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Arkansas General Assembly· SB 377Died in Senate Committee at Sine Die adjournment.

An act TO CREATE THE GROCERY TAX RELIEF ACT, the official text

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Stricken language would be deleted from and underlined language would be added to present law.

1 State of Arkansas             A Bill
2 95th General Assembly

3 Regular Session, 2025                                            SENATE BILL 377

4

5 By: Senator Hester

6 By: Representative Underwood

7

8                               For An Act To Be Entitled

9         AN ACT TO CREATE THE GROCERY TAX RELIEF ACT; TO AMEND

10        THE LAW CONCERNING THE SALES AND USE TAXES LEVIED ON

11        FOOD AND FOOD INGREDIENTS, AS AFFIRMED BY REFERRED

12        ACT 19 OF 1958; TO EXEMPT FOOD AND FOOD INGREDIENTS

13        FROM STATE SALES AND USE TAXES; TO MAKE CONFORMING

14        CHANGES TO ARKANSAS TAX LAW; AND FOR OTHER PURPOSES.

15

16

17                                       Subtitle

18                       TO CREATE THE GROCERY TAX RELIEF ACT; TO

19                       AMEND THE LAW CONCERNING THE SALES AND

20                       USE TAXES LEVIED ON FOOD AND FOOD

21                       INGREDIENTS, AS AFFIRMED BY REFERRED ACT

22                       19 OF 1958; AND TO EXEMPT GROCERIES FROM

23                       STATE SALES AND USE TAXES.

24

25 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:

26

27        SECTION 1. DO NOT CODIFY. Title.

28        This act shall be known and may be cited as the "Grocery Tax Relief

29 Act".

30

31        SECTION 2. DO NOT CODIFY. Legislative intent.

32        The General Assembly intends:

33        (1) To exempt the gross receipts or gross proceeds derived from

34 the sale of food and food ingredients from state taxes; and

35        (2) For the gross receipts and gross proceeds derived from the

36 sale of food and food ingredients to continue to be subject to taxes levied

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1 by municipalities and counties under the Arkansas Gross Receipts Act of 1941,

2 � 26-52-101 et seq., and the Arkansas Compensating Tax Act of 1949, � 26-53-

3 101 et seq.

4

5   SECTION 3. Arkansas Code � 19-5-1103(b), concerning the Property Tax

6 Relief Trust Fund, is amended to read as follows:

7   (b) The fund shall consist of such revenues as generated by �� 26-52-

8 302(c), 26-52-317(c)(1)(B), 26-52-319(a)(2)(B), 26-53-107(c), 26-53-

9 145(c)(1)(B), 26-53-148(a)(2)(B), and 26-56-224(c)(2) and shall be used for

10 such purposes as set out in � 26-26-310.

11

12  SECTION 4. Arkansas Code � 19-5-1227(b)(3), concerning the Educational

13 Adequacy Fund, is amended to read as follows:

14                (3) The revenues generated by � 26-52-302(d), � 26-52-316,

15 � 26-52-317(c)(1)(C), � 26-52-319(a)(2)(C), � 26-53-107(d), � 26-53-

16 145(c)(1)(C), � 26-53-148(a)(2)(C), � 26-56-224(c)(3), and � 26-57-

17 1002(d)(1)(A)(ii); and

18

19  SECTION 5. Arkansas Code � 19-6-201(58), concerning the enumeration of

20 general revenues, is repealed.

21             (58) Seventy-six and six-tenths percent (76.6%) of all taxes,

22 interest, penalties, and costs on taxes levied on the gross receipts or gross

23 proceeds derived from the sale of food and food ingredients, � 26-52-

24 317(c)(1)(A);

25

26  SECTION 6. Arkansas Code � 19-6-201(60), concerning the enumeration of

27 general revenues, is repealed.

28             (60) Seventy-six and six-tenths percent (76.6%) of the taxes,

29 interest, penalties, and costs received on taxes levied on the privilege of

30 storing, using, distributing, or using food and food ingredients, � 26-53-

31 145(c)(1)(A);

32

33  SECTION 7. The introductory language of Arkansas Code � 26-52-301,

34 concerning the sales tax levied on the sale of certain products and services,

35 is amended to read as follows:

36  Except for food and food ingredients that are taxed under � 26-52-317

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1 and except for used motor vehicles, trailers, and semitrailers that are taxed

2 under � 26-52-324, there is levied an excise tax of three percent (3%) upon

3 the gross proceeds or gross receipts derived from all sales to any person of

4 the following:

5

6   SECTION 8. Arkansas Code � 26-52-302 is amended to read as follows:

7   26-52-302. Additional taxes levied.

8   (a)(1) In addition to the excise tax levied upon the gross proceeds or

9 gross receipts derived from all sales by this chapter, except for food and

10 food ingredients that are taxed under � 26-52-317 and except for used motor

11 vehicles, trailers, and semitrailers that are taxed under � 26-52-324, there

12 is levied an excise tax of one percent (1%) upon all taxable sales of

13 property, specified digital products, digital codes, and services subject to

14 the tax levied in this chapter.

15  (2) This tax shall be collected, reported, and paid in the same

16 manner and at the same time as is prescribed by law for the collection,

17 reporting, and payment of all other Arkansas gross receipts taxes.

18  (3) In computing gross receipts or gross proceeds as defined in

19 � 26-52-103, a deduction shall be allowed for bad debts resulting from the

20 sale of tangible personal property.

21  (b)(1) In addition to the excise tax levied upon the gross proceeds or

22 gross receipts derived from all sales by this chapter, except for food and

23 food ingredients that are taxed under � 26-52-317 and except for used motor

24 vehicles, trailers, and semitrailers that are taxed under � 26-52-324, there

25 is hereby levied an excise tax of one-half of one percent (0.5%) upon all

26 taxable sales of property, specified digital products, digital codes, and

27 services subject to the tax levied in this chapter.

28  (2) This tax shall be collected, reported, and paid in the same

29 manner and at the same time as is prescribed by law for the collection,

30 reporting, and payment of all other Arkansas gross receipts taxes.

31  (3) However, in computing gross receipts or gross proceeds as

32 defined in � 26-52-103, a deduction shall be allowed for bad debts resulting

33 from the sale of tangible personal property.

34  (c)(1) Except for food and food ingredients that are taxed under � 26-

35 52-317 and except for used motor vehicles, trailers, and semitrailers that

36 are taxed under � 26-52-324, there is levied an additional excise tax of one-

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1 half of one percent (0.5%) upon all taxable sales of property, specified

2 digital products, digital codes, and services subject to the tax levied by

3 this chapter.

4   (2) The tax shall be collected, reported, and paid in the same

5 manner and at the same time as is prescribed by this chapter, for the

6 collection, reporting, and payment of Arkansas gross receipts taxes.

7   (d)(1) Except for food and food ingredients that are taxed under � 26-

8 52-317 and except for used motor vehicles, trailers, and semitrailers that

9 are taxed under � 26-52-324, there is levied an additional excise tax of

10 seven-eighths of one percent (0.875%) upon all taxable sales of property,

11 specified digital products, digital codes, and services subject to the tax

12 levied by this chapter.

13  (2) The tax shall be collected, reported, and paid in the same

14 manner and at the same time as prescribed by this chapter, for the

15 collection, reporting, and payment of Arkansas gross receipts taxes.

16

17  SECTION 9. Arkansas Code � 26-52-317 is amended to read as follows:

18  26-52-317. Food and food ingredients.

19  (a)(1) The Secretary of the Department of Finance and Administration

20 shall determine the following conditions:

21               (A) That federal law authorizes the state to collect sales

22 and use tax from some or all of the sellers that have no physical presence in

23 the State of Arkansas and that make sales of taxable goods and services to

24 Arkansas purchasers;

25               (B) That initiating the collection of sales and use tax

26 from these sellers would increase the net available general revenues needed

27 to fund state agencies, services, and programs; and

28               (C)(i) That during a six-month consecutive period, the

29 amount of net available general revenues attributable to the collection of

30 sales and use tax from sellers that have no physical presence in the State of

31 Arkansas is equal to or greater than one hundred fifty percent (150%) of

32 sales and use tax collected under subsection (c) of this section and � 26-53-

33 145 on food and food ingredients.

34                          (ii) The secretary shall make the determination

35 under subdivision (a)(1)(C)(i) of this section on a monthly basis following

36 the determination that the conditions under subdivision (a)(1)(A) of this

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1 section have been met.

2               (2)(A) The secretary shall make a monthly determination as to

3 whether the aggregate amount of deductions from net general revenues

4 attributable to the following during the most recently ended six-month

5 consecutive period, as compared with the same six-month period in the prior

6 year, has declined by thirty-five million dollars ($35,000,000) or more:

7                         (i) The Educational Adequacy Fund;

8                         (ii) Bonds issued under the Arkansas College Savings

9 Bond Act of 1989, � 6-62-701 et seq.;

10                        (iii) Bonds issued under the Arkansas Higher

11 Education Technology and Facility Improvement Act of 2005, � 6-62-1101 et

12 seq.;

13                        (iv) The City-County Tourist Facilities Aid Fund;

14 and

15                        (v) Bonds issued under the Arkansas Water, Waste

16 Disposal and Pollution Abatement Facilities Financing Act of 1997 and the

17 Arkansas Water, Waste Disposal, and Pollution Abatement Facilities Financing

18 Act of 2007, � 15-20-1301 et seq.

19              (B)(i) In making the determination in this subdivision

20 (a)(2), the secretary shall consider all economic factors existing at the

21 time of the determination that could potentially affect the decline in the

22 aggregate amount of deductions, including without limitation pending

23 litigation.

24                        (ii) If the consideration of additional economic

25 factors under subdivision (a)(2)(B)(i) of this section results in a

26 determination that the decline in the aggregate amount of deductions is not

27 likely to remain at that reduced level, the secretary shall conclude that the

28 conditions in this subdivision (a)(2) have not been met.

29              (3) When the secretary finds that all of the conditions in

30 either subdivision (a)(1) or subdivision (a)(2) of this section have been

31 met, then the gross receipts or gross proceeds taxes levied under subsection

32 (c) of this section shall be levied at the rate of zero percent (0%) on the

33 sale of food and food ingredients beginning on the first day of the calendar

34 quarter that is at least thirty (30) days following the determination of the

35 secretary.

36        (b) As used in this section:

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1             (1) "Food" and "food ingredients" mean the same as defined in �

2 26-52-103 except that "food" and "food ingredients" do not include prepared

3 food; and

4             (2) "Prepared food" means the same as defined in � 26-52-103

5 except that "prepared food" does not include:

6                 (A) Food that is only cut, repackaged, or pasteurized by

7 the seller; or

8                 (B) Eggs, fish, meat, and poultry, and foods containing

9 these raw animal foods requiring cooking by the consumer to prevent food-

10 borne illnesses as recommended by the United States Food and Drug

11 Administration in its 2005 Food Code, � 3-401.11, as it existed on January 1,

12 2007.

13         (c)(1) Beginning July 1, 2011, in lieu of the gross receipts or gross

14 proceeds taxes levied on food and food ingredients under �� 26-52-301 and 26-

15 52-302, there is levied a tax on the gross receipts or gross proceeds derived

16 from the sale of food and food ingredients at the rate of one and three-

17 eighths percent (1.375%), to be distributed as follows:

18                (A) Seventy-six and six-tenths percent (76.6%) of the

19 taxes, interest, penalties, and costs received by the secretary under this

20 subdivision (c)(1) shall be deposited as general revenues;

21                (B) Eight and five-tenths percent (8.5%) of the taxes,

22 interest, penalties, and costs received by the secretary under this

23 subdivision (c)(1) shall be deposited into the Property Tax Relief Trust

24 Fund; and

25                (C) Fourteen and nine-tenths percent (14.9%) of the taxes,

26 interest, penalties, and costs received by the secretary under this

27 subdivision (c)(1) shall be deposited into the Educational Adequacy Fund.

28            (2) The gross receipts or gross proceeds taxes levied under

29 subdivision (c)(1) of this section shall be collected, reported, and paid in

30 the same manner and at the same time as is prescribed by law for the

31 collection, reporting, and payment of all other Arkansas gross receipts

32 taxes.

33         (d)(b) The gross receipts or gross proceeds derived from the sale of

34 food and food ingredients shall continue to be are subject to the:

35            (1) Excise tax levied under Arkansas Constitution, Amendment 75,

36 � 2; and

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1            (2) All municipal and county gross receipts taxes.

2      (e) The Department of Finance and Administration shall promulgate

3 rules to implement the provisions of this section.

4

5      SECTION 10. Arkansas Code � 26-52-323 is amended to read as follows:

6      26-52-323. Application of tax to candy and soft drinks.

7      The Secretary of the Department of Finance and Administration shall

8 either:

9            (1)(A) Publish a list of the Universal Product Codes for items

10 that meet the definition of:

11                    (i) A candy under � 26-52-103 or � 26-53-102; or

12                    (ii) A soft drink under � 26-52-103 or � 26-53-102.

13                    (B) The list published by the secretary under subdivision

14 (1)(A) of this section shall provide guidance to retailers, sellers, and

15 vendors regarding which items are defined as a candy or a soft drink but not

16 defined as food and food ingredients under the Arkansas Gross Receipts Act of

17 1941, � 26-52-101 et seq., or the Arkansas Compensating Tax Act of 1949, �

18 26-53-101 et seq.

19                    (C) The list published by the secretary under subdivision

20 (1)(A) of this section is exempt from the Arkansas Administrative Procedure

21 Act, � 25-15-201 et seq.; or

22           (2) Not subject a retailer, seller, or vendor to the penalties

23 under � 26-18-201, � 26-18-202, � 26-18-208, � 26-18-209, � 26-52-512, or �

24 26-53-125 if the retailer, seller, or vendor:

25                    (A) Collects and remits Does not collect or remit tax

26 payments to the Department of Finance and Administration on the gross

27 receipts and gross proceeds derived from the sale of items that meet the

28 definition of:

29                    (i) A candy under � 26-52-103 or � 26-53-102 at the

30 taxable rate for food and food ingredients under � 26-52-317 or � 26-53-145;

31 or

32                    (ii) A soft drink under � 26-52-103 or � 26-53-102 at

33 the taxable rate for food and food ingredients under � 26-52-317 or � 26-53-

34 145; and

35                    (B) Demonstrates a good faith effort to collect and remit

36 tax payments to the department on the gross receipts and gross proceeds

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1 derived from the sale of items that meet the definition of:

2                  (i) A candy under � 26-52-103 or � 26-53-102 at the

3 taxable rate under � 26-52-301, � 26-52-302, � 26-53-106, or � 26-53-107; or

4                  (ii) A soft drink under � 26-52-103 or � 26-53-102 at

5 the taxable rate under � 26-52-301, � 26-52-302, � 26-53-106, or � 26-53-107.

6

7         SECTION 11. Arkansas Code Title 26, Chapter 52, Subchapter 4, is

8 amended to add an additional section to read as follows:

9         26-52-457. Food and food ingredients.

10        (a) As used in this section:

11            (1) "Food" and "food ingredients" mean the same as defined in �

12 26-52-103 except that "food" and "food ingredients" do not include prepared

13 food; and

14            (2) "Prepared food" means the same as defined in � 26-52-103

15 except that "prepared food" does not include:

16                 (A) Food that is only cut, repackaged, or pasteurized by

17 the seller; or

18                 (B) Eggs, fish, meat, and poultry, and foods containing

19 these raw animal foods requiring cooking by the consumer to prevent food-

20 borne illnesses as recommended by the United States Food and Drug

21 Administration in its 2005 Food Code, � 3-401.11, as it existed on January 1,

22 2007.

23        (b) The gross receipts or gross proceeds derived from the sale of food

24 and food ingredients are exempt from the gross receipts tax levied by this

25 chapter and the compensating use tax levied by the Arkansas Compensating Tax

26 Act of 1949, � 26-53-101 et seq.

27

28        SECTION 12. Arkansas Code � 26-53-106(a), concerning the imposition

29 and rate of the compensating use tax, is amended to read as follows:

30        (a) There is levied and there shall be collected from every person in

31 this state a tax or excise for the privilege of storing, using, distributing,

32 or consuming within this state tangible personal property, specified digital

33 products, a digital code, or a taxable service purchased for storage, use,

34 distribution, or consumption in this state at the rate of three percent (3%)

35 of the sales price of the tangible personal property, specified digital

36 products, digital code, or taxable service except for food and food

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1 ingredients that are taxed under � 26-53-145 and except for used motor

2 vehicles, trailers, and semitrailers that are taxed under � 26-53-150.

3

4   SECTION 13. Arkansas Code � 26-53-107 is amended to read as follows:

5   26-53-107. Additional taxes levied.

6   (a)(1) In addition to the excise tax levied upon the privilege of

7 storing, using, distributing, or consuming tangible personal property,

8 specified digital products, a digital code, and taxable services within this

9 state by this subchapter, there is levied an excise tax of one percent (1%)

10 upon all tangible personal property, specified digital products, digital

11 codes, and taxable services subject to the tax levied in this subchapter

12 except for food and food ingredients that are taxed under � 26-53-145 and

13 except for used motor vehicles, trailers, and semitrailers that are taxed

14 under � 26-53-150.

15  (2) The tax shall be collected, reported, and paid in the same

16 manner and at the same time as is prescribed by law for the collection,

17 reporting, and payment of state compensating taxes.

18  (b)(1) In addition to the excise tax levied upon the privilege of

19 storing, using, distributing, or consuming tangible personal property,

20 specified digital products, a digital code, and taxable services within the

21 state by this subchapter, there is levied an excise tax of one-half of one

22 percent (0.5%) upon all tangible personal property, specified digital

23 products, digital codes, and taxable services subject to the tax levied in

24 this subchapter except for food and food ingredients that are taxed under �

25 26-53-145 and except for used motor vehicles, trailers, and semitrailers that

26 are taxed under � 26-53-150.

27  (2) The tax shall be collected, reported, and paid in the same

28 manner and at the same time as is prescribed by law for the collection,

29 reporting, and payment of Arkansas compensating taxes.

30  (c)(1) There is levied an additional excise tax of one-half of one

31 percent (0.5%) upon all tangible personal property, specified digital

32 products, digital codes, and taxable services subject to the tax levied by

33 this subchapter except for food and food ingredients that are taxed under �

34 26-53-145 and except for used motor vehicles, trailers, and semitrailers that

35 are taxed under � 26-53-150.

36  (2) The tax shall be collected, reported, and paid in the same

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1 manner and at the same time as is prescribed by this subchapter for the

2 collection, reporting, and payment of Arkansas compensating taxes.

3   (d)(1) There is levied an additional excise tax of seven-eighths of

4 one percent (0.875%) upon all tangible personal property, specified digital

5 products, digital codes, and taxable services subject to the tax levied by

6 this subchapter except for food and food ingredients that are taxed under �

7 26-53-145 and except for used motor vehicles, trailers, and semitrailers that

8 are taxed under � 26-53-150.

9   (2) The tax shall be collected, reported, and paid in the same

10 manner and at the same time as is prescribed by this subchapter for the

11 collection, reporting, and payment of Arkansas compensating taxes.

12

13  SECTION 14. Arkansas Code � 26-53-145 is amended to read as follows:

14  26-53-145. Food and food ingredients.

15  (a)(1) The Secretary of the Department of Finance and Administration

16 shall determine the following conditions:

17  (A) That federal law authorizes the state to collect sales

18 and use tax from some or all of the sellers that have no physical presence in

19 the State of Arkansas and that make sales of taxable goods and services to

20 Arkansas purchasers;

21  (B) That initiating the collection of sales and use tax

22 from these sellers would increase the net available general revenues needed

23 to fund state agencies, services, and programs; and

24  (C)(i) That during a six-month consecutive period, the

25 amount of net available general revenues attributable to the collection of

26 sales and use tax from sellers that have no physical presence in the State of

27 Arkansas is equal to or greater than one hundred fifty percent (150%) of

28 sales and use tax collected under subsection (c) of this section and � 26-52-

29 317 on food and food ingredients.

30                         (ii) The secretary shall make the determination

31 under subdivision (a)(1)(C)(i) of this section on a monthly basis following

32 the determination that the conditions under subdivision (a)(1)(A) of this

33 section have been met.

34  (2)(A) Beginning July 1, 2013, the secretary shall make a

35 monthly determination as to whether the aggregate amount of deductions from

36 net general revenues attributable to the following during the most recently

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1 ended six-month consecutive period, as compared with the same six-month

2 period in the prior year, has declined by thirty-five million dollars

3 ($35,000,000) or more:

4                         (i) The Educational Adequacy Fund;

5                         (ii) Bonds issued under the Arkansas College Savings

6 Bond Act of 1989, � 6-62-701 et seq.;

7                         (iii) Bonds issued under the Arkansas Higher

8 Education Technology and Facility Improvement Act of 2005, � 6-62-1101 et

9 seq.;

10                        (iv) The City-County Tourist Facilities Aid Fund;

11 and

12                        (v) Bonds issued under the Arkansas Water, Waste

13 Disposal and Pollution Abatement Facilities Financing Act of 1997 and the

14 Arkansas Water, Waste Disposal, and Pollution Abatement Facilities Financing

15 Act of 2007, � 15-20-1301 et seq.

16              (B)(i) In making the determination in this subdivision

17 (a)(2), the secretary shall consider all economic factors existing at the

18 time of the determination that could potentially affect the decline in the

19 aggregate amount of deductions, including without limitation pending

20 litigation.

21                        (ii) If the consideration of additional economic

22 factors under subdivision (a)(2)(B)(i) of this section results in a

23 determination that the decline in the aggregate amount of deductions is not

24 likely to remain at that reduced level, the secretary shall conclude that the

25 conditions in this subdivision (a)(2) have not been met.

26              (3) When the secretary finds that all of the conditions in

27 either subdivision (a)(1) or subdivision (a)(2) of this section have been

28 met, then the compensating use taxes levied under subsection (c) of this

29 section shall be levied at the rate of zero percent (0%) on the sale of food

30 and food ingredients beginning on the first day of the calendar quarter that

31 is at least thirty (30) days following the determination of the secretary.

32       (b) As used in this section:

33              (1) "Food" and "food ingredients" mean the same as defined in �

34 26-53-102 except that "food" and "food ingredients" do not include prepared

35 food; and

36              (2) "Prepared food" means the same as defined in � 26-53-102

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1 except that "prepared food" does not include:

2                 (A) Food that is only cut, repackaged, or pasteurized by

3 the seller; or

4                 (B) Eggs, fish, meat, and poultry, and foods containing

5 these raw animal foods requiring cooking by the consumer to prevent food-

6 borne illnesses as recommended by the United States Food and Drug

7 Administration in its 2005 Food Code, � 3-401.11, as it existed on January 1,

8 2007.

9        (c)(1) Beginning July 1, 2011, in lieu of the compensating use taxes

10 levied on food and food ingredients under �� 26-53-106 and 26-53-107, there

11 is levied a tax on the privilege of storing, using, distributing, or

12 consuming food and food ingredients at the rate of one and three-eighths

13 percent (1.375%) to be distributed as follows:

14                (A) Seventy-six and six-tenths percent (76.6%) of the

15 taxes, interest, penalties, and costs received by the secretary under this

16 subdivision (c)(1) shall be deposited as general revenues;

17                (B) Eight and five-tenths percent (8.5%) of the taxes,

18 interest, penalties, and costs received by the secretary under this

19 subdivision (c)(1) shall be deposited into the Property Tax Relief Trust

20 Fund; and

21                (C) Fourteen and nine-tenths percent (14.9%) of the taxes,

22 interest, penalties, and costs received by the secretary under this

23 subdivision (c)(1) shall be deposited into the Educational Adequacy Fund.

24            (2) The use tax levied under subdivision (c)(1) of this section

25 shall be collected, reported, and paid in the same manner and at the same

26 time as is prescribed by law for the collection, reporting, and payment of

27 all other Arkansas compensating use taxes.

28       (d) The following shall continue to (b) Municipal and county use

29 taxes apply to the sales price of food and food ingredients:

30            (1) The compensating use tax levied under Arkansas Constitution,

31 Amendment 75, � 2; and

32            (2) All municipal and county use taxes.

33       (e) The Department of Finance and Administration shall promulgate

34 rules to implement the provisions of this section.

35

36       SECTION 15. EFFECTIVE DATE. Sections 1-14 of this act are effective

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