Business Startup – Taxes

Small businesses need to make sure they are paying all of the appropriate taxes at the state, federal, and local level. Some industries have specialized taxes that apply due to the type of business. Since ASBTDC can’t give tax advice, consider working with an accountant to make sure all i’s are dotted and t’s are crossed when it comes to paying your taxes.

FEDERAL

Federal Unemployment Tax (FUTA)

FUTA works with state unemployment systems. Currently, the tax rate is 6.2% and is applied to the first $7,000 in wages paid to each employee during the year. Employers may take a credit against the FUTA tax for amounts paid into state unemployment funds. If entitled to the maximum credit, the FUTA tax rate is .8%. Employers utilizing independent contractors do not pay FUTA tax on these individuals. FUTA tax deposits occur quarterly, using Form 940 or 940-EZ.

irs.gov/Individuals/International-Taxpayers/Federal-Unemployment-Tax

Arkansas Department of Workforce Services
501.682.3268
dws.arkansas.gov

STATE

State Withholding
If the business has employees and has already received an Employer Identification Number, register with the state for a state withholding information packet. Use Form AR4ER, obtained from the office or web site below.

The EIN issued by the IRS will be the same number used by Arkansas for the purposes of state withholding.

Upon receipt of the request, the Department of Finance and Administration will forward materials to the business for remitting state income tax on a monthly basis, and submitting tax reports on a quarterly basis.

Department of Finance and Administration
Ledbetter Revenue Building
7th and Wolfe, Room 225,
P. O. Box 9941
Little Rock, AR 72201
501.682.2212
dfa.arkansas.gov

Sales and Use Tax
To apply for a permit, submit an application along with a $50 non-refundable fee to the location referenced below. For more information on sales and use tax, visit the sites listed below.

This department will issue a sales and use tax permit number. It is not the same number as the EIN.

All retail businesses, including e-retailers, and some service businesses should have a sales and use tax permit. Use Tax is paid on goods if purchased out of state and the seller does not collect sales tax.

Taxes are paid monthly. If the business collects $25 or less, taxes are reported quarterly or semiannually.

Check on the status of tax liability when buying an existing business. Sellers should provide buyers with a current statement from the Sales and Use Tax office.

Department of Finance and Administration
Revenue Department
7th & Wolfe Street
Little Rock, AR 72201
501.682.7104 (taxpayer assistance)
dfa.arkansas.gov/offices/exciseTax/salesanduse/Pages/default.aspx
dfa.arkansas.gov/offices/policyAndLegal/Documents/starting_a-new_business.pdf

LOCAL

Business Property Assessment
A business owner must assess the property of the business (building, equipment, and furnishings, but not land). The deadline for assessing is May 31. Be sure to assess immediately if purchasing an existing business (to avoid liability, make sure there are no back taxes before buying a business). Taxes can be paid the 1st working day of March through October 10th without a penalty. There is a 10% penalty for missing the assessment deadline.

After having completed a worksheet listing the business property by category, the assessor will generate an invoice based on the business’ amount, age, and type of equipment. Don’t forget to itemize leased equipment, however the owner of the equipment is the one taxed.

Pulaski County Assessor’s Office
201 S. Broadway, Suite 310
Little Rock, AR 72201
501.340.6170
pulaskicountyassessor.net

Local Taxes
There are more than 275 local taxes in Arkansas. Local municipalities (cities and counties) define their respective tax rates, so it’s a good idea to become familiar with local taxing authorities. To learn more, see dfa.arkansas.gov/offices/policyAndLegal/Documents/moving_2_arkansas.pdf.

Depending on location, restaurants and lodging facilities may be required to collect an additional sales tax (sometimes referred to as a “hamburger” tax) that is remitted to local advertising and promotion commissions.

Little Rock Advertising & Promotion Commission
426 Statehouse Plaza, #7,
Markham & Broadway Sts.
Little Rock, AR 72201
501.370.3201
littlerock.org/CityCommissions/default.aspx?ID=3

North Little Rock City Clerk’s Office
300 Main Street
NLR, AR 72114
501.340.5496
northlittlerock.ar.gov/business/business-in-nlr.asp