Arkansas Business Taxes at a Glance
Arkansas has cut its income tax rates several times in recent years and is changing how it taxes multistate corporations. Groceries are no longer subject to the state sales tax as of 2026. Arkansas also has an unusual income tax exemption for residents of Texarkana and an annual franchise tax on entities. BOMCAS helps Arkansas individuals and businesses keep up with the changes.
Individual Income Tax
Arkansas taxes residents on all income and nonresidents on Arkansas-source income, using graduated rates with a top rate that has been lowered repeatedly by recent legislation. Arkansas starts from its own definition of income rather than federal adjusted gross income in some areas and does not follow all federal changes. Arkansas also offers a retirement income exemption up to a set amount and does not tax Social Security.
We prepare Arkansas returns, apply retirement exemptions, and handle part-year and nonresident filings.
The Texarkana Border City Exemption
Texarkana sits on the Arkansas–Texas line, and Texas has no income tax. To prevent people from moving across the line to avoid tax, Arkansas exempts residents living within the city limits of Texarkana, Arkansas, from Arkansas income tax on income earned while they live there. Residents of Texarkana, Texas, are exempt from Arkansas tax on wages earned in Texarkana, Arkansas, but not on other Arkansas income.
People claiming the exemption still need to file an Arkansas return, with the right form and an address within city limits. We prepare these returns and confirm eligibility.
Corporate Income Tax and Sourcing Changes
Corporations doing business in Arkansas pay corporate income tax on apportioned income, and rates have come down. Arkansas is also changing how it apportions income:
- Throwback phase-out: Arkansas is phasing out its throwback rule, which counted some sales to other states as Arkansas sales. For 2026, a smaller share of those sales is sourced to Arkansas than in 2025, and the rule is scheduled to end by 2030.
- Market-based sourcing: sales of services and intangibles are moving to sourcing based on where the customer receives the benefit.
- Economic nexus: from 2026, nonresident corporations with Arkansas sales above a threshold can owe Arkansas tax even without a physical presence.
Out-of-state companies selling into Arkansas should review whether they now need to file. We prepare corporate returns and model the effect of the sourcing changes.
Franchise Tax and Annual Report
Corporations, LLCs, and certain other entities registered in Arkansas pay an annual franchise tax to the Arkansas Secretary of State, generally due by May 1. For corporations, the tax is based on outstanding capital stock, with a minimum. LLCs pay a flat amount. Missing it can lead to penalties and loss of good standing. We track and prepare franchise tax reports alongside income tax returns.
Sales and Use Tax
Arkansas's state sales and use tax is combined with city and county taxes. Since January 1, 2026, groceries are no longer subject to the state sales tax, but local sales taxes on groceries still apply. Local taxes on a single transaction for certain items are limited to a portion of the price.
Arkansas taxes some services, such as certain repair, cleaning, and pest control services. Businesses need a sales tax permit and file regularly. We register businesses, track rates by location, update grocery classifications in point-of-sale systems, and file returns.
Northwest Arkansas and Retail Suppliers
Northwest Arkansas is home to a large community of consumer goods suppliers and vendor teams that serve major retailers headquartered in the region. These businesses often have employees in Arkansas and headquarters in other states, which raises questions about multistate payroll, apportionment, and the new economic nexus rule. We help supplier teams with bookkeeping, Arkansas payroll, and coordination with their parent companies.
Payroll, Rate Cuts, and the Texarkana Exemption
Arkansas employers withhold state income tax and report unemployment insurance to the Division of Workforce Services. Rate cuts have changed withholding tables several times in recent years. Employers in Texarkana need to handle the border city exemption for eligible employees. We process payroll, file the periodic state reports, and reconcile them to the general ledger.
From Bentonville Suppliers to Delta Farms
- Consumer goods and retail suppliers: multistate payroll and apportionment
- Poultry, rice, and agriculture: farm reporting and agricultural exemptions
- Timber and paper: inventory and fixed assets
- Trucking and logistics: apportionment and fuel tax records
- Tourism in the Ozarks and Hot Springs: lodging taxes and seasonal payroll
Relocating to Northwest Arkansas
Many people move to Bentonville, Rogers, Springdale, and Fayetteville to join supplier teams. Some keep a home in their previous state for a while, which can leave both states claiming them as residents. In the first year, we prepare part-year returns, allocate wages and bonuses to the state where they were earned, and check whether equity awards that vest after the move remain partly taxable in the former state.
Books That Separate Groceries, Sourcing, and Capital
Arkansas bookkeeping should separate grocery and general sales for sales tax, track sales by customer location for corporate sourcing, and keep equity records for the franchise tax. We set up the chart of accounts and monthly close to provide these figures.
Contact BOMCAS About Arkansas
Supplier teams, farms, and growing businesses in Arkansas can contact BOMCAS to review franchise tax reports, the new corporate sourcing rules, or grocery sales tax changes. We work remotely and confirm the rules against your records before filing. City and service pages for Arkansas will be published under this section next. See the BOMCAS home page and our United States services for the rest of our work. This summary is general information only.
Talk to BOMCAS About Your Arkansas Taxes
Have a question about your Arkansas filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.