Source: http://sts.salestaxsupport.com/blogs/state/arkansas/arkansas-sales-tax-is-gross-receipts-tax/
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Arkansas Sales Tax - or Gross Receipts Tax? | Sales Tax Support
Written by B.J. Pritchett CMIJune 19, 2015
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.
33 Responses to Arkansas Sales Tax - or Gross Receipts Tax?
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 bjpritchett 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 bjpritchett 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 bjpritchett 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.
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;
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.
Posted by Michael on November 29, 2017 6:44pm:
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 bjpritchett 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?
Posted by bjpritchett 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).
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 bjpritchett on October 16, 2017 6:16am:
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.
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.
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 bjpritchett 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:
(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
(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 bjpritchett 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:
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.
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 bjpritchett 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)
Posted by bjpritchett on August 9, 2017 3:32pm:
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 bjpritchett 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:
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.
Source: Arkansas Rule GR-21 states the replacement of flooring in an existing building is subject to tax both materials and labor.
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 bjpritchett 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.
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?
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?
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!
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 bjpritchett 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 bjpritchett 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
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.
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 ?
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.