 |
 |
| |
Corporate Franchise Tax
The Arkansas Franchise Tax is an annual tax imposed upon domestic
corporations for the grant of charter privileges and upon foreign
corporations for the privilege of doing business.
The tax is based
upon outstanding capital stock employed in the state. Rates
vary from a minimum of $50 per year.
Use Tax
The Arkansas compensating
use tax of six percent is levied on tangible personal property purchased
from outside Arkansas for use, storage or consumption within Arkansas.
The exemptions of the sales tax apply to the use tax.
Personal
Income Tax
Resident individuals,
estates and trusts 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 |
1.00% |
| Next
$3,000 |
2.50% |
| Next
$3,000 |
3.50% |
| Next
$6,000 |
4.50% |
| Next
$10,000 |
6.00% |
| $25,000
and more |
7.00% |
|
| |
To arrive at net taxable income, the taxpayer may elect either to
itemize deductions or to use the standard deduction of $2,000 or
10 percent of gross income, whichever is less. 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 taxed at Arkansas income tax
rates. The following personal tax credits are allowed: |
| |
| 1 |
Single
Individuals |
$20
|
| |
Blind
and/or deaf taxpayers, additional |
$20
each |
| 2 |
Head
of household |
$40
|
| 3 |
Dependents
with gross income of less than $3,000 |
$20 |
| 4 |
Fiduciaries |
$20
|
| 5 |
Retarded
Child Credit |
$500
|
| 6 |
65
Special |
$20
|
|
| |
State Property Tax
There is no state
property tax in Arkansas.
Free Port Law of
Arkansas
Arkansas’ Free Port
Law applies to finished inventories maintained by manufacturers
within the state and to goods stored in warehouses in transit to
destinations outside the state.
This law 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 that are moving through the state and may
be stored in a warehouse, dock, etc., in transit to a destination
outside of Arkansas.
Act 269 states: “Tangible
personal property in transit for a destination within this State
shall be assessed only in the taxing district of its destination.
Tangible personal property in transit through this State and tangible
personal property manufactured, processed or refined in this State
and stored for shipment outside the State shall, for purposes of
ad valorem taxation, acquire no situs in the State and shall not
be assessed for taxation in this State.”
A unique feature of
Act 269 is that goods that are manufactured in this state and then
stored in a warehouse here prior to distribution to points outside
the state are not assessed for taxation in Arkansas.
Corporate Income
Tax
Domestic corporations
and all foreign corporations doing business within the state are
subject to tax on net income at the following rates:
|
| |
| Net
Taxable Income |
Rate |
| First
$3,000 |
1.00% |
| Next
$3,000 |
2.00% |
| Next
$5,000 |
3.00% |
| Next
$14,000 |
5.00% |
| Next
$75,000 |
6.00% |
| More
than $100,000 |
6.50% |
|
| |
When
business is derived from activity that is taxable both within
and without Arkansas, it is apportioned for taxation according
to the percent of property and payrolls utilized in the state
and sales attributable to Arkansas pursuant to the multistate
tax compact (rent and royalties, capital gains and losses, interest
and dividends are allocated to the state of situs).
Arkansas state income
tax computations based on $250,000 net income and Arkansas tax
rates;
|
| |
| |
Income |
Tax |
| Amount
taxable at 1% (first $3,000) |
$3,000
|
$30
|
| Amount
taxable at 2% (next $3,000) |
$3,000
|
$60
|
| Amount
taxable at 3% (next $5,000) |
$5,000
|
$150
|
| Amount
taxable at 5% (next $14,000) |
$14,000
|
$700
|
| Amount
taxable at 6% (next $75,000) |
$75,000
|
$4,500
|
| Amount
taxable at 6.5% (more than $100,000) |
$150,000
|
$9,750
|
| Total:
|
$250,000
|
$15,190
|
|
| |
A corporation doing business in Arkansas and sustaining a net
operating loss may carry forward the loss to the next succeeding
taxable year and annually thereafter for a total period of three
years succeeding the year of such loss and deduct it from net
income.
Net income is that income reported on the federal return, with
certain additions and deductions prescribed by Arkansas law, such
as adjustments for state income tax deductions, adjustments for
capital gains and losses, and deductions for energy-saving devices
purchased for use by the corporation.
Sales Tax
The Arkansas sales tax is 6 percent of 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 deductions
for the cost of labor.
“Sale” includes the lease or rental of tangible personal property.
“Taxable services” include the sales of gas, water, electricity,
telephone and telegraph services and repair services. The
following exemptions applicable to industry are offered:
1. Goods
used in manufacturing, compounding, processing, assembling or
preparing products for sale.
2. Machinery
and equipment used for repair, replacement or expansion of existing
manufacturing or processing facilities; and installations for
prevention or reduction of air or water pollution.
Within the Little
Rock/North Little Rock MSA, Pulaski and Lonoke counties have 1
percent sales taxes with the same exemptions applicable to industry.
Little Rock has a half-percent sales tax, and North Little Rock
has a 1 percent sales tax. Tax payments for these additional
1 percent sales taxes have a maximum of $25 per transaction, and
the additional tax is applicable only on goods sold and delivered
within the corporate limits of the respective taxing area.
INVESTARK Tax Credit
The InvestArk Tax
Credit, Act 529 of 1985, as amended, is a program designed to
stimulate the expansion and modernization of existing facilities
and equipment of eligible Arkansas companies by offering credits
against a portion of the sales and use tax liability of the company
making the investment. Several categories of businesses
are eligible. These eligible businesses must have been in
continuous operation in Arkansas for at least two years and invest
at least $5 million in a facility or equipment for defined purposes.
Once the application has been approved by the Arkansas Department
of Economic Development, a credit equal to 7 percent of the total
project cost, not to exceed 50 percent of the total sales and
use tax liability in a single year, is allowed.
Advantage Arkansas
(Income Tax Credit)
Advantage Arkansas
provides a credit on state income tax equal to one percent of
new payroll for five years.
To qualify for Advantage
Arkansas, the business’ operations must fit one of the following
descriptions continuously and throughout the project term:
- Manufacturers in
NAICS codes 31-33 and businesses primarily engaged in commercial,
physical or biological research; or
- Eligible computer-related
businesses with no retail public sales that derive at least 75
percent of their revenue from out-of-state sales; or
- Businesses primarily
engaged in motion picture production with no retail public sales
that derive at least 75 percent of their revenue from out-of-state
sales; or
-Distribution centers, including
e-commerce distributors, that derive at least 75 percent of their
resources from out-of-state sales; office sector businesses; corporate
or regional headquarters; or trucking/distribution terminals with
no retail public sales; or
-Scientific and technical
services businesses that derive at least 75 percent of their revenue
from out-of-state sales.
For the business to
qualify for the income tax credit, employees must be Arkansas
taxpayers. The credit begins in the year in which the new
employees are hired. Any unused portion of the credit may
be applied against income tax for the succeeding nine years.
Workers’ Compensation
Arkansas has one
of the most progressive workers’ compensation programs in the
nation, with more than 30 insurance underwriters. Since
July 1, 1992, the state has not experienced a rate increase, and
premiums have decreased overall by 38 percent.
City and County
Taxes
The property tax is
the principal source of revenue for Arkansas counties and municipalities.
Business firms, as well as individuals, are subject to annual
taxes on all real and personal property with exchange value.
The legal ratio of
assessment is 20 percent and applies to the true market value
of real property and to the usual selling price of personal property.
Business property is assessed at the same legal ratio as individual
property. The basis for assessment varies among types of
property or business activity. Merchants’ stocks and manufacturers’
inventories are assessed at their annual average value.
The annual tax rate
is the aggregate of all levies for county, municipal, school and
other special district purposes within constitutional and statutory
limits. School district rates are not limited but are subject
to approval each year by the voters in each school district.
Rates per $1,000 of assessed valuation are shown below:
|
| |
| Little
Rock |
|
|
| |
Real
Property |
$69.00
|
| |
Personal
Property |
$69.00
|
| North
Little Rock |
|
|
| |
Real
Property |
$59.40
|
| |
Personal
Property |
$59.40
|
| Benton |
|
|
| |
Real
Property |
$44.80
|
| |
Personal
Property |
$44.80
|
| Bryant |
|
|
| |
Real
Property |
$41.30
|
| |
Personal
Property |
$41.30
|
| Cabot |
|
|
| |
Real
Property |
$40.95
|
| |
Personal
Property |
$40.95
|
| Carlisle
|
|
|
| |
Real
Property |
$42.40
|
| |
Personal
Property |
$42.40
|
| Conway |
|
|
| |
Real
Property |
$44.90
|
| |
Personal
Property |
$44.90
|
|
|
| England |
|
|
| |
Real
Property |
$42.73
|
| |
Personal
Property |
$42.73
|
| Greenbrier |
|
|
| |
Real
Property |
$46.40
|
| |
Personal
Property |
$46.40
|
| Jacksonville |
|
|
| |
Real
Property |
$52.80
|
| |
Personal
Property |
$52.80
|
| Lonoke |
|
|
| |
Real
Property |
$46.20
|
| |
Personal
Property |
$46.20
|
| Maumelle |
|
|
| |
Real
Property |
$62.40
|
| |
Personal
Property |
$62.40
|
| Mayflower |
|
|
| |
Real
Property |
$42.90
|
| |
Personal
Property |
$42.90
|
| Sherwood |
|
|
| |
Real
Property |
$51.00
|
| |
Personal
Property |
$51.00
|
|
|
Exceptions to the property tax in all cities and counties include:
-Real and personal property financed by Act 9 and Amendment 49
industrial financing bonds during the lease-amortization period
in which the local government retains title to the property.
-Capital invested in textile mills for the first seven years from
the date of location of the mill.
-Tangible personal property in transit through Arkansas and tangible
personal property manufactured, processed or refined in Arkansas
and stored for shipment outside the state.
An example of property
tax computation for a hypothetical firm in Little Rock is:
Appraised
market value of taxable property – $100,000
Assessed
taxable value assuming 20 percent legal assessment ratio ($100,000
x 20%) – $20,000
Millage
applicable per $1,000 taxable value aggregate: county, city, school
district) – $69
Tax
due ($20,000 x $69 per thousand) – $1,380 |
