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HB 1685

TO CREATE THE GROCERY TAX RELIEF ACT; TO AMEND THE LAW CONCERNING THE SALES AND USE TAXES LEVIED ON FOOD AND FOOD INGREDIENTS, AS AFFIRMED BY REFERRED ACT 19 OF 1958; AND TO EXEMPT GROCERIES FROM STATE SALES AND USE TAXES.

2025 Regular Session Introduced by Brandon Achor and 40 co-sponsors

The Grocery Tax Relief Act exempts Arkansas consumers from state sales tax on groceries, lowering costs, but may reduce local government revenue by millions.

Notification that HB1685 is now Act 1008
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WeVote Research Nonpartisan
Bill Summary · HB 1685

Summary of HB 1685 - Grocery Tax Relief Act

Purpose and Intent

House Bill 1685, titled the Grocery Tax Relief Act, aims to amend existing sales and use tax laws in Arkansas by exempting food and food ingredients from state sales and use taxes. This legislation is designed to alleviate the financial burden on consumers by reducing the cost of groceries.

Key Provisions

  • Exemption from State Sales Tax: The bill exempts food and food ingredients from the current state sales tax rate of 0.125%, which is levied under Amendment 75 of the Arkansas Constitution.
  • Definitions: The bill retains existing definitions for "food" and "food ingredients," which include substances sold for human consumption but exclude items like candy, soft drinks, alcoholic beverages, tobacco, and dietary supplements.
  • Prepared Food: Sales of "prepared food" will continue to be taxed at the full state sales and use tax rate. Prepared food is defined as food that has been cooked or otherwise processed for immediate consumption.
  • Local Taxes: While the state sales tax on food is eliminated, local municipalities and counties can still levy sales and use taxes on food and food ingredients. This includes taxes enacted under various enabling acts, ensuring that local revenue streams are maintained.
  • Implementation Date: The provisions of this act will take effect on January 1, 2026.

Fiscal Impact

  • Estimated Revenue Loss: The bill is projected to result in significant revenue losses for the state and local governments:
    • FY 2026: Approximately $4.4 million in state sales and use tax loss for five months of reduced tax collection.
    • FY 2027: Estimated loss of $10.9 million in state sales and use tax.
  • Local Tax Loss: Local city and county sales and use tax losses are estimated to be around $4.3 million for FY 2026 and $10.6 million for FY 2027.

Affected Parties

  • Consumers: The primary beneficiaries of this legislation will be Arkansas consumers, who will no longer pay state sales tax on groceries, potentially lowering their overall grocery bills.
  • Local Governments: Local governments may experience a decrease in revenue from sales taxes on food, which could impact funding for local services.

Procedural Aspects

  • Legislative Journey: HB 1685 was introduced on March 5, 2025, and underwent several amendments before being passed. It was signed into law as Act 1008 on April 22, 2025.
  • Implementation Requirements: The Arkansas Integrated Revenue System (AIRS) will require programming updates at an estimated cost of $14,000 to accommodate the changes in tax collection.

Conclusion

The Grocery Tax Relief Act represents a significant shift in Arkansas tax policy regarding food sales, aiming to provide financial relief to consumers while balancing the need for local government revenue. The act's implementation will require careful monitoring to assess its impact on state and local finances.

Compiled from official sources — confirm details with the bill’s official record.

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