Arkansas Enacts Economic and Marketplace Nexus Legislation

Effective Date: July 1, 2019

Threshold: $100,000 or 200 or more separate transactions

Measurement Date: Previous or current calendar year

Includable Transactions: Taxable sales; Marketplace sales excluded from the threshold for individual sellers

When You Need to Register Once You Exceed the Threshold: Next transaction

Under an emergency clause, Arkansas has enacted economic and marketplace nexus legislation, effective July 1, 2019. Remote sellers and marketplace facilitators that sell or facilitate the sale of tangible personal property, taxable services, a digital code, or specified digital products into Arkansas are required to collect and remit sales and use tax if, in the previous or current calendar year, the remote seller or marketplace facilitator had:

  • $100,000 in aggregate sales; or
  • 200 transactions

The new requirement to collect and remit sales or use tax will not be applied retroactively.

The legislation defines a “remote seller” as a person that does not maintain a place of business in Arkansas but makes sales into the state that are subject to tax.

A “marketplace facilitator” is defined as a person that facilitates the sale of tangible personal property, taxable services, a digital code or magazine, or specified digital products by listing or advertising the products/services previously listed for sale in a forum. Marketplace facilitators either directly or indirectly facilitate payments between purchasers and sellers. The legislation also repeals the previous provisions requiring sellers to collect tax based on affiliated relationships and payments of referral fees which are often referred to as “click-through” nexus. (S.B. 576, Laws 2019, Effective July 1, 2019)

UPDATE: The Arkansas Department of Finance and Administration has issued two legal opinion letters stating that the economic nexus threshold to collect and remit tax for remote sellers is based on taxable sales. Previously, it had appeared that the threshold was based on gross sales of tangible goods, taxable services, digital codes or specified digital products. The legal opinion letters note that remote sellers should retain suitable records if making sales into Arkansas that are tax-exempt. (Opinion No. 20190501, August 29, 2019 and Opinion No. 20190511, September 9, 2019, Revenue Legal Counsel, Arkansas Department of Finance and Administration)

Update: The Arkansas Department of Finance and Administration (DFA) has issued a letter opinion regarding the filing obligations of marketplace sellers who make sales only through a marketplace facilitator. The DFA states that a seller who transacts entirely as a marketplace seller is not required to obtain a sales tax license. For more information, read our news item: Arkansas Issues Guidance Regarding Filing Obligations of Marketplace Sellers.

Posted on October 16, 2019