Arkansas sales tax exemptions remove the 6.5% state gross receipts tax, and sometimes local tax on top of it, from specific purchases: groceries, prescription drugs, qualifying medical equipment, farm and manufacturing inputs, back-to-school items during the annual holiday, and sales to certain buyers like the federal government and approved nonprofits. Most exemptions are not automatic. You claim them by presenting an exemption certificate or an approved credential at the time of sale, and the seller keeps that paperwork on file.
Below is what qualifies, who qualifies, and how to actually claim it.
Exemptions for Everyday Consumers
Groceries
Starting January 1, 2026, Arkansas charges zero state sales tax on food and food ingredients.1Arkansas House of Representatives. Laws Taking Effect January 1st That covers the normal grocery run: produce, meat, dairy, canned goods, baking supplies, and similar items for human consumption.
Two limits matter. Local city and county taxes on groceries are not affected, so you may still owe the local portion. And “prepared food” stays fully taxable — anything sold heated, mixed or combined by the seller into a single item like a deli salad, or sold with utensils provided by the store.2Justia. Arkansas Code 26-52-317 – Food and Food Ingredients Food that the seller only cuts, repackages, or pasteurizes still qualifies, and so do raw meat, fish, poultry, and eggs that you have to cook at home.
Prescription Drugs and Medical Equipment
Prescription drugs and oxygen sold for human use are exempt from state and local sales tax when a licensed pharmacist, hospital, or physician dispenses them.3Justia. Arkansas Code 26-52-406 – Prescription Drugs and Oxygen Over-the-counter medicines are not exempt.
Four more categories are exempt when a physician prescribes them for a specific patient before the sale:4Justia. Arkansas Code 26-52-433 – Durable Medical Equipment, Mobility Enhancing Equipment, Prosthetic Devices, and Disposable Medical Supplies
- Durable medical equipment designed for home use, such as hospital beds, oxygen concentrators, and nebulizers.
- Mobility enhancing equipment, such as wheelchairs, walkers, and scooters.
- Prosthetic devices worn on or in the body, such as artificial limbs and orthotic braces. Corrective eyeglasses, contact lenses, and dental prostheses are excluded.
- Disposable medical supplies like ostomy and incontinence products.
Repair and replacement parts for qualifying durable, mobility, and prosthetic equipment are exempt as well.
Low-Income Residential Electricity
If your total household income is $12,000 or less a year, the first 500 kilowatt-hours of electricity each month are exempt from state gross receipts tax and other state excise taxes.5Justia. Arkansas Code 26-52-416 – Electricity Sold to Low-Income Households You have to claim it. Complete Form E-416 from the Department of Finance and Administration and submit it to your electric utility, which then applies the exemption going forward.6Arkansas Department of Finance and Administration. Form E-416 – Claim for Low-Income Electricity Customers Sales Tax Exemption
Vehicle Trade-In Credit
When you trade a used vehicle in on another vehicle, Arkansas taxes only the net difference. Buy a $30,000 truck, trade a $10,000 car, and you pay sales tax on $20,000.7Justia. Arkansas Code 26-52-401 – Various Products and Services You can still get the credit if you sell your old vehicle privately, as long as you buy the replacement within 60 days and bring a bill of sale signed by all parties to the revenue office when you register the new vehicle.
Isolated Sales
A one-time sale of personal property by someone who is not in the business of selling that type of item is an “isolated sale” and is exempt. Selling old furniture to a neighbor is the typical example. The exclusion that trips people up: motor vehicles, trailers, semi-trailers, mobile homes, and airplanes do not qualify, even in a purely private sale.8Justia. Arkansas Code 26-53-126 – Tax on New and Used Motor Vehicles A used car bought from a private seller is taxable at registration.
The Annual Sales Tax Holiday
Arkansas suspends state and local sales and use tax on clothing, school supplies, school art supplies, school instructional materials, and certain electronic devices during a back-to-school weekend. In 2026 it runs from 12:01 a.m. Saturday, August 1 through 11:59 p.m. Sunday, August 2.9Arkansas Department of Finance and Administration. 2026 Sales Tax Holiday All retailers must participate.
Exemptions for Farms and Manufacturers
Farm Equipment and Inputs
New and used farm equipment used exclusively and directly in farming is exempt from gross receipts tax.10Justia. Arkansas Code 26-52-403 – Farm Equipment and Machinery Qualifying items include tractors, combines, sprayers, plows, mechanical pickers, milking equipment, and irrigation systems, including buried pipe. Motor vehicles that must be registered for highway use, airplanes, hand tools, and implements used in timber production do not qualify.
Agricultural inputs for commercial production are also broadly exempt: seed (including timber seedlings), fertilizer, limestone, agricultural chemicals such as pesticides, herbicides, and livestock vaccines, and feedstuffs for livestock and poultry, including supplements.
Instead of filling out an exemption certificate for every purchase, eligible farmers can apply through the state’s online taxpayer portal for an Arkansas Farmer Sales Tax Exemption Card. It costs $20 initially, $10 to renew, and is valid for eight years.11Arkansas Department of Finance and Administration. Commercial Farmer Sales Tax Exemption To qualify, you have to show the Department of Finance and Administration that you farm as a business and can produce in commercially marketable quantities.
Manufacturing Machinery
Machinery and equipment used directly in producing, manufacturing, processing, assembling, finishing, or packaging articles of commerce at Arkansas plants are exempt from use tax, whether for new facilities or to replace an existing machine in its entirety.12Justia. Arkansas Code 26-53-114 – Exemption for Certain Machinery and Equipment “Used directly” is read narrowly. Molds, dies, and process-control computers count. Hand tools, repair and maintenance equipment, and general plant infrastructure like lighting and climate control do not. A wrench used to fix an exempt production line is still taxable.
Raw Materials, Components, and Consumed Chemicals
Raw materials and components that become a recognizable, integral part of a finished product intended for resale are exempt. Catalysts, chemicals, reagents, and solutions that are physically or chemically consumed during manufacturing are also exempt, even though they do not end up in the finished product.
Manufacturing Utilities
Natural gas, electricity, and coal sold to a manufacturer for use directly in the manufacturing process are taxed at a zero percent rate.13Justia. Arkansas Code 26-52-319 – Natural Gas, Electricity, and Coal To get the rate, the manufacturer files a utility sales tax exemption form with the utility, backed by a study separating production energy from non-production uses like office lighting. Only the production portion qualifies.
Pollution Control Equipment
Machinery and equipment used by a manufacturing plant or municipality to prevent or reduce air or water pollution is exempt when the equipment actually controls pollution from the facility’s operations and is required by Arkansas or federal environmental rules, documented in writing by the Division of Environmental Quality or the EPA. Replacement parts and consumed catalysts and chemicals also qualify.
Exemptions for Governments and Nonprofits
Federal Government
Sales to the United States government are exempt.7Justia. Arkansas Code 26-52-401 – Various Products and Services In practice, that means purchases on a centrally billed federal account qualify, while charges on an individually billed card used by a federal employee do not.14GSA SmartPay. Arkansas Tax Information
State and Local Government
Sales to Arkansas and its subdivisions are generally taxable, with narrow exceptions. School buses sold to public school districts are exempt. Motor vehicles sold to municipalities, school districts, and state-supported colleges and universities are exempt.15Legal Information Institute. Arkansas Code R. 006.05.06-005-GR-34 – Exemptions from Tax – Motor Vehicles Purchased by Specific Individuals and Organizations Regional airport authorities and public housing authorities also hold exempt status.
Nonprofits
Specific nonprofits are named in statute as exempt, including the American Red Cross and Habitat for Humanity. Act 1007 of 2025 added an exemption for qualified 501(c)(3) nonprofits with annual operating budgets under $200,000 that perform charitable community-based services for Arkansas residents in need.16Arkansas Department of Finance and Administration. What’s New in Sales Tax for 2025 The exemption covers most tangible personal property and services the nonprofit buys, but not motor vehicles, computers, or construction materials. The nonprofit has to apply to the Department of Finance and Administration for documentation confirming its exempt status before using it.
How to Claim an Exemption
No exemption works automatically at the register. You give the seller documentation; the seller keeps it; and if the Department of Finance and Administration later audits that sale, the burden of proving it was exempt is on the seller.
The standard document is the Arkansas Sales and Use Tax Exemption Certificate, Form ST391, though the multi-state Streamlined Sales and Use Tax Certificate of Exemption is also accepted.17Arkansas Department of Finance and Administration. Arkansas Sales and Use Tax Exemption Certificate – Form ST391 You fill in your tax permit number, the reason for the exemption, and what you are buying. The seller may take the certificate at the time of sale or within 90 days afterward.18Justia. Arkansas Code 26-52-517 – Exemption Certificates
A seller who follows the certificate requirements and accepts a properly completed form is relieved of tax liability even if the buyer’s claim later turns out to be invalid. That protection goes away if the seller fraudulently fails to collect tax, encourages a buyer to claim a bogus exemption, or accepts an entity-based exemption that does not exist in Arkansas.
A few categories use their own paperwork instead of, or in addition to, Form ST391:
- Low-income electricity customers use Form E-416, filed with the utility.
- Commercial farmers can use the Farmer Sales Tax Exemption Card at the point of sale.
- Manufacturers claiming the zero-rate on gas, electricity, and coal file a utility sales tax exemption form plus a usage study with the utility.
- Nonprofits must apply to the Department of Finance and Administration first and present the resulting documentation.
Penalties for Misusing an Exemption
Claiming an exemption you do not qualify for has real costs. Arkansas imposes a 10% penalty on any tax deficiency caused by negligence or intentional disregard of the law. If the Department of Finance and Administration determines the deficiency was due to fraud, the penalty rises to 50% of the unpaid tax, plus interest. A taxpayer who keeps filing returns with false information after the department has warned them owes an additional $50 per return.