At the Arkansas Baptist Foundation, we have the opportunity to answer lots of questions from churches about various administrative issues. One question we get quite often is whether or not a church has to pay sales tax.
Churches in Arkansas are generally not exempt from paying sales tax on purchases they make for their operations. According to the Arkansas Department of Finance and Administration, churches are subject to sales tax on almost all purchases, including those of tangible personal property, such as office supplies, furniture, and equipment.
However, certain purchases, such as utilities and food items, may be exempt from sales tax. These exclusions will typically only be allowed in specific areas of ministry, such as a food pantry or family/orphan care. A list of exclusions allowed by the Arkansas Department of Finance and Administration can be found on their website at: https://www.dfa.arkansas.gov/images/uploads/exciseTaxOffice/SalesTaxExemptionsFY2011.pdf
The decision to require churches to pay sales tax in Arkansas has been a controversial one. Some argue churches provide valuable services to their communities and should be exempt from sales tax to help support their charitable activities. Others argue exempting churches from sales tax would be unfair to other charities that are required to pay sales tax.
Despite the opinions surrounding the issue, churches in Arkansas must comply with the state’s sales tax laws. Failure to do so can result in penalties and fines. Therefore, it is important for churches to understand their sales tax obligations and to ensure they are paying sales tax on eligible purchases. By doing so, churches can help support their communities while also complying with state law.
If you or your church have questions, the Arkansas Baptist Foundation is happy to be a resource. Please do not hesitate to reach out to us anytime.
I was hoping use tax would be mentioned in this article. Attending and leading classes at various training opportunities provided by ABSC and the Association of Arkansas Baptist Secretaries, I have been surprised at the number of churches that do not know about reporting purchases that did not have tax applied to the total to the State each month through the Sales and Use Tax return . There have been changes in some regulations and there is not nearly as many vendors who are not applying sales tax to the total invoice but there are still a number of purchases that require paying sales/use tax.