Taxes in Arkansas: Features and Advantages

Main Taxes in the State of Arkansas

Income Tax:

Arkansas applies a progressive personal income tax scale with several brackets. For 2025, the rate ranges from 2% to 4.4% depending on income level. Since 2023 the state has begun gradually reducing the tax burden, moving toward a simplified scale. All major types of income are taxed: wages, investments, capital gains, and rental income.

Sales Tax:

The base sales tax rate in Arkansas is 6.5%. In addition, cities and counties may add local surcharges, resulting in a combined rate of up to 11.625% — one of the highest combined rates in the U.S. The tax applies to most goods, digital products, commercial property rentals, and a range of services including telecommunications and construction. Food items are taxed at a reduced rate.

Determining the taxable base and applying the correct sales tax rate can be complex and requires professional expertise and knowledge of state law. Our company provides services for obtaining a Sales Tax Certificate, as well as preparing and filing Sales and Use Tax Returns. We advise business owners on registration, calculation, and reporting.

Property Tax:

Arkansas does not levy property tax at the state level — this is the responsibility of counties and school districts. The average effective rate is about 0.61% of market value, which is below the national average.

Business Taxes:

C‑corporations are subject to corporate income tax on a progressive scale from 1% to 5.3% (the maximum rate applies to profits over $25,000). Arkansas also levies a Franchise Tax, applicable to all corporations and LLCs registered in the state. The amount depends on capital structure and organizational form, but cannot be less than $150 per year.

An Annual Report is mandatory for corporations and LLCs and must be filed with the Secretary of State. The filing deadline is annually by May 1. Businesses must also file tangible personal property tax returns if asset values exceed the threshold.

Our company provides services for registering LLCs and corporations in Arkansas, preparing Annual Reports, calculating Franchise Tax, and choosing the optimal tax structure for businesses.

Excise Taxes:

Arkansas levies excise taxes on alcohol, tobacco, gasoline, diesel, car rentals, and slot machines.

Favorable Tax Conditions in Arkansas:

Arkansas offers moderate and clear conditions for individuals and small businesses:
• Low property tax,
• Moderate income tax with a trend toward reduction,
• Relatively low corporate tax,
• No inheritance tax,
• A formally simplified regime for filing Annual Reports and tax returns.

Taxes in Arkansas Compared to Other States:

• Sales Tax — one of the highest combined rates in the country (up to 11.625%),
• Income tax lower than in California or New York, but higher than in Florida or Texas (where it is absent),
• Property tax lower than in most states,
• Franchise Tax is mandatory, as in Delaware and Texas,
• Annual Report is required but relatively simple in form.