An Arkansas sales tax exemption certificate is a form a qualifying buyer gives a seller so the seller doesn’t collect sales tax on the purchase. The buyer fills in their business details and the reason for the exemption, and the seller keeps the certificate as proof. If the seller gets a properly completed certificate at the time of sale, or within 90 days after, the seller is generally relieved of the duty to collect that tax.1Arkansas Code of Rules. 26 CAR § 30-1210
Who Qualifies to Use One
Resellers are the most common users. A retailer or wholesaler buying inventory for resale can purchase tax-free by holding a valid Arkansas permit and giving the seller a completed exemption certificate. Sales tax then gets collected only when the final customer buys the product.2Arkansas Code of Rules. 26 CAR § 30-1134
Manufacturers qualify for exemptions on machinery and equipment used directly in production, meaning the equipment plays an essential role such as transforming raw materials into a finished product. Raw materials that become a recognizable and integral part of the finished item are also exempt.3Arkansas Code of Rules. 26 CAR § 30-1136
Purchases made directly by the United States federal government are generally not taxed. Independent contractors working on federal projects do not get that treatment; they are considered the final consumers of what they buy and usually owe sales tax on those purchases.4Arkansas Code of Rules. 26 CAR § 30-1125
Nonprofits, including churches and charities, do not get a blanket exemption. Under state rules, they pay sales tax on items bought for their own use. They qualify to use an exemption certificate only when the purchase is for items they intend to resell.5Arkansas Code of Rules. 26 CAR § 30-1117
Which Purchases the Certificate Covers
The certificate only works for transactions the law actually exempts. Resale inventory is the most straightforward. Manufacturing machinery, equipment, and qualifying raw materials fall under separate rules. Manufacturers can also buy natural gas and electricity at a 0% state tax rate when the utilities are used directly in the manufacturing process; certain constitutional and local taxes may still apply. If one meter serves both manufacturing and non-manufacturing uses, the business has to use a reasonable method to separate and document the exempt share.6Arkansas Code. AR Code § 26-52-3197Arkansas Code of Rules. 006-05-07-Ark-Code-R-§-005
One trap to watch for is withdrawal from stock. If you buy goods tax-free for resale and then pull some out for your own business use, you owe the tax yourself. You have to report and pay it to the state at the time you use the items rather than resell them.8Arkansas Code. AR Code § 26-52-517
How to Fill Out and Deliver the Certificate
Buyers typically use the Arkansas Exemption Certificate (Form ST 391) or the Multistate Certificate of Exemption. The form has to include the buyer’s business details and the reason for the claim. Give it to the seller at the time of the sale, or make sure the seller receives it within 90 days of the sale. Without a completed certificate in that window, the seller is expected to collect tax on the transaction.1Arkansas Code of Rules. 26 CAR § 30-1210
Recordkeeping Rules
Both sides have to hold on to the paperwork. Buyers and sellers must keep records of exempt transactions for six years so the Department of Finance and Administration can review them during an audit. A seller who follows the documentation rules is generally protected from being held liable if it later turns out the buyer wasn’t actually entitled to the exemption.9Arkansas Code of Rules. 26 CAR § 9-1108Arkansas Code. AR Code § 26-52-517
What Happens If You Misuse the Certificate
A buyer who claims an exemption they don’t qualify for owes the unpaid tax, plus interest and any applicable penalties. The DFA can examine business records and assess those amounts retroactively if an audit turns up errors.1Arkansas Code of Rules. 26 CAR § 30-121010Arkansas Code. AR Code § 26-18-506
Resale permits can also be lost. A permit holder who repeatedly fails to tell sellers when a purchase is not for resale may have the retail permit canceled by the state. Keeping the lines clear with your suppliers is how you keep the permit.2Arkansas Code of Rules. 26 CAR § 30-1134