Tax Cap and Tax Rate
Current Tax Rate
As of July 1, 2013 the local tax rate is 9.75%. This is comprised of 6.5% State tax, 2% City of Fayetteville tax, and 1.25% Washington County tax.
Sales Tax Changes: D F & A Document - 2008 Tax Changes
Effective January 1, 2008, the State of Arkansas changed the way that sales tax is
calculated and paid for invoices exceeding $2,500.00. The State of Arkansas is now
a participant in the Streamlined Sales Tax (SST) which is designed to facilitate the
collection of sales tax on internet and catalog sales on a national basis. SST does
not allow the use of Arkansas’ local tax caps.
For all invoices exceeding $2,500.00 with an invoice date of January 1, 2008 or greater, the vendor will charge the actual sales tax for the location, without taking into consideration any local tax cap. The State of Arkansas is allowing for reimbursement of the excess sales tax that is paid on an invoice if we provide the appropriate information to the State within 6 months of the purchase.
The BASIS team modified the Accounts Payable functions to provide the following:
- Vendor provides invoice that now includes state and local sales tax without capping the local taxes.
- Accounts Payable pays invoice, but when logged in ILOG the BASIS system defines how much of the vendor’s sales tax is the ‘correct /capped’ amount and how much is the ‘excess’ amount. (Both of these amounts are displayed on ILOG)
- The vendor receives payment for the entire invoice, BUT the departmental cost center(s) that paid for the goods is only expensed for the amount of the goods with the ‘correct/capped’ sales tax amount. A centrally funded cost center is used to expense the ‘excess’ sales tax.
- Financial Affairs will request a reimbursement from the State of Arkansas for the ‘excess’ sales tax that was paid.
Bottom Line: Departments will only have the capped amount expensed against their cost centers.