Arkansas Sales Tax Nonpayment Risk Checklist

Arkansas Sales Tax Nonpayment Risk Checklist

Sales tax nonpayment in Arkansas occurs when a business collects sales tax from customers but fails to remit the collected amount to the state. This is a serious compliance issue because the money collected belongs to the state, not the business.

Many small business owners do not realize that unpaid sales tax can trigger penalties, interest, and enforcement action relatively quickly. Understanding what nonpayment means and how

Arkansas responds helps you recognize the problem early and take appropriate steps.

Sales tax nonpayment differs from not filing a return—it specifically means that a return was filed, but the payment was not sent, or a payment was incomplete. The state tracks both filing and payment separately, so missing one creates a distinct compliance problem.

What This Issue Means

Your business received sales tax money from customers but did not remit the full amount owed to Arkansas within the required timeframe. This can happen when you filed a return showing tax owed but sent no payment, sent a partial payment, or sent a payment that arrived after the deadline.

Arkansas views this as a debt owed by your business to the state. The debt includes the unpaid tax amount plus penalties and interest that accrue over time.

Why the State Issued This or Requires This

Arkansas requires businesses to pay sales tax by specific deadlines because the state depends on this revenue for operations. When a return is filed, the state’s system tracks whether payment arrived by the due date, and the collections division is notified if no payment is received.

Common triggers for Arkansas sales tax nonpayment notices include missed payment deadlines, payments sent to the wrong address, or cash flow problems that caused the business to prioritize other expenses. The state operates based on what was actually received in the department’s account and does not automatically assume a payment failed due to mail delays or bank errors.

What Happens If This Is Ignored

Arkansas typically sends follow-up notices requesting payment if sales tax nonpayment is ignored. If payment is still not made, the state can file a tax lien against your business or personal assets, depending on the circumstances.

A lien is a legal claim that gives the state the right to your property if the debt is not paid. The state may also take collection action, such as wage garnishment or bank levy, which means taking money directly from your business bank account or wages to cover the debt.

Penalties and interest continue to accrue, making the total amount owed larger. Under Arkansas

Code Section 26-18-201, any taxpayer who willfully attempts to evade or defeat the payment of any state tax is guilty of a Class C felony.

Arkansas sales tax permit suspension can occur when the Arkansas Department of Finance and Administration determines that a business has failed to comply with reporting and payment requirements within the last three years. Arkansas Code Section 26-18-601 authorizes permit cancellation actions and establishes specific procedures with notice requirements and hearing rights.

What This Does NOT Mean

Receiving a nonpayment notice does not mean your business license will be immediately suspended or that you are being criminally prosecuted. It does not mean the state has seized your assets or that you have no options.

Checklist: What to Do After Receiving a Nonpayment

Notice or Identifying Unpaid Sales Tax

1. Locate the original notice or documentation from the state regarding unpaid sales tax by checking your business mail and electronic communications.

2. Gather your business records by collecting bank statements, cancelled checks, and payment records from the period in question.

3. Verify the amount claimed by reviewing the notice to identify the exact tax amount, penalties, and interest listed on the assessment.

4. Contact the department by calling the Sales and Use Tax Section at 501-682-7104 or

501-682-7105 to request an account summary, or call the Collections Office at

501-682-5000 for collection matters.

5. Ask about payment options when you contact the department and inquire whether they offer installment agreements or payment plans for the amount owed.

6. Respond to the notice in writing if the document requires a response, and prepare your written statement before the deadline specified in the notice.

7. Arrange payment or a payment plan by following the department's instructions for submitting funds if you intend to pay the full amount immediately.

8. Keep copies of all correspondence by filing every notice you send, payment confirmation you make, and response you receive from the department.

9. Follow through on any agreed payment plan by making payments on time and in the amount specified if a payment plan is approved.

10. Monitor your account by periodically contacting the department to confirm that the balance is being reduced and that the account status is accurate.

What Happens After This Is Completed

The state updates your account file after you make contact with the department and either pay the amount owed or establish a payment plan. Processing time for payment applications can take several business days to appear in the state’s system.

Payment plans require written agreements outlining the payment schedule and amount. Interest continues to accrue at ten percent per annum on unpaid tax debt even during payment plans, as specified in Arkansas Code Section 26-18-508.

Common Mistakes to Avoid

• Missing response deadlines can result in the state proceeding with collection action

without further notice.

• Failing to respond to follow-up notices escalates the matter and demonstrates

noncompliance.

• Sending payment to the wrong address delays processing and can appear as

nonpayment in state records.

• Providing incomplete information when contacting the department causes delays in

locating your account and resolving issues.

• Assuming a payment arrived without confirmation creates problems because mailed

checks can be delayed or lost.

• Ignoring penalty and interest charges increases the total debt because these charges

must be included in any payment or payment plan.

Frequently Asked Questions

Can the state suspend my business license for unpaid sales tax?

Arkansas Code Section 26-18-601 authorizes the Secretary to cancel or refuse to issue, extend, or reinstate a sales tax permit for failure to comply with reporting and payment requirements within the last three years. The process requires written notice, and the taxpayer has twenty days after receipt to request a hearing.

Can I be held personally liable for unpaid business sales tax?

Arkansas corporate officer sales tax liability applies under specific statutory provisions in