Arkansas Tax and CPA Services: State, County and City Taxes

Arkansas has been lowering its income tax rates in steps, removed the state sales tax on food from January 1, 2026, and gives pass-through businesses an entity-level tax option. Local governments, however, still add their own sales taxes, so what you pay depends on where you buy or sell. This page covers the state's individual, business, sales and payroll rules, and what they mean for residents, remote workers and employers. We serve Arkansas clients remotely from our Naperville, Illinois office.

Individual income tax

Arkansas has cut its top individual rate repeatedly. The Department of Finance and Administration (DFA) reports that Act 532 lowered the top rate to 4.7 percent for tax year 2023. DFA's 2026 withholding formula now applies rates of 0, 2, 3, 3.4 and 3.7 percent, with the 3.7 percent rate applying to higher incomes, and a $2,470 standard deduction in the withholding calculation. Treat these as the withholding mechanics and not a substitute for the annual tax tables; the actual return computes final liability using that year's DFA tax rate schedule.

Several features are worth knowing:

• Standard deduction and credits: the standard deduction is indexed for inflation. A personal tax credit of $29 per exemption is built into the 2026 withholding formula, and a small additional credit exists for lower-income filers.
• Military retirement: DFA describes a full $6,000 exemption for military retirement and survivor benefits.
• Remote work: under Act 1019, income from work performed entirely outside Arkansas is not taxed by Arkansas. If work is mixed, only the portion allocable to Arkansas is taxed. This matters for remote workers who split time between states.

Check DFA's current-year instructions for Social Security and retirement-plan treatment on the AR1000F, because that depends on the year and on your income sources. Nonresidents and part-year residents report Arkansas-source income and apportion tax. Our multi-state tax service covers those returns.

Business taxes

Arkansas passed Act 719 of 2025, which moves service and intangible sales to market-based sourcing (taxed where the customer receives the benefit) and sets an economic nexus filing threshold for nonresident corporations and partnerships. Out-of-state businesses selling into Arkansas should review it.

The pass-through entity tax (PET) applies to tax years beginning on or after January 1, 2022. Partnerships, S corporations and LLCs taxed as such can file one return and pay tax for all owners. The rate equals the highest individual rate, with capital gains taxed at half that rate. It is not available to C corporations, trusts or sole proprietorships. The calendar-year due date is April 15. The entity-level payment can help owners work around the federal cap on the state and local tax deduction; see SALT deduction and property taxes.

Entities formed in Arkansas also deal with the Secretary of State on franchise tax and annual reports. Check that office for fees and deadlines.

Sales and use tax

The state sales and use tax rate is 6.5 percent. Under Act 1008, effective January 1, 2026, the state exempts food and food ingredients, but cities and counties may keep taxing them, so food is not tax-free everywhere. Other 2025 changes include a sales tax exemption for certain sales to qualified large data centers and a rule that the $2,500 local tax cap on vehicle sales applies to the total of periodic payments on a vehicle sale or lease.

Local rates vary and are listed by DFA by city and county, with lookup tools for the exact rate at an address. Businesses register and file through the Arkansas Taxpayer Access Point (ATAP). Remote sellers and marketplace facilitators have a separate DFA page for registration. See our sales tax service and nexus guide.

Payroll in Arkansas

• Withholding: employees claim exemptions on Form AR4EC. Employers can use DFA's withholding tables or the formula method for 2026. See state income tax withholding.
• Unemployment insurance: the Division of Workforce Services states a wage base of $7,000 per employee per calendar year. Its 2025 section shows a 2.0 percent rate for new employers (a 1.9 percent base plus a 0.1 percent administrative assessment) and experienced employers between 0.200 and 10.100 percent. Confirm the 2026 notice for your rate. See state unemployment insurance.
• Registration: DFA's online portal, ATAP, is used to register for tax accounts, and unemployment insurance accounts are handled by the Division of Workforce Services.

Cities, counties and local taxes

Arkansas cities and counties levy local-option sales and use taxes administered through DFA, which is why two stores in the same state can charge different rates. Cities such as Little Rock, Fayetteville, Bentonville and Fort Smith, and their counties, can each have their own local rates. Property tax is run at the county level, and the state offers a property tax center on its portal for payments and information. Before hiring in a particular city, check its business licensing rules; see local payroll taxes by city and county.

How we can help

We prepare Arkansas resident, part-year and nonresident returns, evaluate whether the PET election suits your business, help out-of-state sellers handle registration and local rate lookups, and set up payroll through ATAP and the Division of Workforce Services. For a letter from DFA, see state tax notices and representation. Contact us to start; this page is general information.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.