Arkansas State Tax Updates

Our Dash of SALT Blog provides the most recent developments and changes in state and local tax regulations. Here are the latest updates for Arkansas.

August 18, 2025

Arkansas Announces Local Rate Changes

Authored by: Courtney Easterday, MSA and Ryan Schupp

The Arkansas Department of Revenue has announced changes to local sales and use tax rates, set to take effect on October 1, 2025. The update includes rate adjustments across four counties and one city, reflecting both increases and decreases in local tax assessments.

Key changes include:

Cherry Valley: City rate will increase from 1% to 2%
Madison County: County rate will increase from 2.5% to 3.5%
Howard County: County rate will decrease from 2.5% to 1.75%
St. Francis County: County rate will decrease from 3% to 2.88%
Saline County: Will rescind its local sales and use tax rate entirely

Businesses operating in these jurisdictions should update their systems accordingly and ensure compliance with the revised rates. For further details, the Arkansas Department of Revenue provides comprehensive guidance on its official website.

If you have questions about maintaining correct sales and use tax rates, please reach out to a member of Withum SALT Team.

May 6, 2025

Arkansas Adopts Market-Based Sourcing

Authored by: Chao Zhang, MSA and Bonnie Susmano, JD, MBA

Beginning January 1, 2026, Arkansas will abandon its “cost of performance” method of sourcing services and receipts from intangibles in favor of a “market-based” approach. An alternative means of apportionment will be allowed where standard methods fail to represent a company’s activities adequately. Nonresident partnerships or companies with no physical presence and derived less than $250,000 in Arkansas gross receipts over the past 12 months are exempt from Arkansas Corporate or Nonresident Income Taxes. Some service providers are afforded until December 31, 2035, to utilize the extension of the “cost of performance” sourcing methodology.

If you have questions about how state apportionment methodologies affect your business, please reach out to a member of the Withum SALT Team.

May 6, 2025

Arkansas Removed the State Sales Tax on Certain Foods

Authored by: Chao Zhang, MSA and Bonnie Susmano, JD, MBA

Effective January 1, 2026, the state of Arkansas will repeal the state’s 0.125% sales and use tax on the sale of food and food ingredients. However, local city and county sales taxes may still apply, and certain border cities, including Texarkana, have a special 1% sales tax. “Food ingredients” do not include products like candy, soft drinks, alcoholic beverages, tobacco, dietary supplements, and prepared foods. Food ingredients are defined as substances for human consumption for taste or nutrition.

If you have questions about whether goods or services are subject to state sales taxes, please reach out to a member of the Withum SALT Team.

April 15, 2025

Arkansas Senate Recommends a Shift to Market-Based Sourcing

Authored by: Courtney Easterday, MSA and Kiana McGowan, CPA, MBA

On April 2, 2025, the Arkansas Senate Committee recommended the passage of Senate Bill 567. This bill proposes changing how income from multistate businesses is apportioned and revising the method for determining where sales of services and intangibles are sourced in Arkansas. Instead of using the current cost-of-performance method, the bill adopts a market-based sourcing approach. This means that sales will be attributed to the location where the customer benefits from the service, rather than where the service is performed.

The proposed change would bring Arkansas’s apportionment methodology in line with most states already implementing market-based sourcing. Additionally, the bill includes provisions to ensure that the new sourcing rules are applied consistently and equitably across different types of income-producing transactions.

For more details, please refer to the full bill here.

If you have questions about multistate apportionment, please reach out to a member of the Withum SALT Team.