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Arkansas Offers a Business-Friendly Tax Environment

November 01, 2017

When trying to decide where to locate (or relocate) your business, a state’s tax structure can tell you a lot about the business climate there. In Arkansas, we have a fair and pro-business tax system, bringing in companies from around the world who want to take advantage of those tax credits for their business.

Taxes are rarely simple, so we’ve done our best to bring you the top 10 ways Arkansas’s tax structure is friendly to new and existing businesses:

1. Arkansas’s corporate income tax is moderate, ranging from 1 percent to 6.5 percent of net income.

2. Arkansas offers competitive income tax exemptions for qualified manufacturers.

3. Businesses may be eligible for a one-percentage point refund on the 6.5 percent Arkansas sales and use tax for purchases of machinery and equipment

or replacement parts purchased to modify, replace or repair manufacturing machinery and equipment. Additional discretionary refunds are available through the Arkansas Economic Development Commission.

4. Arkansas manufacturers may take advantage of the reduced sales and use tax rate of 0.625 percent for energy (electricity and natural gas) used in the manufacturing process.

5. Businesses may claim certain exemptions from Arkansas sales and use taxes, listed here.

6. Businesses may apply to the Arkansas Department of Finance and Administration for a refund of city or county sales and use taxes.

7. A business with no previous employment record in Arkansas is taxed at 3.2 percent on the first $12,000 (starting January 1, 2018, the wage base will decrease to $10,000) of each employee’s earnings until an employment record is established, usually within three years. Existing Arkansas businesses pay an unemployment insurance tax rate between 0.1 percent and 14.0 percent, determined by past experience and the amount of the reserve-ratio.

8. The Capital Gains Tax Reduction (Act 1173 of 2015) allows for an exemption of 50 percent of net capital gains. The amount of net capital gain in excess of $10,000,000 from a gain realized on or after January 1, 2014, is exempt from the state income tax.

9. Real and personal property financed by revenue bonds and general obligation bonds may be exempt from local property taxes during the lease-amortization period in which a local government retains the title to a property. Payments by businesses to local governments in lieu of property taxes are generally encouraged and negotiated between the locality and the company.

10. Arkansas’s Freeport Law §26-26-1102 provides that all goods manufactured within the state and stored for shipment outside Arkansas shall not be assessed for taxation in the state. Also covered in this tax exemption are goods moving through the state that may be stored in a warehouse, dock, etc., which are in transit to a destination outside of Arkansas.

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