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Understanding Arkansas Sales and Use Taxes

Fact checked on February 12, 2013.

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Resale exemptions and blanket exemptions are two of the most important exceptions to sale tax liability. In addition, it is important to understand if you have enough "presence" within a state to be taxed by it.

 

Resale exemptions

Retail permits or resale permits, including those issued by other states, may be accepted by Arkansas sellers to establish entitlement to the "sale for resale" exemption. The sale for resale exemption is only applicable if the purchaser has a sales tax permit. The certification that a sale is for resale can be made on the bill, invoice, or sales slip retained by the seller, or a certification letter can be provided to the seller.

This certification should include:

  • the name and address of the purchaser
  • the retail permit number of the permit issued to the purchaser
  • a statement that the purchaser is engaged in the business of reselling what was purchased
  • a statement that the articles purchased are purchased for resale
  • the signature of the purchaser

Resale certificate exemption.

Arkansas has developed a resale certificate that includes (1) the retail permit number of the purchaser; (2) a statement that the personal property purchased is for resale; (3) a statement that the purchaser will report the tax due if the property is withdrawn from stock or not resold; (4) a description of the property and of the purchaser's business; (5) purchaser's signature, business name and address, and the date; and (6) a notice to the vendor that the resale certificate must be accepted in good faith, or the vendor may be held liable for sales tax

Blanket resale certificates

Sellers who repeatedly sell the same type of property to the same purchaser may accept a blanket certificate that covers more than one transaction with that purchaser. A blanket certificate will relieve the burden of executing a separate certificate for each individual tax-exempt purchase as long as there is no significant change in the operations. There is no prescribed form for a blanket certificate, but it should include all the information that a resale certificate needs.

Purchases from out-of-state vendors

A credit for tax paid in another state is given for any tangible personal property upon which a like tax has been paid in another state. If the amount of tax paid in another state is less than the amount due in Arkansas, the purchaser must pay the difference to Arkansas.

Procedure for accepting resale certificates

No particular form need be used by sellers receiving statements of exemption from their customers. The seller merely has the customer certify on the invoice or a separate certification letter that the transactions are exempt and why. The certification letter should include:

  • the name and address of the purchaser
  • the retail permit number of the permit issued to the purchaser
  • a statement that the purchaser is engaged in the business of reselling what was purchased
  • a statement that the articles purchased are purchased for resale
  • the signature of the purchaser

Procedure for accepting blanket certificates

Sellers who repeatedly sell the same type of property to the same purchaser may accept a blanket certificate that covers more than one transaction with that purchaser. A blanket certificate will relieve the burden of executing a separate certificate for each individual tax-exempt purchase as long as there is no significant change in the operations. There is no prescribed form for a blanket certificate but it should include the same information discussed above for a resale certificate.

Sales and use tax liability for out-of-state mail order and catalogue retailers

Arkansas no longer has a statute that specifically taxes out-of-state mail order and catalogue sellers. You will be responsible for paying sales tax only if you have physical presence within Arkansas. To determine if you have physical presence, ask yourself the following:

  • Do I have retail facilities, a warehouse or any office space in Arkansas? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
  • Do my employees or I enter Arkansas for purposes of taking and transmitting orders from Arkansas? If your employee or independent contractor goes into Arkansas to take or transmit orders your business may have physical presence in Arkansas. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
  • Do my delivery vehicles frequently enter Arkansas for purposes of delivering property? Frequent deliveries in Arkansas by your trucks will give you physical presence in Arkansas.

Absorbing the tax — using a "no sales tax" advertising strategy to drum up business

The sales tax is the responsibility of the seller. It appears that retailers are able to advertise or state to the public that the tax will not be added to the selling price.

Claiming refund for excess tax payments

A refund is claimed by filing an amended return or a verified claim for refund. The claim should include the name of the taxpayer, the time when, and the period for which, the tax was paid, the amount of tax claimed to have been erroneously overpaid, and the grounds upon which a refund is claimed.

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