SALES TAX TUESDAY 2018: Arkansas

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Right next door (to me at least), that’s the way I like to think of ‘Arkansas’. Known as “the Natural State”, Arkansas is a place of great beauty, wilderness, diversity and some of the best ‘trout fishing’ in the world.

As I mentioned in my article back in 2015, the state’s name is a French interpretation of the Native American Sioux word “Acansa” meaning ‘downstream place’, which is most fitting when you think of all the majestic winding rivers within the state. And when you get mountains and rivers, the views are frequently spectacular.

One of those rivers, the Buffalo, has some of the most scenic places on earth. By the way the Buffalo just happens to flow into my own beloved ‘White River’ I spoke so much about in that earlier Sales Tax Tuesday article. 

As you can see in the illustration to the right, Whitaker Point sitting above the Buffalo is indeed worthy of one of it’s nicknames “The Best Place to Get Kissed in Arkansas”. Heck, with few exceptions like perhaps atop the Eiffel Tower in Paris, it might just be the ‘best place to get kissed anywhere’. Best of all you won’t pay any sales tax in reaching this kissing location. (And yes, that is an actual person sitting on the stone precipice of the Point.)

We've arrived in Arkansas just in time for three festivals that take place this week. The first is the Spring Bluegrass Festival being held in the Ozark Folk Center (State Park) which is in Mountain View, Arkansas, not too far from the Buffalo River. You can count on the fact that there will be a lot of "hooting and hollarin' goin' on" along with a lot of kick-up-your heals toe-tappin' bluegrass country music. You will pay a 'day-rate' or '3 day event rate' admission but that includes the tax. You might also choose local campgrounds, lodging or a package plan if you arrive in a big RV as well. 

In those cases be aware that "taxable facilities, services and special events within Arkansas are subject to applicable state and local taxes added to or included in the fee at the time of use/sale. The gross receipts or gross proceeds derived from sales of tangible personal property or services to churches or charitable organizations are NOT exempt from tax unless the items are purchased for resale by the church or charitable organization." You can't even buy your supper at a church social without paying the Arkansas tax man.

And speaking of sales tax, thanks to Avalara, the 'tax people', this article is our fourth in a new (2018) 50 part series, covering sales tax issues associated with each and every state tax jurisdiction in the United States. Insightful Accountant is publishing Sales Tax Tuesday 2018" every Tuesday to give you updated information as well as another look at some of the key information from our 2015 series. So, come take a ride with me in my big RV as we journey from state-to-state looking for what's great, and paying sales taxes all along the way.

Blue-grass music isn't the only festival this week, one of the best places to see a pastel of beauty will be at the Daffodil Festival held in Camden Arkansas starting March 9.  Thousands of visitors will come from not only Arkansas but from across the nation to tour the daffodil gardens and enjoy the history of southwest Arkansas. You will have the opportunity to tour antebellum homes and see historic re-enactments as well as partake of food, crafts, and one of my favorites, 'the steak cook-off'.  The festival itself is free (no sales tax there) but many of the specific events will require taxable admission.

And speaking of country cooking (what could be more country than a 'steak-off'), Washington (Historic) State Park will be holding their Cast Iron Cooking festival. Now it's only about 60 miles from Camden (the Daffodil Festival) to Washington, Ar. (the Cast Iron Cooking festival) but it will take you about 90 minutes to get there.  Remember this is Arkansas where almost everywhere you go is on a two-lane road and with a mountain between you and there.  None the less when you get to the park there will be plenty of people demonstrating their culinary skills making everything from biscuits to fried chicken, from beans and chili to blackberry cobbler and even pineapple upside-down cake all cooked in cast-iron atop open fires. This is at another state park, so once again be prepared to pay the 'day rate' admission (including sales taxes).

If you aren't hungry by now, then you just must not appreciate good food, and you won't want me to remind you of what we call 'shore lunch'. Nonetheless I will take this opportunity to remind you just how lucky I am to have a vacation home on the White River, about 40 miles 'up river' from where the Buffalo flows into the White. 

Located just 15 miles south of Bull Shoals Damn in North Central Arkansas, life is much simpler. The dawn breaks over the mountain across from my home and gleams off the crystal clear waters of the White. Fishing this way is the ultimate of relaxation as you simply float along the course of the river until finally your line enters one of any number of deep holes where the trout lie in wait for something to float by.  By lunch time you are on shore with a roaring file and your iron skillets cooking those trout, 'sales tax free'.  After a short nap simply climb back into your Jon-boat and cast away for the evening's catch. Can you really fault me for wanting to retire in such a place (that's rhetorical, I don't care even if you do fault me.)

Arkansas is home to the Ozark Mountains, we saw a beautiful peak above the Buffalo river at the start of this article. Wherever there are mountains, there are caves, and many times the most unusual of things can be found in caves. Not just unusual, but rare as well. As early as 1906 it was recorded that miners and prospectors were discovering diamonds in many parts of the Ozarks. Despite attempts to mine areas commercially for those 'girls best friends' the stronghold just wasn't found, but still to this day the idea of digging-up gem-quality stones attracts thousands of visitors each year to Crater of Diamonds State Park.  In fact Gary (our publisher) took his own boys rock-hounding there a couple of years ago.

And, even if you don't end up with 'a big one' ready to be cut, polished and set into a ring for your beloved, isn't it still just fun for the kid in you to enjoy 'digging in the dirt' once again?

Arkansas is home to more than 3-million people, and occupies an area of 53,179 square miles. The median household income is just over $40-thousand per family, making Arkansas one of the poorest states in the US (ranked 48th).

All of the state of Arkansas, as well as most of Oklahoma were acquired by the United States in 1803 under the Louisiana Purchase. Traditionally these areas had been home to several Native American tribes, and during the 1830 many other Native Americans were forced to move into Arkansas and Indian Territory (now Oklahoma). Arkansas became the 25th state in the US on June 15, 1836 and again Native American living in the new state were quickly forced west.

Due to the Mississippi River running the entire north-south distance of the eastern border of the state agriculture and river transportation afforded great wealth to those living along and adjacent to the river.  Large plantation houses as found in 'the Old South' sprang up prior to the Civil War.  While initially deciding to remain with the Union at the time the Gulf states seceded, Arkansas finally succumb and joined the Confederacy in May 1861. Several noted battles took place during the Civil War within Arkansas including the Battle of Cane Hill and Battle of Pea Ridge. At the conclusion of the war, Arkansas was restored to statehood in June of 1868.

While the earliest economic benefit was furs from trapping along the Mississippi and many of the other majestic rivers, agriculture became the number one economic driver in an otherwise poor state for much of Arkansas history.  Today the state is home to production of poultry (chickens and turkeys - the single largest production state) and eggs along with cattle and milk, hogs, soybeans, rice and sorghum. 

But our modern times has also produce the world's single largest retailer, Walmart which is based in the northwest Arkansas community of Bentonville. At the museum commemorating Walmart's founder Sam Walton you will also find his restored 'old truck' that he drove up until his death, despite being one of the wealthiest people on the planet.

Whether you are selling chicks at the store to raise around the house, or chickens in the meat case of the local grocery store, you will pay Arkansas sales tax in either case.  You might only pay sales tax on your admission to 'dig a few rocks out of the dirt', and not pay a thing extra if one of them turns out to be a 3 carat gem, but you will certainly pay sales tax on that diamond when you take your girlfriend to pick out her wedding ring.

Staying abreast of sales and use tax, even in a Streamlined Sales Tax state like Arkansas is almost a full-time job. For example, more than 26 local jurisdictions within Arkansas implemented 'rate' or other local tax changes on January 1, 2018. Another 26 local jurisdictions made changes in October of 2017, and yet 10 more made changes in April, 2017.

Clearly you can see why you need a sales tax expert like Avalara to help you stay current in what's going on with sales and use taxes impacting your business. So, let’s take a look at just a few Arkansas sales tax facts.  In case you missed them, you will find essential definitions related to terminology in this article within our opening article to this series.

  • Arkansas’ state sales tax rate is 6.5%. Depending on local municipalities, the total tax rate can be as high as 11.25%
  • Arkansas sales and use tax is administered by the Department of Finance, Revenue Division, Sales and User Tax Section (in Little Rock, AR)
  • Arkansas is one of the few states that charges a 'different' sales tax on food, this tax is 1.5% as opposed to the full 6.5% standard sales tax. This is know as a ‘reduced state sales tax’. Be clear, this 1.5% is not in excess of the normal state tax, but in lieu of it.
  • There are more than 300 local taxes in Arkansas. Most cities and counties have enacted a local sales and use tax passed by the voters in their jurisdiction. These local sales taxes are collected by the state rather than the cities or counties, they are then distributed back to the cities and counties every month by the state.
  • Arkansas taxpayers file sales tax returns online. The state discourages paper returns and no longer supports sales tax filings by mail.
  • Arkansas is a destination sourcing state. This means that sales tax is based on the location of the buyer. This means if the tax rate changes in the location where the buyer is located, you are responsible for collecting the correct rate even if you don't know there has been a change.
  • Arkansas is a member of Streamlined Sales Tax (SST)
  • Arkansas has one sales tax holiday for two days in August for clothing and school supplies. This year (2018) the holiday begins at 12:01 a.m. on Saturday August 4 and ends at 11:59 p.m. on Sunday August 5.

A sweet tooth will cost you as of January 1 - If you live in Arkansas having a sweet tooth will cost you more effective January 1, 2018. On that date Act 141 of the 2017 Arkansas Legislative Session became law and removes 'candy' and 'soft drinks' from the definitions of Food and Food Ingredients. This means that you will now pay the full 6.5% state sales tax rate, plus any city and county sales taxes. No more 'penny-n-1/2' on a $1 candy bar or Soda at Sonic.

Ring in more tax for 'digital products' as well - The same Act raising sales taxes on 'candy and soft drinks' also imposes state sales taxes (and local taxes as well) on digital audio works, digital audio-visual works, digital books, and digital code. As an explanation, and not intended to be an exact interpretation of every possibility, digital works mean products resulting from the fixation (recording by any means) of a series of musical, spoken or other sounds, including ringtones. Those blue-grass tunes at the 'hoot-nanny' are taxable even if you record them yourself. In other words, Arkansas found a way to 'ring in' some new sales taxes along with the New Year.

Whether you are selling candy and soft drinks at the local Five-N-Dime (like Sam Walton started out), or passing along the 'jams' with digital music offerings for iPhones, if you are selling it in Arkansas you had better know when and where it's taxable. Trying to remain compliant manually makes you prone to error and consumes valuable hours of your time in collection, accounting and reporting for what is pass-through paperwork rather than revenue-generating activities.

Avalara provides solutions for sales tax automation, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting. Automation via Avatax gives you the assurance of compliance without sacrificing productivity so that your sales tax is way less taxing than ever before. And in a state like Arkansas, that means just lay back and take things easy.