Arkansas's tax nexus rules determine when businesses must register for sales tax, income tax, and employment taxes in the state. Companies domiciled or incorporated in Arkansas automatically have nexus and must register from formation, while out-of-state businesses trigger registration requirements by crossing specific thresholds.
Understanding these thresholds is crucial because crossing them creates immediate compliance obligations and potential penalties for non-registration. Arkansas uses different triggers for different tax types: economic thresholds for sales tax, physical presence tests for income tax, and employee-based triggers for payroll taxes. Each operates independently, so you could owe one type of tax without owing others.
Arkansas implemented economic nexus rules on July 1, 2019, following the Wayfair decision. The Arkansas Department of Finance and Administration actively enforces these requirements and coordinates with the Secretary of State on foreign registration obligations.
Arkansas establishes sales tax nexus through two primary methods: economic activity thresholds and physical presence triggers. Since July 1, 2019, remote sellers must register once they exceed specific revenue or transaction thresholds, while any physical presence creates immediate obligations.
Arkansas's economic nexus rule requires remote sellers with more than $100,000 in Arkansas revenue or 200 separate taxable transactions during the current or previous calendar year to register and collect sales tax. Both thresholds, based only on taxable Arkansas sales, must be monitored continuously since crossing either one triggers immediate registration requirements.
Sales made through registered marketplace facilitators are excluded from your personal threshold calculation because the platform already collects and remits tax on your behalf. Direct sales through your own website, phone orders, and other non-marketplace channels count toward both thresholds.
Once you meet either threshold, your obligation to collect Arkansas sales tax begins immediately with your next sale. The state expects registration before the next taxable transaction, making real-time threshold monitoring essential for compliance.
Certain business activities create immediate sales tax nexus in Arkansas, establishing instant tax obligations regardless of sales volume:
Physical presence creates sales tax nexus instantly, making the economic thresholds irrelevant for businesses with any Arkansas footprint. Even a temporary presence, like trade show participation or short-term projects, triggers nexus for the entire period.
Register for sales tax through the Arkansas Department of Finance and Administration portal immediately upon establishing nexus. The online registration process requires basic business information and a federal EIN, typically processing within 8-10 business days.
Arkansas assigns filing frequency based on tax volume - monthly, quarterly, or annually. Returns and payments are generally due by the 20th of the month following the reporting period. The state imposes a 5% monthly penalty (capped at 35%) for late filing, plus 1% monthly penalty (capped at 35%) for late payment.
Arkansas Code establishes income tax nexus for corporations and LLCs electing corporate tax treatment through "doing business" or "deriving income" from Arkansas sources. The state takes a broad approach that captures most business activities within its borders.
Physical presence clearly establishes nexus through owning property, employing labor, or conducting regular business activities in Arkansas. Public Law 86-272 offers limited protection for businesses that only solicit orders for tangible personal property shipped from outside the state, but this protection disappears when you provide services, maintain inventory, or sell intangible products.
Economic presence creates nexus through substantial revenue from Arkansas customers or ongoing service relationships. For tax years beginning before January 1, 2026, there is no specific dollar threshold; nexus is based on whether your activities constitute “doing business” in Arkansas.
Beginning in tax years after January 1, 2026, non-resident corporate taxpayers will also create Arkansas corporate income tax nexus if they have at least $250,000 in Arkansas gross receipts sourced to the state.
Once nexus is established, foreign entities must first obtain a Certificate of Authority from the Secretary of State before conducting business legally. Then register for corporate income tax through the Combined Business Tax Registration (Form AR-1R) with the Department of Finance and Administration.
Arkansas corporate income tax returns follow your federal fiscal year schedule, with annual returns due by the 15th day of the fourth month after year-end. Estimated quarterly payments are required for businesses expecting significant liability. Late filing penalties are 5% monthly (capped at 35%) plus statutory interest.
Employment tax nexus in Arkansas is triggered when an employer has one or more employees working within the state for some portion of 10 or more days within a calendar year. Registration is required before paying wages.
Any employee working from an Arkansas location — whether full-time, part-time, remote, or temporary — establishes employment tax nexus. The location where work is performed determines nexus, not where the employee was hired or where they normally work.
Employment nexus requires immediate registration for multiple tax types:
Registration must occur before paying the first Arkansas employee. The same 5% monthly penalty structure applies to employment taxes, making timely registration essential.
Arkansas's tax rules capture modern business activities, including digital products and remote employees working from Arkansas locations. The state distinguishes between different types of digital offerings for tax purposes.
Arkansas exempts pure SaaS subscriptions from sales tax but taxes downloadable software, e-books, and streaming media. The $100,000 revenue or 200-transaction economic nexus threshold applies to all taxable digital sales to Arkansas customers.
Remote employees working from Arkansas addresses create immediate employment tax nexus and may trigger income tax nexus if their activities constitute "doing business" in the state. Cloud infrastructure alone typically doesn't create nexus, but the people managing those systems do if they work from Arkansas.
Sales through registered marketplace facilitators provide relief when the platform exceeds Arkansas's economic nexus thresholds and collects tax on your behalf. These marketplace sales don't count toward your personal threshold calculation, allowing higher direct sales volumes before triggering registration.
Affiliate relationships don't automatically create nexus unless combined with other Arkansas connections. However, drop-shipping arrangements through Arkansas-based third parties or maintaining inventory in-state creates an immediate physical presence nexus requiring registration.
Crossing Arkansas's tax nexus thresholds—such as exceeding $100,000 in sales, hiring employees, or deriving income from Arkansas sources—creates immediate tax compliance obligations and often signals that a business is "transacting business" in the state. Arkansas requires foreign corporations and LLCs to register with the Secretary of State before transacting business, which typically includes activities like maintaining property, having employees, or conducting regular business operations in Arkansas.
While there is no exact tax-based threshold for Secretary of State registration, paying Arkansas taxes strongly indicates that a company is engaged in activities likely to require foreign registration. Businesses should always consult Arkansas law or the Secretary of State to confirm if registration is necessary for their specific activities.
Foreign entities must also obtain a Certificate of Authority from the Secretary of State, adding another layer of compliance coordination.
Arkansas expects detailed documentation supporting nexus calculations, including sales records separating Arkansas retail sales from wholesale and marketplace-facilitated transactions, payroll registers identifying employee work locations and compensation, property records documenting Arkansas-located assets, and business activity logs supporting income tax nexus determinations.
Maintain records for at least seven years to survive state audits and statute of limitations periods. Digital copies are acceptable but must be organized and accessible for examination.
Arkansas imposes a 5% monthly penalty (capped at 35%) for late filing and 1% monthly penalty (capped at 35%) for late payment across most tax types. Interest accrues from the original due date until payment is made in full.
The state offers reasonable cause exceptions for penalties when circumstances beyond your control caused delays, but interest is rarely waived. Proactive registration and filing prevent penalty accumulation that can exceed the underlying tax liability.
Discern provides comprehensive registered agent services and automated compliance tracking to ensure your Arkansas obligations are met without administrative burden. Our platform monitors compliance requirements across all jurisdictions where you operate, handling foreign registrations and ongoing filing requirements through a single dashboard.
Ready to streamline your Arkansas compliance requirements? Book a demo with Discern today.
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