Arkansas Business Taxes: Registration to Remittance

To register your business in Arkansas, you'll need to file an annual report with the Secretary of State's office, which costs $20 for domestic corporations and $25 for foreign corporations. This report is due by the last day of the fourth month after the close of your fiscal year.

The Arkansas Secretary of State's office is responsible for maintaining a database of all registered businesses, which is available to the public. You can check if your business is registered by searching their database online.

To obtain a sales tax permit, you'll need to file Form ST-4 with the Arkansas Department of Finance and Administration, which is responsible for collecting sales tax revenue. This permit is required for any business that sells tangible personal property.

The Arkansas Department of Finance and Administration also requires businesses to file a quarterly sales tax return, known as Form ST-100, by the 20th day of the month following the end of each quarter.

To register your business in Arkansas, you'll need to obtain a business license. This requires providing documentation such as your EIN confirmation, proof of business registration, and professional/occupational licenses. You'll also need to obtain local permits and zoning forms, financial statements, a business plan, lease agreements or property deeds, and more.

Most businesses operating in Arkansas need a business license, with some exceptions for certain professional services, agriculture, and vendors at special events. If you sell taxable goods or services, hire employees, or operate a storefront or office, you'll likely need a state business license.

Here's a list of typical documentation needed for an Arkansas business license:

In Arkansas, a small business is defined as one with fewer than 100 full-time employees and annual gross revenue under $6 million.

This definition is crucial for understanding what qualifies a business for certain tax incentives and programs.

The state of Arkansas sets these specific criteria to help small businesses thrive and access the resources they need.

These criteria also help larger businesses understand what they are not considered small businesses.

Businesses with more than 100 employees or annual gross revenue over $6 million may not be eligible for the same tax incentives and programs.

Understanding the definition of a small business is essential for navigating the business registration and licensing process in Arkansas.

To start a business in Arkansas, you'll need to obtain a license. This typically involves providing documentation such as an EIN confirmation, proof of business registration, and financial statements. You may also need to obtain professional or occupational licenses depending on your business type.

The cost of registering for a sales tax permit in Arkansas is $50. You can register online through the DFA, providing information such as your business name, address, and contact information, as well as your Federal EIN number.

The full application process for a business permit can take 2-4 weeks, so be sure to plan ahead and account for processing times when starting your Arkansas business. You'll need to obtain your Federal Employer Identification Number (EIN) from the IRS and register your business name and structure with the Arkansas Secretary of State.

To determine if your business requires a license, check the Arkansas Economic Development Commission for guidance on business license requirements for your specific business type. Most businesses operating in Arkansas need a business license, especially if you sell taxable goods or services, hire employees, or operate a storefront or office.

Here's a summary of the typical documentation needed for an Arkansas business license:

To register a business in Arkansas, you need to choose a unique and compliant name. The corporation's name must contain the word "Corporation", "Incorporated", "Company", "Limited" or an abbreviation thereof.

In Arkansas, the corporate name requirements are quite specific. The corporation's name may not contain language stating or implying the corporation is organized for other business purposes.

When selecting a name, keep in mind that it must be distinguishable from names in use by certain other enumerated entities. This means you'll need to research and ensure your chosen name doesn't infringe on existing business names.

If you're considering starting a professional services business in Arkansas, here are some key things to keep in mind. You can form a professional corporation (PC) as an accountant, attorney, or physician. This type of corporation is specifically allowed in Arkansas for professionals.

To form a PC, you'll need to take certain ongoing steps to keep your business in compliance. This includes steps that help preserve the limited liability a corporation provides its owners. It's essential to follow these requirements to avoid any issues.

As a professional services business, you'll need to consider tax planning to reduce your taxable income. A good starting point is to allocate 30% of your net business income to taxes. This can help you avoid any surprises and stay on top of your liability.

Here are some examples of exempt businesses in Arkansas:

These businesses may not need a state business license. However, it's always best to check with the Arkansas Economic Development Commission for guidance on specific business license requirements.

Arkansas has a statewide sales tax rate of 6.5%, but this can reach up to 11.625% when combined with city and county sales taxes.

Small businesses should use Arkansas' online sales tax rate lookup tool to find the specific tax rate based on their business location and the delivery address.

For remote sellers, economic nexus laws apply in Arkansas, requiring out-of-state sellers with over $100,000 in sales or 200+ transactions delivered to Arkansas to register and collect sales tax.

Arkansas has a graduated state individual income tax, with rates ranging from 2.00 percent to 4.40 percent, and a graduated corporate income tax, with rates ranging from 1.0 percent to 4.8 percent.

The state also has a 6.50 percent state sales tax rate and an average combined state and local sales tax rate of 9.45 percent.

Arkansas has a 0.53 percent effective property tax rate on owner-occupied housing value.

The state does not have an estate tax or inheritance tax.

Arkansas collects $4,842 in state and local tax collections per capita, and has $6,867 in state and local debt per capita.

To collect sales tax in Arkansas, you must first determine if you have nexus in the state. This means you need to have a physical presence, such as a store or office, or you must have exceeded $100,000 in sales or 200 separate transactions in the state. If you meet these criteria, you'll need to register for a sales tax permit and start collecting the correct amount of sales tax per sale.

To register for a sales tax permit, you can apply online through the Arkansas Department of Finance and provide the necessary information about your business, including your business name, address, and contact information, as well as your federal EIN number and projected monthly sales and taxable sales. The cost to register is $50. Once you have your permit, you'll need to display it at your physical business establishment or on invoices/receipts.

The sales tax rate in Arkansas is 6.5% statewide, but can reach as high as 11.625% when combined with city and county sales taxes. Remote sellers with over $100,000 in sales or 200+ transactions delivered to Arkansas must also register and collect sales tax.

In Arkansas, out-of-state sellers may be required to collect sales tax if they have nexus in the state. Nexus is established when a business has a physical presence, such as a warehouse or office, in Arkansas.

If you're an out-of-state seller with no physical presence in Arkansas, you may still establish nexus through various means. These include affiliate nexus, click-through nexus, and economic nexus.

Affiliate nexus occurs when you have ties to businesses or affiliates in Arkansas, such as through the design and development of goods sold by the remote retailer. However, this type of nexus was repealed in 2019.

Click-through nexus is established when you have an agreement to reward a person in Arkansas for referring potential customers to your business through an internet link or website. If the cumulative gross receipts from sales to Arkansas customers referred by such agreements exceed $10,000 in a 12-month period, you may have click-through nexus.

Economic nexus is established when you have a certain level of economic activity in Arkansas. Specifically, you must register with the state and collect sales tax if you have more than $100,000 in total taxable sales in Arkansas or 200 or more separate transactions into the state in the current or previous calendar year.

Here are the key thresholds for economic nexus in Arkansas:

If you have nexus in Arkansas, you're required to register with the Department of Finance and Administration (DFA) and charge, collect, and remit the appropriate tax to the state.

To collect and remit sales tax in Arkansas, you must track all taxable sales and purchases to accurately calculate sales tax owed. Tax returns and payments are due monthly or quarterly depending on the business' average sales tax liability.

Using sales tax automation software like AvaTax can simplify the process of collecting, calculating, filing, and remitting sales taxes in Arkansas.

To determine whether you need to collect sales tax in Arkansas, answer these three questions:

1. Do you have nexus in Arkansas?

2. Are you selling taxable goods or services to Arkansas residents?

3. Are your buyers required to pay sales tax?

If the answer to all three questions is yes, you’re required to register with the state tax authority, collect the correct amount of sales tax per sale, file returns, and remit to the state.

You can register for an Arkansas seller’s permit online through the DFA. To apply, you’ll need to provide the DFA with certain information about your business, including:

The cost to register for a sales tax permit in Arkansas is $50.

To collect sales tax, you can use brick-and-mortar point-of-sale solutions, hosted store solutions like Shopify and Squarespace, or mobile point-of-sale systems like Square. Each option has its own way of determining the sales tax rate and applying it to the order.

Arkansas requires out-of-state sellers to collect and remit sales tax once they exceed $100,000 in sales or 200 separate transactions in the state, under economic nexus laws as per AR Code § 26-52-117.

Some customers are exempt from paying sales tax under Arkansas law, including government agencies, some nonprofit organizations, and merchants purchasing goods for resale. Sellers are required to collect a valid exemption or resale certificate from buyers to validate each exempt transaction.

If you meet the criteria for collecting sales tax and choose not to, you’ll be held responsible for the tax due, plus applicable penalties and interest. It’s extremely important to set up tax collection at the point of sale — it’s near impossible to collect sales tax from customers after a transaction is complete.

Once you have an Arkansas seller's permit, you’re required to file returns at the completion of each assigned collection period regardless of whether any sales tax was collected. When no sales tax was collected, you must file a "zero return.”

In Arkansas, some goods are exempt from sales tax, such as prescription drugs.

These exemptions can be a big help to individuals and businesses alike, especially for those who rely on certain items. Purchases made with food stamps are also exempt from sales tax.

Some farming equipment is exempt from sales tax, which can be a significant cost savings for farmers and agricultural businesses.

In Arkansas, you're responsible for applying the sales tax rate determined by the ship-to address on all taxable sales.

The state of Arkansas is a destination-based state, meaning the sales tax rate is based on the location of the buyer, not the seller.

You'll need to track all taxable sales and purchases to accurately calculate sales tax owed, and tax returns and payments are due monthly or quarterly depending on the business' average sales tax liability.

Arkansas has a 6.50 percent state sales tax rate and an average combined state and local sales tax rate of 9.45 percent.

This means you'll need to use sales tax automation software like AvaTax to simplify the process of collecting, calculating, filing, and remitting sales taxes in Arkansas.

The state's tax code is complex, but understanding the basics is a good starting point.