006.05.06 Ark. Code R. § 71 - TAX COLLECTED BY SELLER - PROHIBITED PRACTICE - TAX DUE ON GROSS RECEIPTS - LOCAL TAXES

A. The gross receipts tax must be collected by the seller of tangible personal property or taxable services in all cases except those cases where the tax is to be paid directly to the state by the purchaser.

B. TAX RATE. The amount of state tax to be collected by the seller is six percent (6%) of the gross receipts or gross proceeds derived from the sale.

1. Manufacturing Utilities. As of July 1, 2008, the state tax rate on sales of natural gas or electricity to a manufacturer for use directly in the manufacturing process is four percent (4%) of the gross receipts or gross proceeds derived from the sale. From July 1, 2007, through June 30, 2008, the state tax rate on sales of natural gas or electricity to a manufacturer for use directly in the manufacturing process was four and one-half percent (4 1/2) of the gross receipts or gross proceeds derived from the sale. (See Rule 2007-5.)

2. Food and Food Ingredients. As of July 1, 2007, the state tax rate on sales of food and food ingredients is three percent (3%) of the gross receipts or gross proceeds derived from the sale. (See Rule 2007-3.)

C. COMPUTATION. In computing the tax to be collected upon any particular sale, sellers may elect to compute the tax due on a transaction on a per item or an invoice basis. However, sellers must apply the rounding rule to the aggregated state and local sales or use taxes.

1. Rounding Rule. Sellers must utilize the following rounding algorithm for sales or use tax computation.

a. Tax computation must be carried to the third decimal place; and

b. The tax must be rounded to a whole cent using a method that rounds up to the next cent whenever the third decimal place is greater than four.

2. Examples:

a. Computing tax on an item basis. XYZ retailer sells a book and a magazine to Purchaser A. The sales price of the book is $17.95 and the sales price of the magazine is $6.00. The applicable state sales tax rate is six percent (6.0%). XYZ retailer elects to compute the tax due on a per item basis. The state tax on the book is $1.08 (6% of $17.95 = $1.077). The state tax on the magazine is $0.36 (6% of $6.00 = $0.36). The total state tax computed on a per item basis is $1.44.

b. Computing tax on an invoice basis. XYZ retailer sells a book and a magazine to Purchaser A. The sales price of the book is $17.95 and the sales price of the magazine is $6.00. The applicable state sales tax rate is six percent (6.0%). XYZ retailer elects to compute the tax due on an invoice basis. The invoice price before tax is $23.95. The total state tax computed on the invoice basis is $1.44 (6% of $23.95 = $1.437).

D. LIABILITY. Sellers are liable for the sales tax derived from all taxable sales during the taxable period at the combined state, city, and county sales tax rate. (See GR-79.)

E. LOCAL TAXES. Towns, cities, and counties have authority under Arkansas law to levy sales taxes. Taxpayers should contact the Sales and Use Tax Section of the Revenue Division if they have a question as to whether they are within a jurisdiction which requires them to collect and remit a local tax. When the Commissioner is authorized or required to collect or administer a local sales tax, that tax shall be administered in accordance with these rules. See GR-91 for specific rules concerning the administration of local sales taxes.

Notes

006.05.06 Ark. Code R. § 71

Ark. Code Ann. §§ 26-52-501; 26-52-508; 26-52-301; 26-52-302; 26-52-103(8); various sections of Title 26, Chapters 73, 74, and 75