Taxes

Sales Tax and Use Rates

Sales tax is paid by the consumer at the point of final sale and includes the lease or rental of tangible personal property. Services that are taxable include sales of water, gas, electricity, telephone, and repair services.

Source: Arkansas Department of Finance and Administration

Property Tax

The State of Arkansas does not have a property tax. However, Arkansas cities and counties do collect taxes on real property, personal property, and the average fair market value of a merchants' stocks and/or manufacturers' inventories. In Arkansas this is the principal source of revenue for funding local public schools.

This is how the total tax is calculated. Add the fair market value of real property, personal property and inventory, then multipy it by 20% (assessment) times the total millage rate. The table below shows the average millage rates in Fayetteville. Individual tax districts will have slight variations.

Here is an example based on the total millage rate:

Source: Fayetteville Chamber of Commerce.

Personal Income Tax

Source: Arkansas Department of Finance and Administration

Arkansas Common Exemptions:

• Standard deduction of 10% of gross income up to $1,000
• Student loan interest deduction allows a deduction of up to $2500 in interest
• Medical and dental expenses (more the 7.5% of your AGI)
• Home mortgage and investment interest
• Charitable contributions
• Casualty and theft losses
• Miscellaneous deductions that exceed 2% of AGI

Corporate Income Tax

Domestic and foreign corporations doing business in Arkansas are subject to tax on net income. Definitions:

• Domestic - Applied to any corporation or association, including partnership created or organized in the state of Arkansas
• Foreign - Applied to any corporation or association, including partnership, created or organized outside the state of Arkansas
• Net Income - Income reported on the federal `return`, with certain additions and deductions prescribed by Arkansas law. Adjustments include but are not limited to state income tax deductions, capital gains and losses, and deductions for energy devices purchased for use by the corporation

A corporation doing business in Arkansas and sustaining a net operating loss may carry forward the loss to the next succeeding taxable year and annually thereafter for a total period of five years succeeding thereafter and deduct it from Arkansas taxable income. Operating steel mills may carry forward the loss for ten years. Domestic corporations and foreign corporations doing business in Arkansas are subject to tax on net income. Arkansas' corporate tax structure consists of six separate brackets with the top rate of 6.5% taking effect at an income level above $100,000.

Source: Arkansas Department for Economic Development.

Corporate Franchise Tax

Source: Arkansas Department for Economic Development

Unemployment Insurance Tax

Every business in Arkansas pays an unemployment insurance tax. A business with no previous employment record in Arkansas is taxed at 3.3 percent on the first $9,000 of each employee's earnings until an employment record is established, usually within five years. The rate generally decreases to an average of 2.0 percent after an employment history is established.

Each firm's employment record is determined primarily by its taxable payroll and history of employee involuntary termination. The tax is determined by past experience and the amount of the reserve-ratio. The reserve-ratio is the excess of contributions paid over benefits charged as related to payroll. The higher the reserve-ratio, the lower the tax rate. Currently, the minimum rate is 0.5 percent and the maximum is 6.4 percent.

Occupational License Tax

Licenses may be required by law to practice in a particular occupation. To search for occupational licenses that are required in the State of Arkansas or by occupation or agency visit the following website: