Is Shipping Taxable in Arkansas? Arkansas Sales Tax Rules for Shipping, Freight, and Delivery Charges
In Arkansas, shipping, freight, and transportation charges are generally included in the taxable gross receipts when the products being shipped are subject to Arkansas sales and use tax. However, freight charges billed directly to the purchaser by a common carrier are not taxable. Shipping charges for non-taxable goods are also not subject to Arkansas sales and use tax.
On this page
For e-commerce sellers, remote sellers, marketplace sellers, and businesses shipping products into Arkansas, one common sales tax question is whether shipping, freight, and delivery charges are taxable.
In Arkansas, shipping charges are generally taxable when the products being shipped are subject to Arkansas sales and use tax. According to the Arkansas Department of Finance and Administration, all freight, shipping, or transportation charges are considered part of the gross receipts or invoice total on which sales and use tax must be collected and remitted by the seller if the shipped products are taxable.
This means that when a seller charges shipping on the invoice for taxable goods, Arkansas sales tax generally applies to both the product price and the shipping charge.
Arkansas Sales Tax Rule for Shipping and Freight Charges
Arkansas treats freight, shipping, and transportation charges as part of the taxable sales price when they are connected to the sale of taxable products.
These charges may appear on an invoice as:
shipping freight delivery transportation shipping and handling
The label used on the invoice does not necessarily change the tax treatment. If the charge is billed by the seller and relates to taxable goods, it is generally included in the taxable gross receipts for Arkansas sales and use tax purposes.
When Are Shipping Charges Not Taxable in Arkansas?
Although Arkansas generally taxes seller-billed shipping charges for taxable goods, there are two important exceptions.
1. Freight Billed Directly by a Common Carrier
If freight charges are billed directly to the purchaser by a common carrier, the freight charge is not subject to Arkansas sales and use tax.
For example, if a customer pays FedEx, UPS, or another common carrier directly for delivery, and the seller does not include the shipping charge on the sales invoice, that freight charge is generally not part of the seller’s taxable gross receipts.
2. Shipping Charges for Non-Taxable Goods
If the products being shipped are non-taxable, then the freight charges for shipping those non-taxable goods are also not subject to Arkansas sales and use tax.
In practice, the taxability of shipping follows the taxability of the underlying product. Taxable products generally make seller-billed shipping taxable. Non-taxable products generally make related shipping charges non-taxable.
Arkansas Shipping Tax Examples
Example 1: Taxable Goods with Seller-Billed Shipping
A seller ships taxable merchandise to a customer in Arkansas. The product price is $100, and the seller charges $10 for shipping on the same invoice.
Because the product is taxable, the $10 shipping charge is also taxable. Arkansas sales tax should be calculated on the full $110 invoice total.
Example 2: Taxable Goods with Carrier-Billed Shipping
A seller sells taxable goods to an Arkansas customer, but the purchaser pays the common carrier directly for freight.
In this case, the freight charge is not billed by the seller and is not part of the seller’s invoice total. Under Arkansas guidance, freight billed directly to the purchaser by a common carrier is not subject to Arkansas sales and use tax.
Example 3: Non-Taxable Goods with Shipping
A seller ships goods that are not taxable under Arkansas sales tax law.
Because the underlying products are non-taxable, the related freight or shipping charges are also not subject to Arkansas sales and use tax.
Compliance Takeaways for E-Commerce Sellers
Businesses selling into Arkansas should not automatically treat shipping charges as non-taxable. Arkansas generally requires sellers to collect sales tax on shipping, freight, and transportation charges when the related products are taxable.
Sellers should carefully review:
checkout tax settings invoice treatment of shipping and freight charges ERP or tax engine taxability rules marketplace versus direct website sales mixed taxable and non-taxable product orders freight billed by seller versus freight billed directly by carrier
Incorrectly configuring Arkansas shipping tax rules may result in undercollection of sales tax, filing errors, penalties, or interest during a sales tax audit.
Conclusion
Shipping is generally taxable in Arkansas when the products being shipped are taxable. Freight, shipping, and transportation charges billed by the seller are included in the gross receipts or invoice total subject to Arkansas sales and use tax. However, freight billed directly to the purchaser by a common carrier is not taxable, and shipping charges for non-taxable goods are also not subject to sales tax.
For online sellers and remote sellers, correctly configuring Arkansas shipping sales tax rules is an important part of sales tax compliance.
Source
Arkansas Department of Finance and Administration, Sales and Use Tax FAQs, Gross Receipts Rule GR-18A https://www.dfa.arkansas.gov/office/taxes/excise-tax-administration/sales-use-tax/sales-and-use-tax-faqs/