Arkansas sales and use tax compliance

Find out interesting insights with Shaun Walker, SOX Compliance Manager at Norfolk Southern

Moderated by Srishti, Digital Transformation Consultant at Hyperbots

Don’t want to watch a video? Read the interview transcript below.

Srishti: Hello, everyone! My name is Srishti Rajveer, and I’m a digital transformation consultant at Hyperbots. Today, I’m delighted to have Shaun Walker as my guest. Thank you so much, Shaun, for taking out the time today.

Shaun Walker: Absolutely, thanks for having me.

Srishti: Of course! A little bit about Shaun for our viewers here. He is the Sox compliance manager at Norfolk Southern, and today we will be discussing Arkansas sales and use tax compliance. So, let’s begin.

Shaun Walker: Let’s get started.

Srishti: Alright. To start with our first question, could you provide an overview of Arkansas sales tax and use tax rates, and how do these rates differ across goods and services?

Shaun Walker: Arkansas has a base state tax rate of 6.5%, which applies broadly to goods and most services. However, local jurisdictions—cities and counties—can add additional rates, leading to variations in the overall rate depending on the location. Some examples include general merchandise, which has a 6.5% rate, whereas food and groceries are generally taxed at a reduced rate of 1.5%.

Srishti: Understood. Are there any exemptions you’ve noticed across this?

Shaun Walker: There are exemptions, such as prescription drugs and certain medical devices, which are generally exempt from sales tax. The system requires businesses to carefully assess rates based on item types and locations.

Srishti: Understood. Could you discuss some of the jurisdictions in Arkansas with notably high or low tax rates? How does this affect businesses?

Shaun Walker: Some of the highest rates are in cities like Gould and Lakeview, which have a combined rate as high as 11.5%. Meanwhile, rural areas or smaller towns may have combined rates closer to 7%. For businesses, these differences mean they have to adjust rates based on their sales location. Businesses in high-tax areas may face increased costs, which can impact competitiveness, while companies in lower-tax areas may attract more price-sensitive customers.

Srishti: Makes sense. How often do Arkansas sales tax rates change? How do businesses keep up with these updates?

Shaun Walker: The state tax rate changes infrequently, but local rates can change annually or even more often, especially if local governments adjust for budget requirements. For example, recent local rate adjustments have taken place due to infrastructure improvements in various counties. To keep up, businesses rely on tools or resources provided by the Arkansas Department of Finance and Administration or third-party tax compliance solutions.

Srishti: Understood. What are some of the primary resources available to businesses to stay informed about sales and use tax changes in Arkansas?

Shaun Walker: The three main resources are the Arkansas Department of Finance and Administration (DFA), sales tax lookup tools, and third-party compliance solutions. Platforms like Avalara and TaxJar provide real-time updates on local sales tax rates across Arkansas with integration options for sales systems. These resources help businesses manage rate variability across jurisdictions and ensure accurate application of tax rates.

Srishti: I see. What challenges do companies face when managing compliance with Arkansas sales and use tax rules? Could you share some examples for our viewers?

Shaun Walker: Challenges include jurisdiction variability, as numerous counties and cities each have their own tax rates ranging from 7% to 11.5%. Frequent local changes require businesses to stay constantly updated, especially if they operate statewide. Additionally, complex taxability rules make it challenging to determine which goods and services are exempt or partially exempt, like the reduced rate of 1.5% for food items.

Srishti: Understood. Since artificial intelligence is so prevalent, how can AI help businesses manage sales tax and use tax compliance more efficiently, especially in Arkansas’s complex local tax structure?

Shaun Walker: AI can simplify compliance in several ways. Automated rate updates pull in tax rates from government sources and update them for each jurisdiction, ensuring compliance. Location-based rate applications calculate the exact sales tax rate based on the customer’s location, eliminating errors. AI also monitors and applies exemptions, like Arkansas’s reduced rate for groceries, based on transaction details. For example, Hyperbots AI offers advanced solutions that automate local tax rate applications and ensure accurate calculations, reducing errors and saving time.

Srishti: That’s really interesting. How can AI support companies during audits for sales and use tax compliance in Arkansas?

Shaun Walker: AI supports quick document retrieval and error detection. Hyperbots AI systems help businesses prepare for audits by generating compliance reports and organizing transaction records by jurisdiction. This reduces the time and effort required for documentation, making audits less stressful and more transparent.

Srishti: That’s amazing, especially with the advancements AI has brought into this space. This makes me curious—what do you see as the future role of AI in handling Arkansas sales and use tax compliance?

Shaun Walker: AI’s role will continue to expand with predictive analytics to forecast the impact of upcoming rate changes, real-time compliance monitoring through live dashboards, and proactive alerts for rate changes. Hyperbots AI is pioneering these solutions with predictive and real-time capabilities, helping Arkansas businesses anticipate changes and manage tax compliance seamlessly.

Srishti: Thank you so much for sharing your insights. That was really helpful. This brings us to the end of our discussion today. Thank you so much for joining us. It’s been a pleasure talking to you, Shaun. A big thanks to our viewers as well. See you around—goodbye and have a great day!

Shaun Walker: Awesome, thank you.