) used by manufacturers in the manufacturing process is taxed at 0.625% effective July 1, 2015.