Arkansas Sales Tax Nexus
Arkansas Risk Profile
The Trigger: $100,000 in annual gross sales.
(Note: Arkansas officially repealed the “200 transactions” rule on January 1, 2023. It is now a revenue-only state.)
Physical Nexus: Standard triggers apply (offices, employees, inventory). Arkansas is a member of the Streamlined Sales Tax (SST) agreement and uses shared data to identify out-of-state businesses with physical presence or economic thresholds.
Effective Date: July 1, 2019.
Look-back Exposure: Generally 3 years. Arkansas uses sophisticated data matching to find unregistered sellers who have exceeded the revenue threshold.
Danger Level: MODERATE (The Local Tax Trap)
Arkansas has hundreds of local city and county taxing jurisdictions. While the state-level tax on groceries is nearly zero, local jurisdictions still tax food at their full rates. Failing to accurately map customers to their specific local district is a primary source of audit assessments.
The Trap: “Bundled” Software Sales
While SaaS is generally exempt, if your software sale includes any “downloadable” component or is bundled with tangible property, the entire transaction may become taxable. Arkansas auditors frequently look for these bundled services to reclassify exempt revenue as taxable.
Arkansas State Tax Nexus Summary
Arkansas follows a revenue-based economic nexus standard and is a member of the Streamlined Sales Tax (SST) agreement. Recent legislative updates have simplified compliance by removing the transaction count threshold for remote sellers.
Sales Tax Nexus
Remote sellers and marketplace facilitators establish nexus in Arkansas if they meet the following threshold in the current or previous calendar year:
- Economic Threshold: $100,000 or more in gross revenue from Arkansas retail sales.
- Update: As of January 1, 2023, Arkansas no longer utilizes a transaction count (formerly 200 sales) to determine nexus.
Physical nexus is triggered immediately by having a physical presence in the state, such as an office, remote employees, or inventory stored in an Arkansas warehouse or fulfillment center.
Corporate Income Tax
Arkansas imposes a corporate income tax on businesses with substantial economic presence. While many sellers of tangible goods are protected from income tax by Public Law 86-272, businesses with significant Arkansas-sourced revenue must still monitor their state filing obligations.
Taxability of Groceries and SaaS
Arkansas applies a significantly reduced tax rate to unprepared groceries. While the state is generally business-friendly regarding SaaS (which is often exempt), it does tax digital downloads and streaming services.
Conclusion
As an SST member state, Arkansas has access to robust tools to find unregistered sellers. We recommend a review of your Arkansas revenue and local tax collection settings, especially regarding food products and digital media.
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