Hiring your first employee in Arkansas

What do you have to register for before your first payroll?

Arkansas gives you one registration at the Department of Finance and Administration and a second one somewhere else entirely. Form AR-1R is literally titled Combined Business Tax Registration, and the same session at Arkansas Taxpayer Access Point opens your withholding account and your sales and use tax permit together. What it does not touch is unemployment. That is a separate registration with the Division of Workforce Services on Form DWS-ARK-201 through the Tax21 portal, and it is the one an out-of-state employer forgets. The saving grace is that new hire reporting rides on the same Tax21 system as unemployment rather than being a third portal, which is unusual and is worth knowing before you go looking for a standalone new hire site. Workers compensation is not a state account at all because you buy the policy from a private insurer. Budget for two agencies, two portals and one insurance policy.

Does Arkansas require income tax withholding?

Yes. You register with the Arkansas Department of Finance and Administration, Withholding Tax Branch, before your first arkansas payroll, online at arkansas taxpayer access point or by mailing form ar-1r. the employer instructions set no grace period in days..

One remote Arkansas worker creates the account. The Department's own definition of employer reaches a person doing business in or deriving income from sources outside this state who controls the payment of wages for services performed within Arkansas, so having no Arkansas office does not get you out of it. The test is where the work is physically done: you withhold on wages of employees who work within Arkansas, and you do not withhold for an employee who does not work within the state, with a day-count apportionment for anyone who works partly in and partly out. Two things surprise people. First, the rate moved. The 2026 edition of the employer instructions, effective 1 January 2026, states the current withholding tax rate as 3.7 percent, and the older withholdInstructions.pdf still sitting on the DFA server says 3.9 percent because it was last revised 1 July 2024. Believe the 2026 edition. Second, Texarkana. Under a border city exemption an Arkansas resident living inside the city limits of Texarkana, Arkansas pays no Arkansas individual income tax at all, and a Texas resident living inside the city limits of Texarkana, Texas pays none on wages earned in Texarkana, Arkansas. That means separate forms, AR4EC-TX from the employee and an AR-3Q-TEX reconciliation with the AR-TX wage exemption from you by 28 February. Living on a rural route near Texarkana does not qualify. Every new registration starts as a monthly filer on Form AR941M, due the 15th of the following month, and the Department moves you to annual filing only after you have built a filing history with deposits under $1,000 in a period. A zero voucher is still required for a month with no withholding. Annual reconciliation on Form AR3MAR is due 28 February; W-2s with the ARW-3 are due 31 January. Late payment runs 5 percent per month to a 35 percent cap plus 10 percent annual interest. Arkansas has no city or county wage tax, so unlike Alabama or Missouri there is no local layer to chase.

What unemployment insurance does Arkansas charge a new employer?

A new Arkansas employer pays 2% on the first $7,000 each employee earns, so roughly $140 per employee in the first year. For 2026 a new Arkansas employer pays 2.0 percent on the first $7,000 of each worker's wages, which is the 1.9 percent statutory new employer rate plus the 0.1 percent administrative assessment. Act 196 of 2023 did both halves of that: it cut the new employer rate from 2.9 percent to 1.9 percent under section 11-10-704 effective 1 January 2024, and it recharacterised the old stabilization tax as an administrative assessment under section 11-10-705, set at 0.125 percent for the year to 30 June 2024 and 0.1 percent thereafter. You keep the new employer rate until you have three years of chargeable benefit experience, after which a reserve ratio chart puts you between 0.1 percent and 5.0 percent, or into deficit bands of 6.0, 8.0 or 10.0 percent. Read the agency's own pages in the right order, because they disagree with each other. The UI Employer Services page carries the current 2026 block quoted above but also lists a Stabilization rate of 0.200 percent, which cannot be right: stabilization was replaced by the administrative assessment in July 2023, and the same block's experienced range of 0.200 to 5.100 percent is exactly the 0.1 to 5.0 percent base chart plus a 0.1 percent add-on, not a 0.2 percent one. Meanwhile the separate Employer UI Contributions page has not been updated past 2025 and still says in prose that a new employer is assigned 3.1 percent, a figure from 2023. The statute and the current rate block agree on 2.0 percent, so that is what is recorded. Liability is easy to trip: you are an employer once you have one or more individuals in employment for some portion of ten or more days in a calendar year, consecutive or not, and Form DWS-ARK-201 is due no later than the last day of the second month in which you meet the definition. Watch the wage base each January rather than assuming it holds. Section 11-10-215 fixes it at $7,000 only while the trust fund exceeds $600 million at the close of the state fiscal year, and allows it to climb by up to $2,000 a year if it does not.

Do you need workers compensation insurance in Arkansas?

Yes, once you reach 3 employees. Below that Arkansas does not require it, but read the counting rules before assuming you are under the line, because who counts is rarely obvious.

• any employment in which three or more employees are employed by the same employer
• any employment in which two or more employees are engaged in building or building repair work
• any employment in which one or more employee is employed by a contractor who subcontracts any part of the contract
• any employment in which one or more employee is employed by a subcontractor

Three is the headline number, and it is a genuinely high bar next to states that start at one. The Commission's Basic Facts page says most employers with three or more employees must carry coverage and then waves at unnamed exceptions. The exceptions are spelled out properly not on that page but on the face of the current official form: AWCC Form AR-A, revised 1 January 2024, lists the four triggers under Ark. Code Ann. 11-9-102(9)(D) and 11-9-402, and building work drops the threshold to two while any contractor who subcontracts part of a job, and any subcontractor, is covered from the first employee. Where you cross the line is decided by a headcount rule that catches small owner-run businesses: for this purpose an employee includes an owner, a sole proprietor, a full-time partner, a full-time employee, a part-time employee and a volunteer. Two working partners plus one part-timer is three. Whole categories of work sit outside the law regardless of headcount, and the Commission's own question and answer brochure names them: agricultural farm labour, domestic help, and employment by non-profit, religious, charitable or relief organisations, plus railroad and maritime workers who are covered federally. Being exempt is not the same as being safe, because without coverage you also lose the exclusive-remedy protection and an injured worker sues you in ordinary tort instead. The Commission does not publish a dollar penalty for failing to insure, so none is quoted here, but making a false statement to avoid coverage or to avoid paying the proper premium is a Class D felony under section 11-9-106(a).

There is no opt-out for an employer that is over the line. Below it, a sole proprietor, a partner or a member of a limited liability company who is acting as a subcontractor can apply for a Certificate of Non-Coverage on Form A, which costs $50 by check or online payment, requires a notarised affidavit electing to be excluded, and is processed within about ten working days. Form A is not the route for excluding corporate officers or an owner-operator who is not a subcontractor; those exclusions are handled by the insurance agent on the policy itself. Compelling an employee or a sub-subcontractor to obtain a certificate of non-coverage, or to pay for coverage, is a felony.

How quickly must you report a new hire in Arkansas?

Within 20 days after the employee is hired, rehired or returns to work; employers reporting electronically may instead send two transmissions a month. Reports go to the Arkansas Division of Workforce Services, State New Hire Registry.

The registry was created by Act 1276 of 1997 and lives inside the Division of Workforce Services, not the child support agency, even though the Office of Child Support Enforcement is the main consumer of the data. That routing is the useful part: you file through Tax21, the same portal you already use for unemployment wage reports, so there is no separate new hire website to find. All Arkansas employers report every newly hired employee who lives or works in Arkansas, and an out-of-state employer that hires someone who works in Arkansas must report too. If the person filled out a W-4 they are reportable, full-time, part-time or student, and they are reportable even if they worked a single day and quit before you got round to filing. A returning worker counts as a new hire once they have been separated for 60 consecutive days, which catches seasonal staff and anyone coming back from a long unpaid gap. Temporary staff are reported once, not per assignment, unless there has been a break in service. A multi-state employer may report everyone to a single chosen state, but only by filing electronically and by writing to the federal Office of Child Support Enforcement to designate that state. The state agencies use the data for unemployment and workers compensation fraud detection as well as child support, so this is not a formality. No dollar penalty for late new hire reporting is published on the Division's pages or in the employer handbook, so none is quoted here.

Does Arkansas have paid family leave or state disability insurance?

No. Arkansas runs no state paid family leave fund and no state disability insurance, so there is no payroll deduction of that kind and no extra account to open.

Arkansas runs no state disability insurance fund and no paid family or medical leave programme, so there is no employee payroll deduction and no employer contribution of this kind, and nothing extra to register for. The Labor Standards section of the Department of Labor and Licensing lists what it actually enforces, and the list is minimum wage and overtime, child labour, wage claims, mediation and conciliation, breaks for nursing mothers, and private employment agency rules. No paid leave mandate appears anywhere in it, and the 2026 withholding employer instructions describe no leave or disability levy alongside income tax withholding. Any paid leave you give Arkansas staff is your own policy, and federal FMLA protection, if you are large enough to be covered, is unpaid. If you already run payroll in California, New York or Delaware, do not carry that deduction across.

Do you need a sales tax permit in Arkansas?

Arkansas charges for the permit, which puts it in the minority. The Department states the amount plainly on its registration page: a $50.00 sales tax permit fee to be paid electronically upon submission. Two more things it tells you to have ready are easy to miss if you are registering from out of state. A signed lease for the premises if you are leasing, and a signed bill of sale if you bought equipment or inventory from a previous business. The location address cannot be a post office box, which is awkward for a purely remote seller and is worth a phone call rather than a guess. Allow up to two weeks for processing, and note that other tax liabilities must be cleared before a new permit is issued, so an old unpaid Arkansas account will block you. Once you hold the permit, it is not permanently yours: a permit for a taxpayer that files twelve consecutive monthly returns reporting zero sales expires automatically, and the permit must be returned to the Director within thirty days of the notice. Closing an account is done through ATAP and may require you to send back the original paper permit.

Security deposits. None is published. The Department's registration checklist names the $50 permit fee as the only payment due when you submit, and sets no bond, deposit or letter of credit as a condition of the permit. No amount is recorded here because the Gross Receipts Tax Rules themselves could not be read on an official state page for this record: the Code of Arkansas Rules browser only returns rule text when you already hold the exact internal section identifier, and its index pages render nothing without JavaScript. Treat the absence of a published bond as the ordinary case rather than as a guarantee that the Director can never demand security from a delinquent permit holder.

Does a marketplace like Amazon or Etsy handle the tax for you?

Act 822 of 2019 added Ark. Code Ann. 26-52-111 and put the duty on both remote sellers and marketplace facilitators from 1 July 2019. The threshold is the same for either: more than $100,000 of sales, or more than 200 transactions, of tangible personal property, taxable services, digital codes or specified digital products delivered into Arkansas in the current or previous calendar year. Arkansas is now in the shrinking group of states that still keeps the 200 transaction test, and DFA's current remote sellers page confirms it is still live, so a low-value, high-volume seller can be caught here on transaction count long before it gets near $100,000. The provision worth reading twice is subsection (b). A sale made through a marketplace facilitator counts as the facilitator's sale for threshold purposes and is expressly not a sale of the marketplace seller for threshold purposes. So your Amazon and Etsy volume does not push you over the Arkansas line, and if the platform is collecting, that tax is handled. What is still yours is everything you sell through your own site or any other channel, and those sales stand on their own against the $100,000 or 200 transaction test. The Department audits a facilitator only for sales it facilitated, and will not audit the seller for those sales except where the facilitator is claiming relief from liability.

If your sales drop, when can you stop collecting?

Arkansas publishes no rule under the heading of trailing nexus, but the statutory test settles the question on its face, which is why this is recorded rather than left unknown. Section 26-52-111(a) turns the collection duty on if you exceeded $100,000 or 200 transactions in the previous calendar year or in the current calendar year. Read it forward: the last year in which you cross the line obliges you for that year and for the whole of the following calendar year, whatever your Arkansas sales do in the meantime. Only in the second full year below both tests does the duty fall away. That makes the trail one calendar year, but the reading is ours from the statute rather than a Department statement, which is why this sits at S rather than P. Nothing about it closes your account. Arkansas cancels a permit on its own only after twelve consecutive monthly returns reporting zero sales, so if you stop collecting you should close the account deliberately through ATAP rather than going quiet and collecting non-filer notices.

Does Arkansas charge a tax on revenue rather than profit?

This field trips people up in Arkansas for a naming reason rather than a tax reason. Search for an Arkansas gross receipts tax and you will find one, but it is the sales tax: the statute and the administrative rules both call it the Gross Receipts Tax, and the Department's rule set is titled Gross Receipts Tax Rules. It is a transaction tax on retail sales, already covered in the sales tax block above, and it is not a Washington B&O, Ohio CAT or Nevada Commerce Tax style levy on your revenue. Arkansas has no such levy. What it has instead, and what an expanding business should budget for, is two flat-ish charges that are not measured on receipts at all. Corporate income tax is imposed on net income, and the annual franchise tax collected by the Secretary of State under the Arkansas Corporate Franchise Tax Act of 1979 is $150 for a limited liability company and a minimum of $150 for a corporation with stock, rising with outstanding capital stock. Both are separate from anything the sales tax touches. No rate range or exclusion threshold is recorded because there is no receipts-based tax to describe.

Do you have to register your out-of-state company in Arkansas?

$300 for both. On the LLC fee schedule, revised January 2025, the line is Application for Statement of Authority by foreign limited liability company at $300.00. On the corporation fee schedule, also revised January 2025, it is Application for certificate of authority at $300.00, and a foreign limited partnership or foreign nonprofit pays the same $300. The fee does not scale with members or authorised shares, and it does not differ between paper and online filing. Reserving a name first, if you need to, is another $25.

Foreign qualification here is registering an entity you formed elsewhere so it can transact business in Arkansas, which is a separate filing from forming an Arkansas entity, and at $300 it is one of the pricier ones in the region. Three practical points. You need an Arkansas registered agent with a physical street address, because post office boxes are not accepted. A foreign corporation must attach a certificate of good standing from its home state dated within the past 30 days, so order it late rather than early or you will be refiling. And the application asks for good faith dollar estimates, so have your numbers before you start. The recurring cost is the thing to plan for, because qualifying puts you straight into the Arkansas franchise tax cycle whether or not you ever make a sale here: $150 a year for an LLC, a minimum of $150 for a corporation with stock, $300 for a corporation without stock, plus a $5 processing fee if you pay online. Franchise tax keeps accruing on a revoked entity until it is formally dissolved, withdrawn or merged, and the Secretary of State will refuse any further filing by an entity that is behind on it, so a lapse quietly blocks amendments, agent changes and withdrawal until you clear it.

Where these figures come from

Every number on this page was read on Arkansas's own agency pages, its statute, or a current-year official form, and this record was last reviewed on 2026-09-08. Where a state's explainer page disagreed with its statute or its current form, we followed the statute or the form and said so in the relevant section, because a state's consumer-facing pages are often the last thing updated when a figure changes.

Anything we could not confirm on a primary source is left blank rather than estimated. A missing figure on this page means we could not verify it, not that it is zero.

This is general information, not legal or tax advice. Rules change and your circumstances matter. Confirm anything you are about to act on with the agency named beside it.