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Arkansas to tax digital goods, increase tax on candy, soda

  • Feb 13, 2017 | Gail Cole

 No longer considered food in Arkansas?

Recently enacted legislation in Arkansas is getting a lot of press for creating an income tax exemption for military retirement and survivor benefits, and for decreasing the tax levied on the sale of soft drink syrup and simple syrup.

There’s been less focus on the fact that the same bill, House Bill 1162, increases the sales and use tax rate on candy and soft drinks and also broadens sales and use tax to include certain electronically delivered goods.

Candy and soft drinks

Candy and soft drinks are currently subject to a reduced state sales and use tax rate in Arkansas: 1.5 percent as opposed to the general 6.5 percent. That will soon change. Beginning January 1, 2018, candy and soft drinks will be taxed at 6.5 percent, plus any applicable local taxes.

The state’s reduced food tax applies to “food and food ingredients,” which are defined as “substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value.” Candy and soda, not known for their nutritional value, must currently qualify for their taste and the fact that they’re ingested or chewed. Once House Bill 1162 takes effect, candy and soft drinks will specifically be excluded from the definition of exempt “food and food ingredients.”

Digital goods

As of January 1, 2018, HB 1162 will also levy the full gross receipts tax on the sale of certain digital goods and digital codes.

The following digital goods will be subject to taxation:

  • Digital audio works (e.g., music, ringtones)
  • Digital audio-visual works (e.g., streamed movies and shows)
  • Digital books (i.e., ebooks)

Digital codes are also taxable under the measure. These are defined as “a code that provides a purchaser with a right to obtain one or more specified digital products, and may be obtained by any means, including email or tangible means, regardless of its designation as a song code, video code, or book code.”

Tax automation

If you’re especially fond of candy and soda — or ebooks and ringtones — you have the better part of a year to build your reduced-tax stockpile.

If you sell these items, you may want to put that time to better use and switch to an automated tax solution that will facilitate sales or use tax compliance in Arkansas and other states. Learn more.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.