Arkansas adopts significant tax changes

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April 2019

Overview

On April 9, Arkansas enacted S.B. 576, under which the state moves to a single sales factor apportionment formula, adjusts the highest corporate income tax rate, extends NOL carryover periods, and imposes sales/use tax collection and remittance requirements on remote sellers and marketplace facilitators.

The takeaway

With the changes in corporate tax rate, apportionment factor, and NOL carryforward periods, taxpayers should evaluate the effect on future tax liabilities.  The remote seller provisions of S.B. 576 will bring Arkansas into step with other states that have enacted similar legislation in the wake of the US Supreme Court decision in Wayfair.

The intention of these bills is to make Arkansas more competitive in attracting business investment.  Prior to this legislative session, Arkansas commissioned a task force to identify and study the impact of certain reforms to the state’s tax provisions.  

Absent from the final legislation are other tax proposals studied by the task force that were not accepted in view of state budgeting negotiations. Some of these other tax proposals may be included in future legislation, dependent upon the budget impacts of the recently enacted legislation.  Most notable of the omitted tax proposals was repeal of throwback provisions in the sales factor. Other legislation that has been deferred for further study is a pass-through entity tax, akin to what has been enacted by Connecticut.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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