An Arkansas sales tax exemption certificate is the form a qualifying buyer gives a seller so the seller does not collect sales tax on a specific purchase. Eligibility depends on the transaction and the buyer’s status under state law, and the seller is generally relieved of the duty to collect tax once they receive the buyer’s identifying information and the reason for the exemption.1Arkansas Code of Rules. 26 CAR § 30-1210
Who Qualifies
Retailers and wholesalers buying inventory for resale are the most common users of the certificate. They must hold a valid permit and give the seller a completed exemption certificate so tax is deferred until 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 themselves are exempt when they become a recognizable and integral part of the finished item.3Arkansas Code of Rules. 26 CAR § 30-1136
Purchases made directly by federal agencies are generally not taxed. Independent contractors on government projects do not get the same treatment; the state treats them as the final consumers of what they buy, so they usually pay sales tax on their purchases.4Arkansas Code of Rules. 26 CAR § 30-1125
Nonprofits, including churches and charities, do not receive a blanket exemption. They must pay sales tax on items purchased for their own use and are only exempt when buying items to resell.5Arkansas Code of Rules. 26 CAR § 30-1117
Transactions the Certificate Covers
The certificate applies to specific transactions, not to a buyer’s every purchase. If a business buys goods tax-free for resale and then uses those items itself, that is a withdrawal from stock. The business owes the tax at the time of use and must report and pay it to the state.6Arkansas Code. AR Code § 26-52-517
Manufacturers can also access a 0% state tax rate on natural gas and electricity used directly in the manufacturing process. Certain constitutional and local taxes may still apply. When one meter serves both manufacturing and non-manufacturing activities, the business must use a reasonable method to separate and document the exempt usage.7Arkansas Code. AR Code § 26-52-3198Arkansas Code of Rules. 006-05-07-Ark-Code-R-§-005
How to Complete and Submit the Certificate
The buyer gives the seller a completed form showing the business details and the reason for the exemption. The seller must obtain that information at the time of purchase or within 90 days of the sale. The two forms commonly used are the Arkansas Exemption Certificate (Form ST 391) and the Multistate Certificate of Exemption.1Arkansas Code of Rules. 26 CAR § 30-1210
Both buyer and seller must keep the records for six years so they are available if the Department of Finance and Administration audits the transaction.9Arkansas Code of Rules. 26 CAR § 9-1106Arkansas Code. AR Code § 26-52-517
What Happens If the Certificate Is Misused
A buyer who claims an exemption they don’t qualify for owes the unpaid tax, interest, and any applicable penalties. The DFA can examine business records and assess these amounts retroactively if an audit finds errors.1Arkansas Code of Rules. 26 CAR § 30-121010Arkansas Code. AR Code § 26-18-506
A resale permit is also at risk. If a permit holder repeatedly fails to tell sellers when a purchase is not for resale, the state may cancel the retail permit.2Arkansas Code of Rules. 26 CAR § 30-1134