This month we travel to the southern state of Arkansas, the Natural State. It is known for its abundant parks and wilderness areas, with terrain encompassing mountains, caves, rivers and hot springs. The rugged Ozarks region in the northwest portion of the state has hiking trails and limestone caves, such as Blanchard Springs Caverns.
The state’s diverse geography varies from mountain ranges from the Ozark and the Ouachita Mountains, which make up the U.S. Interior Highlands, to the densely forested land in the south known as the Arkansas Timberlands, to the eastern lowlands along the Mississippi River and the Arkansas Delta.
Arkansas’s enduring image has earned the state “a special place in the American consciousness.” People such as politician and educational advocate William Fulbright, former President Bill Clinton, former secretary of state Hillary Clinton, former NATO supreme Allied Commander General Wesley Clark, Walmart magnate Sam Walton, singer-songwriters Johnny Cash and Glen Campbell, the poet C.D. Wright, and physicist William L. McMillan, who was a pioneer in superconductor research, have all lived in Arkansas.
Arkansas generally has a humid subtropical climate. While not bordering the Gulf of Mexico, the state is still close enough to this warm, large body of water for it to influence the weather in the state. Generally, Arkansas has hot, humid summers and slightly drier, mild to cool winters.
Arkansas is known for extreme weather and frequent storms. A typical year brings thunderstorms, snow, hail, and ice storms. Situated between the Great Plains and the Gulf States, Arkansas receives about 60 days of thunderstorms a year. The state is located in Tornado Alley and some of the most destructive tornadoes in U.S. history have struck the state. While far from the coast to avoid a direct hit from a hurricane, Arkansas often gets the remnants of tropical systems, which can dump heavy amounts of rain in the state.
Business Climate
Arkansas’s earliest industries were fur trading and agriculture, with the development of cotton plantations in the areas near the Mississippi River. They were dependent on slave labor through the American Civil War.
Once a state with a cashless society in the uplands and plantation agriculture in the lowlands, Arkansas’s economy has evolved and diversified. Today, six Fortune 500 companies are based in Arkansas, including the world’s #1 retailer, Walmart. Tyson Foods, J.B. Hunt, Dillard’s, Murphy USA, and Windstream are all headquartered in the state. The state’s agricultural outputs are poultry and eggs, soybeans, sorghum, cattle, cotton, rice, hogs, and milk. Its industrial outputs are food processing, electric equipment, fabricated metal products, machinery, and paper products. Mines in Arkansas produce natural gas, oil, crushed stone, bromine, and vanadium.
Tourism is also very important to the Arkansas economy. The official state nickname “The Natural State” was created for state tourism advertising in the 1970s, and is still used today. The state maintains 52 state parks and the National Park Service maintains seven properties in Arkansas. Many cities hold festivals, which draw tourists to Arkansas culture, such as The Bradley County Pink Tomato Festival in Warren, King Biscuit Blues Festival, Ozark Folk Festival, Toad Suck Daze and the Tontitown Grape Festival.
Tax Climate
The top individual income tax rate is 6.6% and the top corporate income tax rate is 5.9%.
Apportionment: Arkansas taxpayers apportion income tax using a sales formula.
Arkansas generally sources services using destination sourcing.
Sales Tax Structure
The state sales tax rate is 6.5%. The combined rate is approximately 9.53%.
Arkansas imposes sales and use tax on specified digital products and digital codes that are sold, stored, used, distributed, or consumed in the state. Prewritten computer software delivered electronically is exempt from tax. Custom computer software delivered electronically is not subject to sales or use tax in Arkansas. Arkansas has not adopted any statutory or regulatory provisions explaining its application of the gross receipts tax and compensating use tax to cloud computing transactions, nor has the Department of Finance and Administration issued formal guidance for taxpayers. How products are produced, sold and delivered is critical to determining the tax status.
Arkansas has an economic nexus law where if an out of state seller sells $100,000 or makes 200 transactions worth of merchandise into the state, sellers need to collect and remit sales tax on those transactions. Transactions that are included in the threshold include aggregated sales of taxable tangible personal property or services, taxable services, digital codes and specified digital products subject to Arkansas sales or use tax delivered into a state. Excluded transactions include exempt sales, exempt services and sales made through a registered marketplace. This legislation was enacted on July 1, 2019.
A marketplace facilitator that sells or facilitates more than $100,000 in sales or makes at least 200 transactions of tangible personal property, taxable services, a digital codes, or specified digital products for delivery into Arkansas in the previous or current calendar year must collect and remit sales or use tax on all sales made through the marketplace for delivery into the state. This legislation was enacted on July 1, 2019.
Many states have annual sales tax holidays, during which certain items the state wants to promote the purchase of (like school supplies emergency preparedness supplies, or energy efficient appliances) can be purchased sales tax free. Arkansas has a sales tax holiday on August 6-7 and applies to clothing up to $100 and school supplies. For more information on the sales tax holiday, click here.
Our team at Miles Consulting Group is always available to discuss the specifics of your situation, whether in Arkansas or other U.S. States, and help you navigate the complex tax structures arising from multistate operations. Call us to help you achieve the best tax efficiencies.
Random Facts
- The community of Mountain View is called the Folk Capital of America. This little town preserves the pioneer way of life and puts it on display for visitors at the Ozark Folk Center State Park from March through October.
- The state contains over 600,000 acres of lakes and 9,700 miles of streams and rivers.
- Famous Singer Johnny Cash was born in Kingsland.
- Sam Walton founded his Wal-Mart stores in Bentonville.
- Mount Ida is known as the Quartz capital of the world.
- Milk was officially designated as the official state beverage in 1985.
- The Ozark National Forest covers more than one million acres.
- The fiddle is the official state instrument and was designated in 1985.
- The state park’s dominant natural feature is Pinnacle Mountain, which rises more than a thousand feet above the Arkansas River Valley. Tourists flock from all over the area to hike this mountain.
