Bill would end sales tax on groceries in Arkansas

LITTLE ROCK, Ark. – A bill before the Arkansas legislature would end taxes on food and food ingredients.

House Bill 1661 was submitted Thursday and would strip entire blocks from the Arkansas code, ending taxes on food and food ingredients.

“Food and food ingredients,” by Arkansas law, do not include prepared food items, such as a sandwich or a box of donuts. Alcohol-containing beverages are also not included as food or food items by state statute.

Taxed at lower food and food ingredient rate

• Baby food
• Loaf of bread
• Coffee
• Birthday cake (not iced and decorated)
• Cold cuts
• Frozen pizza
• Soft drinks
• Chicken
• Breakfast bar
• Lettuce
• Pumpkin

Taxed at full sales and use tax rate

• Food sold with eating utensils
• Fresh-baked bread (ie. from a bakery)
• Cup of coffee
• Baked and iced birthday cake
• Deli tray
• Prepared pizza
• Fountain drink
• Rotisserie chicken
• Dietary supplements
• Salad
• Decorated pumpkin

According to Arkansas Department of Finance and Administration spokesperson Scott Hardin, the Arkansas tax rate on food has been reduced over the years.

Hardin said that Arkansas’s tax rate on food and food ingredients is currently 0.125%, first set in 2013. Previously, the legislature lowered the food tax rate to 1.5% in 2011.

In 2009 the tax was reduced to 2% by the legislature.

Hardin said that currently, all collections go to the state’s Conservation Fund, which divides it between Arkansas Game & Fish, Parks & Tourism, Department of Heritage and Keep Arkansas Beautiful.

In its February revenue report, the DFA showed Arkansas tax revenues for the eight-month fiscal year are $250.2 million, or 5.6%, above what was forecast. 

The 0.125% state sales tax on food generated $8.4 million for Arkansas in fiscal year 2022, which ran from July 1, 2021, to June 30, 2022. 

The bill is sponsored by Rep. Kendon Underwood (R-Cave Springs).