Arkansas enforces a structured system of taxation that applies to corporations, LLCs, partnerships, and individuals with state income obligations. The compliance framework covers Franchise Tax, Corporate Income Tax, Estimated Corporation Income Tax, and Individual Income Tax. Each comes with specific filing deadlines, payment rules, and penalties for non-compliance.
The Franchise Tax applies broadly to corporations, LLCs, banks, insurance companies, and other entities registered or operating in Arkansas. Entities without authorized stock pay a fixed amount, while those with stock pay based on their capital stock apportioned to Arkansas. LLCs owe a flat fee. Corporate Income Tax is imposed on both C corporations and S corporations, with graduated rates up to 5.9% of net taxable income, apportioned based on property, payroll, and sales.
Filing requirements include strict deadlines and the use of state-specific forms, with extensions permitted for returns but never for tax payments. Estimated corporate income tax payments are required for corporations with significant liabilities, particularly those exceeding $20,000, which must pay electronically.
Pass-through entities like S corporations, partnerships, and LLPs are taxed at the individual level, with partners or shareholders reporting their share of income on Arkansas individual income tax returns. Arkansas maintains a progressive individual income tax rate from 2% to 5.9%, along with penalties and interest for late filings or payments.
Altogether, Arkansas provides a clear but rigorous tax environment. Businesses and individuals must remain vigilant about deadlines, filing requirements, and payment obligations to avoid costly penalties.
Franchise Tax
The Arkansas Franchise Tax must be filed by May 1st each year, with no extensions available. This filing requirement applies to a wide range of entities, including C corporations, S corporations, LLCs, limited partnerships, limited liability partnerships, banks, insurance companies, and other similar entities organized or registered in Arkansas.
Failure to file on time results in a late filing penalty of USD 25. Additionally, interest accrues at a daily rate of 0.0274%, calculated on the total tax and penalty due until payment is made.
Key Franchise Tax Obligations:
- LLCs: Pay a flat USD 150 if filed within the due date.
- Corporations without authorized stock: Pay a fixed USD 300.
- Corporations with authorized stock: Pay the greater of USD 150 or 0.3% of Arkansas capital stock. Arkansas capital stock is determined by multiplying the value of property apportioned to Arkansas by the issued and outstanding stock.
The franchise tax report provides essential information about an entity’s net worth, assets, and other details. Missing this annual filing can disrupt compliance standing and trigger financial penalties.
Corporate Income Tax
The Arkansas Corporate Income Tax applies to both C corporations and S corporations, regardless of whether they are based in Arkansas or are foreign corporations deriving income from the state.
Arkansas imposes a graduated tax rate on net taxable income (NTI):
| Net Taxable Income (USD) | Rate |
| First 3,000 | 1.0% |
| Next 3,000 | 2.0% |
| Next 5,000 | 3.0% |
| Next 14,000 | 5.0% |
| Over 25,000 | 5.9% |
For multistate businesses, income is apportioned using a three-factor formula based on property, payroll, and sales. This ensures Arkansas receives its fair share of tax based on in-state business activity.
Entities must file the appropriate corporate income tax return:
- C Corporations: File Form AR1100CT.
- S Corporations: File Form AR1100S.
Due Date: Returns must be filed by the 15th day of the fourth month following the end of the tax year.
Penalties:
- Late filing or payment incurs a penalty of 5% per month, capped at 35% of the total due.
- Interest accrues at a daily rate of 0.027397% from the original due date until payment.
Extensions: Entities can request a six-month extension by filing Form AR1155. However, extensions only apply to filing, not to payments. Taxes must still be paid by the original deadline.
Filing Requirements
Arkansas requires corporations to make estimated tax payments throughout the year if they expect to owe income tax.
Key Points:
- Corporations must file estimated tax payment vouchers 1 through 4, provided or approved by the Corporation Income Tax Section.
- Payments are due in four equal installments: 15th day of the 4th, 6th, 9th, and 12th months of the tax year.
- Payments made electronically must be remitted by the day before each due date.
- Corporations with estimated quarterly income tax liabilities of USD 20,000 or more must pay electronically via the Electronic Funds Transfer (EFT) system.
- Others may opt into EFT payments with prior approval.
Corporations can also use the Arkansas Taxpayer Access Point (ATAP) portal to make estimated payments.
Estimated Corporation Income Tax
Estimated corporation income tax ensures that businesses with significant liabilities pay in advance rather than waiting until the annual return.
- Corporations meeting the threshold must submit four equal installments throughout the year.
- The use of EFT is mandatory for larger corporations, streamlining payments and improving accuracy.
- Failure to meet these requirements can result in penalties and interest similar to those imposed on late filings.
This system ensures that Arkansas collects taxes consistently and that corporations spread out their liability over the year.
Individual Income Tax
Pass-through entities in Arkansas, such as S corporations, partnerships, LLCs, and LLPs, are taxed at the individual level. These entities themselves are not directly taxed; instead, income flows through to owners, members, or partners, who must report it on their personal returns.
Key Filing Requirements:
- Individual income must be reported on Form AR1000 – Arkansas Individual Income Tax Return.
- The due date is generally April 15th. If the date falls on a weekend or holiday, it shifts to the next business day.
- Individuals may request an extension of six months by filing Form AR1055.
Arkansas uses a progressive tax structure, with rates ranging from 2% to 5.9% across income brackets. This ensures fairness by applying higher rates to higher income levels.
Penalties and Interest:
- Similar to corporate tax rules, penalties of 5% per month (up to 35%) apply for late filing or payment.
- Interest accrues daily at the rate set by the Department of Finance and Administration.
Conclusion
Arkansas’s tax compliance framework is detailed and demanding. Businesses must navigate franchise taxes, corporate income taxes, estimated payments, and filing requirements, while individuals tied to pass-through entities must comply with progressive personal income tax rules.
The Franchise Tax requires strict adherence to the May 1st deadline, with no extensions available. Corporations face a graduated income tax system, alongside obligations to file annual and estimated returns, while S corporations and partnerships must ensure that income is correctly reported by shareholders or partners.
Extensions provide additional time for filing but never relieve taxpayers of payment deadlines. Late filings or payments bring steep penalties and daily accruing interest, underscoring the importance of compliance.
For both corporations and individuals, Arkansas’s tax system rewards diligence and penalizes delays. Accurate record-keeping, timely filings, and proactive payment planning are essential for maintaining good standing in the state.
