Arkansas
Taxes and business formation • USA 2025–2026
Corporation in Arkansas
Tax system of Arkansas
Income Tax
Arkansas uses a progressive personal income tax with several brackets. For 2025, rates range from 2% to 4.4% depending on income level. Since 2023 the state has been gradually reducing its tax burden, moving toward a simpler structure. 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%. Cities and counties can add local surcharges, so the combined rate can reach up to 11.625% — one of the highest combined rates in the U.S. The tax applies to the sale of most goods, digital products, commercial property rentals, and a number of services, including telecommunications and construction. Groceries are taxed at a reduced rate. Determining the taxable base and the correct sales tax rate can be quite complex and requires a professional approach and knowledge of state law. Our firm provides services for obtaining a Sales Tax Certificate and for preparing and filing the Sales and Use Tax Return. We advise business owners on all matters related to this tax, including registration, calculation, and reporting.
Property Tax
Arkansas does not levy a property tax at the state level — it is the prerogative 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 a progressive corporate income tax ranging from 1% to 5.3% (the top rate applies to profits above $25,000). Arkansas also levies a Franchise Tax that applies to all corporations and LLCs registered in the state. The amount depends on the capital structure and entity type but is no less than $150 per year. An Annual Report is mandatory for corporations and LLCs and is filed with the Secretary of State, due each year by May 1. Businesses are also required to file tangible personal property returns if asset values exceed the threshold. Our firm provides services for LLC and corporation registration in Arkansas, Annual Report preparation, Franchise Tax calculation, and selection of the optimal tax structure for the business.
Excise Taxes
Arkansas levies excise taxes on alcohol, tobacco, gasoline, diesel, car rentals, and gaming machines.
Favorable Tax Conditions
Arkansas offers moderate and straightforward conditions for individuals and small businesses: • Low property tax, • A moderate personal income tax that is trending downward, • A relatively low corporate tax, • No estate tax, • A fairly simple filing regime for Annual Reports and tax returns.
Compared to Other States
• Sales Tax is among the highest in the country on a combined basis (up to 11.625%), • The personal income tax is lower than in California or New York but higher than in Florida or Texas (which have none), • Property tax is lower than in most states, • A Franchise Tax is mandatory, as in Delaware and Texas, • The Annual Report is mandatory but relatively simple in form.
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