Arkansas Sales Tax Penalties & Interest Checklist
Sales tax penalties and interest are additional charges the Arkansas Department of Finance and
Administration adds to an unpaid or late sales tax liability. Understanding how these charges work matters because ignoring them causes the total amount owed to grow significantly over time.
What This Issue Means
A penalty is a punishment charge imposed for specific violations, such as filing late or underpaying. Interest is a time-based charge that accumulates daily on any unpaid tax balance, increasing the total debt substantially.
Why the State Issued This or Requires This
Arkansas applies penalties and interest to enforce tax law compliance and recover the cost of sales tax collection efforts. The state uses these charges when a business fails to file a return on time, pays less than the required amount, or does not remit payment by the deadline.
Penalties for sales tax violations include a failure-to-file penalty of 5% per month, a failure-to-pay penalty of 5% per month, a negligence penalty of 10%, and a fraud penalty of
50%. Interest on all unpaid tax amounts accrues as a matter of routine administrative process, beginning from the original due date.
What Happens If This Is Ignored
When Arkansas sales tax penalties and interest remain unpaid, the total amount owed continues to grow. The state may send additional notices, place the account into collection, or pursue enforcement action such as liens, levies, or wage garnishment.
What This Does NOT Mean
Receiving penalties or interest does not mean criminal charges are being filed. Your Arkansas seller’s permit will not automatically be revoked or suspended, though other compliance failures could trigger that action.
Checklist: What to Do After Receiving This or Identifying
This Issue
Follow these steps to understand your situation and respond to the state’s charges
Step 1: Locate and review the official notice
Gather the notice or statement from the Arkansas Department of Finance and Administration.
Write down the notice date, case or account number, tax period covered, base tax amount, penalty amount, interest amount, and any deadline listed.
Step 2: Verify the tax period and calculation
Cross-check the reported sales, taxable sales, and tax collected against what the state shows.
Calculate what you believe you owe independently and note any discrepancies between your records and the notice for each tax return period.
- Failure to pay penalty: 5% per month, capped at 35%
- Failure to pay penalty: 5% per month, capped at 35%
- Negligence penalty: 10% of the deficiency
- Fraud penalty: 50% of the deficiency
Step 3: Determine the penalty type
Identify which penalty was assessed from these Arkansas sales tax penalties:
The notice typically states which violation triggered the charge. Both failure to file penalty and failure to pay penalty are capped at 35% of the tax due, and the state assesses only one penalty type when multiple violations occur. A failure to file penalty applies when your Arkansas sales tax return was not submitted by the required deadline.
Step 4: Calculate the interest
Interest in Arkansas is calculated from the original due date to the payment date at a rate of
10% per annum. Verify the interest calculation yourself using the notice information, and confirm the Arkansas sales tax rate applied matches the statutory requirement for sales tax collection.
Step 5: Check for penalty abatement eligibility
Arkansas Code section 26-18-804 provides for penalty abatement only when the penalty is attributable to erroneous written advice from an Arkansas Department of Finance and
Administration agent that the taxpayer reasonably relied upon.
Sales tax regulations state that no penalty will be assessed if the failure to file or pay is due to reasonable cause and not willful neglect under tax law, but this prevents penalty assessment initially rather than providing post-assessment abatement.
Step 6: Determine your payment status
Confirm whether you have paid the base tax amount, penalties, interest, or any combination representing your tax liabilities. Review payment records and correspondence with the state to identify which portions were paid and which remain outstanding on your sales tax returns.
Step 7: Review the notice deadline
Taxpayers have 60 days from receipt of a notice of proposed assessment to file a written protest. After that period, if no protest is filed, a notice of final assessment is issued, and taxpayers then have 30 days to either pay and file suit or post a bond and file suit.
Step 8: Gather supporting documentation
Collect sales records, payment records, cancelled checks, deposit records, and any prior correspondence with the state. Organize documents in chronological order and have these ready if you dispute the assessment or request relief related to your tax return filings.
Step 9: Contact the Arkansas Department of Finance and Administration
Call the Arkansas Department of Finance and Administration to ask questions about the notice and your options. Have your account number and notice information ready, and ask specifically about payment plan options and any deadlines for disputes or appeals regarding your sales tax returns under current tax law provisions.
Step 10: Set up a payment plan (if needed)
If you cannot pay the full amount immediately, ask the Arkansas Department of Finance and
Administration about payment plan options. A payment plan halts sales tax collection activity
while payments are made as agreed, though interest at 10% per annum continues to accrue on unpaid balances.
Step 11: Make payments and keep records
Submit payments to the address on the notice or through any online payment method the state offers. Make payments under the name and account number listed on the notice, and keep payment receipts and confirmation numbers for your records.
Step 12: Monitor for follow-up correspondence
After submitting a request, payment, or payment plan agreement, watch for state responses.
File any follow-up notices, confirmations, or correspondence with your original notice and respond to any additional requests from the state promptly.
- State enforcement actions and notices
- Payroll tax debt review and resolution
- Penalty and interest reduction options
- Payment plans and compliance solutions
- Representation before state tax agencies
Step 13: Keep compliance current
Continue filing all future Arkansas sales tax returns on time and paying tax owed by the deadline. New violations during this period will add additional failure to file penalty charges and may complicate resolution of the existing issue.
What Happens After This Is Completed
Once you submit a payment, a payment plan, or a penalty abatement request, the state typically processes it and sends an acknowledgment. Interest at 10% per annum continues to accrue on unpaid balances until full payment, even during payment plan arrangements.
Moving Forward
Sales tax penalties and interest are serious financial obligations, but they are also manageable through proper communication with the Arkansas Department of Finance and Administration.
Staying current with future sales tax returns while addressing past penalties prevents the situation from worsening and demonstrates good faith compliance.
Facing State Enforcement or Payroll Tax Issues?
If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.
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