- Tax Exemption Enactment: Arkansas H.B. 1685, effective January 1, 2026, exempts gross receipts from the sale of food and food ingredients from state sales and use taxes, replacing the previous reduced tax rate of 1.375% on groceries.
- Definition Clarifications: The legislation specifies that the definitions of “food” and “food ingredients” do not include prepared food, which remains taxable. Prepared food is defined as items that are not merely cut, repackaged, or pasteurized, and excludes certain raw animal foods and specific categories like candy and soft drinks.
- Compliance Advisory: Businesses involved in the sale or purchase of food and food ingredients in Arkansas should review their invoicing and tax compliance processes to ensure they are prepared for the upcoming state-level exemption.
Source PwC
