Corporate & Personal Tax Information
ARKANSAS TAXES
Arkansas is among the states with the lowest per capita tax burden.
CORPORATE CHARTER AND FRANCHISE TAX
The Arkansas franchise tax is imposed upon domestic corporations for the grant of charter privileges and upon foreign corporations for the privilege of doing business in the state.
Domestic for-profit corporations pay a charter fee and initial franchise tax upon filing articles of incorporation. The charter fee is $50. Franchise tax is twenty seven one-hundredths of one percent (0.27%) of that portion of the par value of the outstanding capital stock that represents the real and personal property of the corporation. Corporations with no authorized capital stock pay an annual tax of $100 regardless of valuation. No corporation shall pay less than $50 or more than $1,075,000. After the initial payment, the franchise tax is due May 1 of each year.
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CORPORATE INCOME TAX
All corporations doing business in the state, whether foreign or domestic, are subject to tax on net income. The rates are as follows:
The revenue derived from this 6.5% tax will help fund an improved program for workforce retraining and literacy training.
Pursuant to the Multi-State Tax Compact, income derived from both within and without Arkansas is apportioned for taxation according to the percent of property and payrolls utilized in the state and sales attributable to Arkansas.
A net operating loss can be deducted from gross income and carried forward for a total period of five years succeeding the year of such loss. Operating steel mills may carry forward the loss for ten years.
Period Covered
Any corporation operating in the State must calculate its Arkansas income tax liability by using the same income year for State income tax purposes as was used for Federal purposes.
Accounting Methods
A corporation must calculate its Arkansas income tax liability using the same accounting method for State income tax purposes as for Federal purposes.
For additional Corporate Income Tax information, contact:
Corporate Income Tax Section, Room 213
P O Box 919
Little Rock, Arkansas 72203-0919
(501) 682-4775
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INCOME TAX WITHHOLDING
Employers are required to withhold Arkansas individual income taxes on all employees who perform services for an employer doing business in, or deriving income from sources in Arkansas. An employer should request a registration packet from the Arkansas Withholding Section upon hiring the first employee. The packet contains; an employer registration statement, a withholding chart and instructions, and Arkansas Withholding Exemption Certificates. The employer should complete the registration forms and return them with the required Federal Employer Identification Number (FEIN).
To obtain a FEIN, you may request this form by telephone by calling 1-800-829-3676.
For more Employer’s Responsibility information, contact
Revenue Division
Withholding Tax Unit, Room 225
P O Box 8055
Little Rock, AR 72203-9941
(501) 682-2212
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PROPERTY TAX
The state of Arkansas does not have a property tax; however, Arkansas cities and counties do collect a property tax, which is the principle source of revenue for funding local public schools.
The tax is calculated based on 20 percent of the fair market value of real and personal property and the average annual value of merchants’ stocks and/or manufacturers’ inventories based on millage rates in individual school districts. Business firms and individuals are subject to annual property tax on all real and personal property.
Payment in lieu of taxes
Real and personal property financed by revenue bonds and general obligation bonds may be exempt from property taxes during the lease-amortization period in which a local government retains title to the property. Payments by businesses to local governments in lieu of property taxes are generally encouraged and negotiated between the parties involved.
The negotiated payment in lieu of property taxes shall not be less than 35 percent of the property taxes that would have been paid if the property were on the tax bills.
2003 TOTAL MILLAGE RATES BY SCHOOL DISTRICT
These are 2003 tax rates that will be collected in 2004.
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PERSONAL INCOME TAX
Residents and nonresident individuals, estates, and trusts deriving income from within the state are subject to a tax on their net income at the following rates:
To arrive at net taxable income, the taxpayer may elect to either itemize deductions or to use the standard deduction of $2,000 per taxpayer. (Married couples may deduct $2,000 per spouse). Federal income tax is not deductible from income subject to Arkansas’ personal income tax.
A credit is allowed resident individuals for the amount of income tax paid to any other state not to exceed what the tax would be on out-of-state income if added to the Arkansas income and calculated at Arkansas income tax rates. The following personal tax credits allowed:
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SALES AND USE TAXES
The Arkansas sales tax is 5.125 percent of the gross receipts from the sales of tangible personal property and certain selected services. The tax is paid by the consumer at the point of final sale and is computed on the total consideration received without any deduction of expenses. “Sale” includes the lease or rental of tangible personal property.
Taxable services include sales of gas, water, electricity, telephone and telegraph service and repair services.
The Arkansas compensating use tax of 5.125 percent is levied on tangible personal property purchased from outside the state of Arkansas for use, storage, or consumption within the state of Arkansas.
LOCAL SALES AND USE TAX
The City of Warren and Bradley County jointly shares a sales tax of 1%, on gross receipts from sales within the county. The City of Warren also places an additional 1% sales tax on gross receipts from sales within the city. Bradley County also has an additional 1/2 cent sales tax for the renovation of the Bradley County Medical Center. The current sales tax is 8.125 percent in Warren and 7.625 percent for Bradley County.
Exemptions from Sales and Use Taxes:
• For office section businesses, all 1-800 calls
• Property that becomes a recognizable, integral part of property manufactured, compounded, processed or assembled for resale.
• Machinery and equipment used directly in manufacturing that ate purchased for a new manufacturing facility or to replace existing machinery and equipment. Machinery and equipment required by Arkansas law to be purchased for air or water pollution control are also exempt.
• Catalysts, chemicals, reagents and solutions that are consumed or used in producing, manufacturing, fabricating, processing, or finishing articles of commerce at manufacturing or processing plants or facilities; and/or to prevent or reduce air, water and other contamination.
The term “used directly” includes molds and dies that determine the physical characteristics of the finished product or its packaging materials; testing equipment to measure the quality of the finished product; computers and related peripheral equipment that directly control or measure the manufacturing process; machinery and equipment that produce steam, electricity or chemical catalysts; and solutions that are essential to the manufacturing process but are consumed during the course of the manufacturing process and do not become necessary and integral parts of the finished product.
In addition to those operations commonly understood within their ordinary meaning, the term “manufacturing” includes mining; quarrying; refining; the extracting of oil and gas; cotton ginning; the drying of rice; soybeans and other grains; the manufacturing of feed; the processing of poultry; the processing of eggs and livestock; the hatching of poultry; printing of all kinds; the processing of metal into grades and bales for further processing’ and the rebuilding or re-manufacturing of use parts and retreading of tire for automobiles, trucks and other mobile equipment powered by electrical or internal combustion engines or motors, provided that the rebuilt or remanufacturing parts or retreaded tires are not sold directly to the consumer but are sold for resale.
Special Exemptions include the following:
• Electricity used in the production of aluminum metal by the electrolytic reduction process
• Barges, towboats and vessels of at least 50-ton load displacement
• Feedstuffs used in livestock production, including poultry
• Agricultural chemicals used in the commercial production of agricultural products
• Sewer, sanitation and garbage service charges
• Sales of any item of new or used farm equipment or machinery
• Sales of aircraft manufactured or substantially completed in Arkansas and sold to a purchaser outside the state
• Chemicals, nutrients and other ingredients used in the commercial production of yeast
• Natural gas used as fuel in the process of manufacturing glass
• Waste fuel used in manufacturing
• Forms which are consumed or destroyed during the manufacture of the item for which the form was built
• Repair or maintenance services performed on railroad cars, parts, or equipment brought into the state only to be repaired, refurbished, modified or converted
• Sales of newspapers and publications; sale of advertising space in newspapers and publications; and billboard advertising services
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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 three to 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.
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CAPITAL GAINS TAX REDUCTION
The Capital Gains Tax Reduction afforded in the 1999 legislative session allows for an exemption of 30 percent of capital gains after January 1, 1999, if the taxpayer has a capital gains tax liability. For taxpayers other than corporations, gross income shall not include 50 percent of any gain from the sale or exchange of qualified small business stock held for more than five years.
Profits from Arkansas venture capital investments are also exempt from the capital gains tax, provided that the investment was made in a business in Arkansas that is qualified technology-based or biotechnology enterprise or a client of the Genesis Technology Incubator. Investments in companies registered on a National Securities Exchange or not eligible.
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Arkansas is among the states with the lowest per capita tax burden.
CORPORATE CHARTER AND FRANCHISE TAX
The Arkansas franchise tax is imposed upon domestic corporations for the grant of charter privileges and upon foreign corporations for the privilege of doing business in the state.
Domestic for-profit corporations pay a charter fee and initial franchise tax upon filing articles of incorporation. The charter fee is $50. Franchise tax is twenty seven one-hundredths of one percent (0.27%) of that portion of the par value of the outstanding capital stock that represents the real and personal property of the corporation. Corporations with no authorized capital stock pay an annual tax of $100 regardless of valuation. No corporation shall pay less than $50 or more than $1,075,000. After the initial payment, the franchise tax is due May 1 of each year.
Return to the top of the page
CORPORATE INCOME TAX
All corporations doing business in the state, whether foreign or domestic, are subject to tax on net income. The rates are as follows:
| First $3,000 | 1% |
| Next $3,000 | 2% |
| Next $5,000 | 3% |
| Next $14,000 | 5% |
| Next $75,000 | 6% |
| In excess of $100,00 | 6.5% |
The revenue derived from this 6.5% tax will help fund an improved program for workforce retraining and literacy training.
Pursuant to the Multi-State Tax Compact, income derived from both within and without Arkansas is apportioned for taxation according to the percent of property and payrolls utilized in the state and sales attributable to Arkansas.
A net operating loss can be deducted from gross income and carried forward for a total period of five years succeeding the year of such loss. Operating steel mills may carry forward the loss for ten years.
Period Covered
Any corporation operating in the State must calculate its Arkansas income tax liability by using the same income year for State income tax purposes as was used for Federal purposes.
Accounting Methods
A corporation must calculate its Arkansas income tax liability using the same accounting method for State income tax purposes as for Federal purposes.
For additional Corporate Income Tax information, contact:
Corporate Income Tax Section, Room 213
P O Box 919
Little Rock, Arkansas 72203-0919
(501) 682-4775
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INCOME TAX WITHHOLDING
Employers are required to withhold Arkansas individual income taxes on all employees who perform services for an employer doing business in, or deriving income from sources in Arkansas. An employer should request a registration packet from the Arkansas Withholding Section upon hiring the first employee. The packet contains; an employer registration statement, a withholding chart and instructions, and Arkansas Withholding Exemption Certificates. The employer should complete the registration forms and return them with the required Federal Employer Identification Number (FEIN).
To obtain a FEIN, you may request this form by telephone by calling 1-800-829-3676.
For more Employer’s Responsibility information, contact
Revenue Division
Withholding Tax Unit, Room 225
P O Box 8055
Little Rock, AR 72203-9941
(501) 682-2212
Return to the top of the page
PROPERTY TAX
The state of Arkansas does not have a property tax; however, Arkansas cities and counties do collect a property tax, which is the principle source of revenue for funding local public schools.
The tax is calculated based on 20 percent of the fair market value of real and personal property and the average annual value of merchants’ stocks and/or manufacturers’ inventories based on millage rates in individual school districts. Business firms and individuals are subject to annual property tax on all real and personal property.
Payment in lieu of taxes
Real and personal property financed by revenue bonds and general obligation bonds may be exempt from property taxes during the lease-amortization period in which a local government retains title to the property. Payments by businesses to local governments in lieu of property taxes are generally encouraged and negotiated between the parties involved.
The negotiated payment in lieu of property taxes shall not be less than 35 percent of the property taxes that would have been paid if the property were on the tax bills.
2003 TOTAL MILLAGE RATES BY SCHOOL DISTRICT
| Warren School District |
Real
|
Personal
|
| Warren City |
50.90
|
50.90
|
| Warren Rural |
45.90
|
45.90
|
| Warren Rural Improvement |
47.40
|
45.90
|
| Rural Banks City |
47.30
|
47.30
|
These are 2003 tax rates that will be collected in 2004.
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PERSONAL INCOME TAX
Residents and nonresident individuals, estates, and trusts deriving income from within the state are subject to a tax on their net income at the following rates:
| Net Taxable Income |
Rate
|
| First $2,999 |
1.0%
|
| Next $3,000 |
2.5%
|
| Next $3,000 |
3.5%
|
| Next $6,000 |
4.5%
|
| Next $10,000 |
6.0%
|
| $25,000 & over |
7.0%
|
To arrive at net taxable income, the taxpayer may elect to either itemize deductions or to use the standard deduction of $2,000 per taxpayer. (Married couples may deduct $2,000 per spouse). Federal income tax is not deductible from income subject to Arkansas’ personal income tax.
A credit is allowed resident individuals for the amount of income tax paid to any other state not to exceed what the tax would be on out-of-state income if added to the Arkansas income and calculated at Arkansas income tax rates. The following personal tax credits allowed:
| Single individuals |
$20
|
| + Blind or deaf |
add $20
|
| + Blind and deaf |
add $40
|
| Head of Household |
$40
|
| Dependents with gross income of less than $3,000 |
$20
|
| Fiduciaries |
$20
|
| 65 or older head of household |
$40
|
| + Spouse 65 or older |
add $20
|
| Credit for “developmentally disabled” dependent in home |
$500
|
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SALES AND USE TAXES
The Arkansas sales tax is 5.125 percent of the gross receipts from the sales of tangible personal property and certain selected services. The tax is paid by the consumer at the point of final sale and is computed on the total consideration received without any deduction of expenses. “Sale” includes the lease or rental of tangible personal property.
Taxable services include sales of gas, water, electricity, telephone and telegraph service and repair services.
The Arkansas compensating use tax of 5.125 percent is levied on tangible personal property purchased from outside the state of Arkansas for use, storage, or consumption within the state of Arkansas.
LOCAL SALES AND USE TAX
The City of Warren and Bradley County jointly shares a sales tax of 1%, on gross receipts from sales within the county. The City of Warren also places an additional 1% sales tax on gross receipts from sales within the city. Bradley County also has an additional 1/2 cent sales tax for the renovation of the Bradley County Medical Center. The current sales tax is 8.125 percent in Warren and 7.625 percent for Bradley County.
Exemptions from Sales and Use Taxes:
• For office section businesses, all 1-800 calls
• Property that becomes a recognizable, integral part of property manufactured, compounded, processed or assembled for resale.
• Machinery and equipment used directly in manufacturing that ate purchased for a new manufacturing facility or to replace existing machinery and equipment. Machinery and equipment required by Arkansas law to be purchased for air or water pollution control are also exempt.
• Catalysts, chemicals, reagents and solutions that are consumed or used in producing, manufacturing, fabricating, processing, or finishing articles of commerce at manufacturing or processing plants or facilities; and/or to prevent or reduce air, water and other contamination.
The term “used directly” includes molds and dies that determine the physical characteristics of the finished product or its packaging materials; testing equipment to measure the quality of the finished product; computers and related peripheral equipment that directly control or measure the manufacturing process; machinery and equipment that produce steam, electricity or chemical catalysts; and solutions that are essential to the manufacturing process but are consumed during the course of the manufacturing process and do not become necessary and integral parts of the finished product.
In addition to those operations commonly understood within their ordinary meaning, the term “manufacturing” includes mining; quarrying; refining; the extracting of oil and gas; cotton ginning; the drying of rice; soybeans and other grains; the manufacturing of feed; the processing of poultry; the processing of eggs and livestock; the hatching of poultry; printing of all kinds; the processing of metal into grades and bales for further processing’ and the rebuilding or re-manufacturing of use parts and retreading of tire for automobiles, trucks and other mobile equipment powered by electrical or internal combustion engines or motors, provided that the rebuilt or remanufacturing parts or retreaded tires are not sold directly to the consumer but are sold for resale.
Special Exemptions include the following:
• Electricity used in the production of aluminum metal by the electrolytic reduction process
• Barges, towboats and vessels of at least 50-ton load displacement
• Feedstuffs used in livestock production, including poultry
• Agricultural chemicals used in the commercial production of agricultural products
• Sewer, sanitation and garbage service charges
• Sales of any item of new or used farm equipment or machinery
• Sales of aircraft manufactured or substantially completed in Arkansas and sold to a purchaser outside the state
• Chemicals, nutrients and other ingredients used in the commercial production of yeast
• Natural gas used as fuel in the process of manufacturing glass
• Waste fuel used in manufacturing
• Forms which are consumed or destroyed during the manufacture of the item for which the form was built
• Repair or maintenance services performed on railroad cars, parts, or equipment brought into the state only to be repaired, refurbished, modified or converted
• Sales of newspapers and publications; sale of advertising space in newspapers and publications; and billboard advertising services
Return to the top of the page
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 three to 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.
Return to the top of the page
CAPITAL GAINS TAX REDUCTION
The Capital Gains Tax Reduction afforded in the 1999 legislative session allows for an exemption of 30 percent of capital gains after January 1, 1999, if the taxpayer has a capital gains tax liability. For taxpayers other than corporations, gross income shall not include 50 percent of any gain from the sale or exchange of qualified small business stock held for more than five years.
Profits from Arkansas venture capital investments are also exempt from the capital gains tax, provided that the investment was made in a business in Arkansas that is qualified technology-based or biotechnology enterprise or a client of the Genesis Technology Incubator. Investments in companies registered on a National Securities Exchange or not eligible.
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