Arkansas restaurant tax rules, and what they mean for your POS setup
Arkansas does not tax a plate and a cocktail the same way. Your point of sale has to know the difference, per city.
Arkansas layers several taxes on a restaurant ticket: state sales tax, county tax, city tax, a local hospitality tax on prepared food, and separate state and city mixed drink taxes on liquor. They do not all apply to the same items. A point of sale running one tax group across the whole ticket will either overcharge your guests or leave you short at filing.
“We are not mosquitoes. You will not be swatting us away. But we are not disappearing after the install either.”
Why does one ticket need more than one tax group?
Because Arkansas taxes prepared food and mixed drinks under different rules, and the local layers do not line up. In Little Rock the 2% hospitality tax, often called the A and P tax, applies to prepared food and does not apply to mixed drinks. Mixed drinks instead carry a state mixed drink tax and a separate city tax that food never sees.
The result is that a ribeye and an old fashioned on the same check are taxed at completely different rates. Your POS handles this with tax groups: one assigned to food items, another to liquor, and often a third to beer and wine where the local rule treats those differently. Getting this wrong is not a rounding error. On liquor in Little Rock the gap between the food rate and the mixed drink rate is 22 percentage points.
What happens if the tax groups are set up wrong?
Two failure modes, both bad. If you undercharge, the tax still becomes due, and you pay it out of margin you already spent. If you overcharge, you have collected money from guests that you were never entitled to collect, and correcting it is awkward and public.
This is the single most common configuration fault we find on systems installed by someone who was not in the room. A national vendor programming a menu remotely does not know that Fayetteville excludes beer from its supplemental beverage tax, or that a Little Rock private club is taxed differently from a restaurant across the street.
It is also why we program the menu, including tax groups, before hardware ships, and why we ask which city and which permit type on the first call.
Did the Arkansas grocery tax change affect restaurants?
Not in the way most people assume. The state reduced food tax rate went to zero on 1 January 2026, and that applies to groceries. Prepared food sold by a restaurant is a different category and continues to be taxed at the ordinary rates plus any local hospitality tax.
Expect guests to ask about it. Staff should be able to answer in one sentence: the change was to grocery tax, and restaurant meals were never taxed at the grocery rate.
A real person calls you back within two hours, Monday to Saturday, 8am to 7pm Central.
Questions restaurant owners ask
How many tax groups does an Arkansas restaurant usually need?
Most full service restaurants serving liquor need at least three: prepared food, mixed drinks, and beer and wine where the local rule treats them separately. Retail items sold to go, like bottled sauces or merchandise, often need a fourth because they are not prepared food.
Does my POS calculate these rates automatically?
Only if someone configured it correctly for your city and permit type. Point of sale systems ship with generic tax settings. The rates and the exclusions are local, so they have to be entered deliberately. This is configuration work, not a feature you can buy.
Is this page tax advice?
No. This is general guidance to help you ask your accountant and your POS installer the right questions. Rates change and local ordinances are amended. Confirm current figures with the city, with Arkansas DFA, and with your accountant before you rely on them.
Vendor pricing and tax rates change without notice. Confirm current figures with the vendor, the city or your accountant before you rely on them. Not tax, legal or accounting advice.
Every number on this page traces to a primary source
- Little Rock combined rates on prepared food and mixed drinkslittlerock.gov / tax information
- Arkansas state sales and use tax rate and mixed drink tax ratesdfa.arkansas.gov / sales use tax
- Fayetteville HMR and supplemental beverage tax rates and exclusionsfayetteville-ar.gov / Sales Tax
- Arkansas state sales and use tax ratedfa.arkansas.gov / sales use tax