Arkansas Grocery Tax Repeal 2026: Act 1008 Exempts Food From State Tax but Prepared Food, Local Tax and the Amendment 75 Tax Stay
Arkansas Grocery Tax Repeal 2026: Act 1008 Exempts Food From State Tax but Prepared Food, Local Tax and the Amendment 75 Tax Stay
If you are researching the Arkansas grocery tax, here is the short answer. Starting January 1, 2026, Act 1008 of 2025 (HB 1685, the Grocery Tax Relief Act, approved April 22, 2025) exempts food and food ingredients from the state sales and use tax. Before 2026, the state rate on food was 0.125%. The change is an exemption for unprepared food at the state level, not an end to every tax on groceries. Prepared food stays at the full 6.5% state rate, and city and county sales and use taxes plus the Amendment 75 compensating use tax still apply to food. This guide explains what changed, what did not, and what to check on your receipts, your tax tables and your registrations.
Disclaimer: This is informational content about Arkansas sales tax and business formation. It is not legal or tax advice. Your tax treatment depends on your specific products, how you sell them and where you sell them. Confirm questions with the Arkansas Department of Finance and Administration (DFA), and consult a qualified CPA or attorney for complex situations.
What Act 1008 Changed
Act 1008 removes food and food ingredients from the state sales and use tax on and after January 1, 2026. That change applies to the state rate only. Arkansas has 75 counties and 500 municipalities, and cities and counties set their own sales and use taxes. Those local taxes still apply to food, so a shopper in one city can pay a different total than a shopper buying the same basket across the county line.
The table below shows how the state rate works after the change.
| Type of food | Arkansas state sales tax rate from January 1, 2026 | What still applies |
|---|---|---|
| Food and food ingredients, unprepared | Exempt (was 0.125% before 2026) | City and county sales and use taxes, and the Amendment 75 compensating use tax |
| Prepared food | 6.5% | City and county sales and use taxes, and the Amendment 75 compensating use tax |
The state exemption is a rate change for a defined category of food. It does not change the rules for other taxable goods, and it does not change local rates.
Prepared Food Stays at 6.5%
The exemption covers food as food. It does not cover prepared food. DFA Rule 2007-3 treats the following as prepared food, which remains taxable at the full 6.5% state rate:
- Food heated by the seller. A hot case item, rotisserie chicken or soup warmed on site is prepared food.
- Items of two or more ingredients mixed or combined by the seller as one item. The rule's examples include salads, birthday cakes and candy the seller makes.
- Food sold with utensils the seller provides. A dispensed coffee cup counts, so a coffee shop drink or a cup of soup handed over with a spoon falls into this category.
One item can meet more than one of these tests. If the seller heats it, mixes it or hands it over with utensils, expect the 6.5% state rate. Check the rule's wording before you assign a product to the exempt category, because a product that looks like a grocery item can still be prepared food at your counter.
Edge Cases: Packaged Bread and Whole-Bean Coffee
Some products fall between the categories. Packaged bread and whole-bean coffee sold without any seller heating, mixing or utensils appear to fit the plain wording of the exemption. However, DFA has not issued an item-by-item ruling on these products. If you cannot tell how a specific product should be taxed, send the question to the DFA Excise Tax Administration in writing and keep the answer with your sales records. Do not assume that a product is exempt just because a competitor treats it that way.
Local and Amendment 75 Taxes Still Apply
The state exemption does not remove the city or county sales tax from groceries. Local rates vary by city and county, so the total you pay depends on where the store is located. Before you set up a tax table, confirm the current local rate with the city or county, or with DFA. The Amendment 75 compensating use tax also still applies to food, and it does not go away because the state rate on unprepared food is now exempt.
Watch for Outdated Tax Sheets
Some tax sheets and point-of-sale tables still show a 0.125% state rate on food. That figure is the pre-2026 rate. If a sheet shows 0.125% state tax on food for sales made in 2026, it is out of date. Replace that line with the exempt treatment for unprepared food and 6.5% for prepared food, and keep the local rates from the city or county. A tax table that is one year behind will overcharge or undercharge customers on every basket.
What Grocers and Food Sellers Should Do
If you sell food in Arkansas, these steps cover the tax side of the change. Confirm each item with DFA or a CPA before you rely on it.
- Confirm your sales and use tax permit. A business that sells tangible personal property or taxable services needs a sales and use tax permit from DFA. The permit costs $50 and is applied for through the Arkansas Taxpayer Access Point (ATAP). ATAP also handles withholding registration. Apply at the DFA sales and use tax registration page.
- Split your product codes by preparation. Assign unprepared food to the exempt state treatment and prepared items to 6.5%. Sort each item by how it reaches the customer, not by the department where it sits in the store.
- Update local rates separately. Keep city and county rates active for food, and confirm each amount with the jurisdiction where the store is located.
- Document edge cases. For each unclear product, write down the item, how it is prepared or packaged, how it is sold and the answer you received from DFA.
- Review your tax tables after each change. Any table that still shows 0.125% state tax on food for 2026 sales needs correction.
Other Licenses and Filings to Check
Act 1008 does not change your other registration obligations. Arkansas has no general state business license and no county business license, and the Secretary of State does not issue business licenses. Requirements come from several sources, so check each one that applies to your business:
- City business license. Cities set their own rules and bases. Little Rock and North Little Rock charge based on a base amount plus the number of employees. Bentonville runs a free registry, and Conway does not require one. Confirm the current requirements with your city.
- Food establishment license. The Department of Health licenses food establishments. Confirm the license type, fee and inspection requirements with the Department of Health before you open or change your food operation.
- Entity filings. If you operate as a limited liability company, the Certificate of Organization (Form LL-01) is filed with the Secretary of State at a $45 filing fee online ($50 on paper). The Annual LLC Franchise Tax Report carries a $150 fee and is due May 1 each year. A late filing adds a $25 penalty plus interest. Every registered entity must also keep a registered agent with a street address in Arkansas, because a P.O. Box is not an acceptable address.
- Alcohol. Selling alcohol requires a license from the Alcoholic Beverage Control Division. That license is separate from the sales tax treatment of food, so the grocery exemption does not change your alcohol licensing obligations.
Questions to Settle With DFA or a CPA
These are the questions that matter most for food sellers after the change. Bring them to DFA or to a CPA who works with Arkansas retailers.
- Does a specific product count as prepared food under DFA Rule 2007-3, given how I heat, mix or serve it?
- Is a packaged or whole-bean product that I sell without preparation exempt, or does it need a ruling?
- Which city and county rates apply at my store address, and how often do those rates change?
- How does the Amendment 75 compensating use tax apply to my purchases and sales?
Official Resources
- Arkansas Department of Finance and Administration: https://www.dfa.arkansas.gov/
- Sales and use tax account registration: https://www.dfa.arkansas.gov/office/taxes/excise-tax-administration/sales-use-tax/register-for-a-tax-account/
- Arkansas Secretary of State, Business and Commercial Services Division: https://www.sos.arkansas.gov/business-commercial-services-bcs/
- Arkansas Small Business and Technology Development Center: https://asbtdc.org/
- SBA resources for Arkansas: https://www.sba.gov/district/arkansas
Arkansas tax rules change, and rates and rulings can be updated after this guide is published. Use the agency pages above to confirm the current figures before you file, set a rate or make a business decision. For a complex product mix, a multi-location operation or a dispute with the state, speak with a qualified CPA or attorney.