An Arkansas Sales Tax Exemption Certificate (commonly known as a Resale Certificate) allows a business to buy goods that it will resell without paying sales tax on the purchase. When the goods are resold, the business will collect and remit sales tax to the state.
Learn how the Arkansas Sales Tax Exemption Certificate works, how to get one, and more.
Table of ContentsWhen retailers purchase products to resell, they often don’t pay state sales tax to the supplier on the purchase. The sales tax will still be paid, but instead of the retailer paying sales tax, the retailer charges sales tax to their customer on the final value of the merchandise.
For instance, imagine a furniture store in Little Rock, Arkansas. When the furniture store buys tables and chairs to sell in their store, by having an Arkansas Sales Tax Exemption Certificate, the furniture store owner won’t pay sales tax on their inventory purchases. When a customer walks into the furniture store and buys a table, the retailer adds Arkansas’s state sales tax which is based on the full price of the table. Over a certain period of time, usually the end of the month, the furniture store will tally all the sales tax it has collected from its customers and send those funds to the Arkansas Department of Finance and Administration.
Be aware that the sales tax exemption is only intended to be used for inventory that will be resold and not intended for the tax-free purchase of items used in normal business operations, such as paper, pens, etc.
Before a business starts selling products or providing taxable services, it must first get an Arkansas Sales Tax Permit (sometimes referred to as a Seller’s Permit) from the Arkansas Department of Finance and Administration. After registering for the permit, the Arkansas Department of Finance and Administration will provide a Sales/Use Tax Permit Number, which will be used when filling out the Sales Tax Exemption Certificate.
Step 1: Begin by downloading the Arkansas Sales Tax Exemption Certificate Form ST391.
Step 2: Include the Arkansas Sales/Use Tax Permit Number or the state and Sales Tax Number if the buyer is from another state.
Step 3: Identify the name of the seller.
Step 4: Describe the merchandise being purchased for resale.
Step 5: Provide the reason the merchandise is exempt (typically because it is being resold).
Step 6: Include the purchaser’s business activity or line of business.
Step 7: Include the purchaser’s business name, signature, address, position, and date.
There is no cost for a Certificate of Exemption in Arkansas.
There is no stated date a certificate expires, but it’s a good practice to keep the buyer’s information current and update certificates at least every three years.
In Arkansas, the certificate is not filed with any government agency. Instead, it is kept by the seller (the business selling the merchandise to the reseller).
The Sales Tax Permit and Sales Tax Exemption Certificate are commonly thought of as the same thing, but they are actually two separate documents. The Sales Tax Permit allows a business to sell and collect sales tax from taxable products and services in the state, while the Exemption Certificate allows the retailer to make tax-exempt purchases for products they intend to resell.
Also, in addition to these, your business may need to register for additional items. For more information, check out our guide to Arkansas business licenses.
When a business is presented with a resale certificate, the seller has the burden of proof to verify that the buyer’s information is correct and to keep these records. Failing to verify this information may result in the seller being liable for Arkansas sales taxes.
Before accepting a resale certificate, a seller should:
– Review the resale certificate to make sure it is completely filled out.
– Verify the purchaser’s Arkansas sales tax ID is valid and active by logging into the Arkansas Taxpayer Access Point.
– Sellers are also responsible for examining the certificate and evaluating whether the goods sold are reasonably consistent with the purchaser’s line of business. For example, if the buyer’s business is a car dealership, but they want to purchase office supplies tax-free, the seller should investigate further.
– Keep a file of resale certificates.
