Sales Tax Info forFood Businesses

Q&A

Access to Opportunity

Handbook Series

Business Innovation Clinic

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This Q&A isintended for food

businesses that sellprepared foods or

food items

Q: I am a food business. How much do I have to pay in local taxes

for food items that sell directly to consumers?

A: It depends on whether you sell prepared foods, or items that

qualify as groceries, and how much of each.

If you sell groceries, or "food and food ingredients" only, then

you must pay 4.0% total (1.5% to Arkansas, 1.0% to Pulaski

County, and 1.5% to the City of Little Rock). Arkansas allows a

reduced tax rate for what is known as "Food and Ingredients"

or groceries, but taxes on "Prepared Foods" are not reduced.

There are limited exemptions given if you are a nonprofit and

do not make revenue after expenses, and a few narrow

instances.

If 75% of what you sell is prepared foods, then you must pay

11% in sales tax on all the items you sell. This includes items

that would otherwise be considered food and food ingredients.

If less than 75% of your sales are prepared foods, then you

apply 4.0% to the items falling under the “food and ingredients

category” and 11% to those falling under the “prepared foods

category.

[1] https://www.littlerock.gov/!userfiles/editor/docs/Finance/Wel%202%20LR-

sales%20tax_Rev3.pdf, p.5

[2] “Food and Food Ingredients” includes most common grocery type food items and food

packaged by a manufacturer for home consumption. (p. 2 of

https://www.dfa.arkansas.gov/images/uploads/exciseTaxOffice/Food_FoodIngAct141_2017.pdf)

[3] A “Prepared Food” is described as the following: Food sold in a heated state or that is heated

by the seller; or food where two or more ingredients are mixed or combined by the seller and

sold as a single item; or food sold with eating utensils, plates, bowls, cups, glasses, napkins or

straws provided by the seller. (p. 6 of

https://www.dfa.arkansas.gov/images/uploads/exciseTaxOffice/Food_FoodIngAct141_2017.pdf

[4]

https://www.dfa.arkansas.gov/images/uploads/exciseTaxOffice/Food_FoodIngAct141_2017.pdf.

[5] https://www.littlerock.com/docs/default-source/tax-information/tax-

applications/(appendix-item-03)-application-for-tax-exemption-(prepared-food).pdf?

sfvrsn=d3528cb6_2

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Q: Where does this money go to?

A: The taxes are distributed to the state, county, and city in the

following fashion:

Government Entity

Arkansas Sales Tax

Pulaski County Sales Tax

Little Rock General Sales Tax

City Little Rock Advertising &

Promotional Tax (A&P or Hospitality

Tax) for prepared foods

Rate

1.5% (if groceries/”ingredients”) or 6.5%

for prepared foods and all other items

1.0%

1.5%

0% if you are not selling prepared

foods or fall under an exemption;

otherwise, 2.0%

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[6] Little Rock imposes a 2.0% hospitality tax on all “Prepared Foods.” Some non-profits may be found exempt from this tax, by filling out an application availablethrough the City of Little Rock website. https://www.littlerock.com/docs/default-source/tax-information/summary-information/ap-tax-information-summary-sheet.pdf?sfvrsn=85518cb6_4

Q: How do I pay these taxes?

A: It depends if you are selling direct to the consumer, or indirectly

through another business.

If you are selling directly to customers who are consuming the food:

Typically, all of the aforementioned taxes will be paid for you by the business

that is selling the items directly to a consumer, but you should confirm with that

business that this is the case. However, be sure to file state and federal income

taxes and any other applicable taxes for the business not covered by this

document.

[7] https://www.dfa.arkansas.gov/excise-tax/sales-and-use-tax/local-sales-and-use-tax-information/

[8] Register for a tax permit and pay taxes here: https://atap.arkansas.gov/_/

[9] A filing frequency is a schedule for how frequently the state will require you to pay sales tax; as a general rule, the more

revenue you make, the more often your state will require you to pay sales tax.

[10] https://www.taxjar.com/states/arkansas-sales-tax-online/#how-to-file-sales-tax-in-arkansas

[11] https://www.littlerock.com/tax/appendix-item-8

[12] https://www.littlerock.com/tax

[13] https://www.littlerock.com/docs/default-source/tax-information/summary-information/ap-tax-information-summary-

sheet.pdf?sfvrsn=85518cb6_4

If you are selling directly to customers who are consuming the food:

The state, county, and city taxes can be paid through the following process:

Register for a tax permit through ATAP website. It will ask you for your

EIN and the names of all the owners or officers.

The state will assign you a filing frequency when you register for your

sales tax permit. It will be either monthly, quarterly, or annually.

AR sales tax returns are always due the 20th of the month following

the reporting period.

The State then should disperse the City and County taxes for you.

Register for an A&P Tax Permit with the City of Little Rock. (A separate

permit is required for each location where sales subject to the tax will

be made.)

Timely file a tax return reporting the taxable gross receipts and the

A&P Tax owed for each Taxable Period (see below) and timely remit

the A&P Tax owed by creating an account and paying through the City

of Little Rock website.

The A&P Hospitality Tax can be paid through the following process:

IMPORTANT NOTE: There is a 2% Discount for Prompt Payment: If

your tax return and payment of the A&P Tax owed for a given

Taxable Period are postmarked or hand-delivered to the

Commission by the 20th calendar day of the month in which they

are due, you may deduct and retain 2% of the A&P Tax to be

remitted for that period as a discount for prompt payment.

This date is called the “Prompt Payment Date.”

For example, July 20 is the Prompt Payment Date for the tax

return and A&P Tax owed for the month of June.

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Have more questions?  Contact Professor Kim Vu-Dinh, Director of the Business Innovations

Clinic at (501)  916- 5468 or kavudinh@ualr.edu.