Arkansas tax changes coming July 1

A slew of tax changes are on tap July 1 and beyond for Arkansas shoppers and businesses.

The state of Arkansas has revised its sales tax rate sheet for the forthcoming fiscal year, which begins July 1, and the Department of Finance and Administration (DF&A) is notifying businesses across the state.

The most noticeable changes taking place on the first of July are changes brought about by Amendment 91, the half-cent sales tax dedicated to road construction and repairs that voters approved last November. That tax increase will lead to:
• Increasing the state sales and use tax to 6.5%
• Increasing the manufacturing utilities reduced rate to 3.25%
• Increasing the electricity manufacturing reduced rate to 4.75%
• Leaving the reduced rate for food at 1.5%

OTHER TAX CHANGES
Other tax changes include the annual sales tax holiday for back-to-school items, such as clothing, school supplies and instructional materials.

This year, that tax break will fall on the weekend of August 3-4, 2013. Three new tax exemptions begin on October 1, 2013. They include:
• Exempting repair parts and labor for pollution control machinery and equipment from the state sales tax;
• Exempting commercial farmers from sales tax on baling twine, net wrap, silage wrap and similar products; and,
• Exempting non-profit blood donation organizations from state and local sales and use taxes.

ADDITIONAL IMPACT
Effective August 16, new laws will go into affect that impact those in the tax and auditing world.

Arkansas consumers can purchase wine from an in-state or out-of-state winery and have it directly shipped to them. However, the purchaser has to have physically visited the winery and made a purchase, and the shipments are limited to one case per calendar quarter. State and local sales taxes must be collected by the winery for the shipments.

In mid-August, DF&A will be allowed to disclose tax records to a joint auditor employed by two or more cities for purposes of auditing the advertising and promotion taxes collected by a city. The records must remain confidential and are not subject to public disclosure.

As part of Arkansas lawmakers’ Medicaid reform efforts, DF&A will be required in August to notify state Medicaid officials if a provider fails to file a state income tax return, state withholding return, a pass through entity tax return, or pay taxes due for the previous calendar year. Those providers will not be in compliance and their Medicaid enrollment will be terminated.

Finally, another new act creates civil and criminal penalties for activities related to software and devices used to modify or falsify electronic records to evade tax payments.

Another seven tax changes will go into effect on January 1 or July 1, 2014.