‘21 marks shift on franchise charges

Different agency now to collect tax

Arkansas businesses are to pay franchise taxes free of additional charges to the state Department of Finance and Administration, rather than to the secretary of state’s office, starting Jan. 1.

The change is a result of 2019’s Act 819, which among other things transfers the administration and collection of the annual tax that companies that conduct business in Arkansas are required to pay. The secretary of state’s office will still register new businesses and handle any activity related to the organizational structure of the entities.

The Department of Finance and Administration already collected state income and sales taxes, so it made sense to transfer over the collection of franchise taxes, department spokesman Scott Hardin said Tuesday. The shift will allow the secretary of state’s office more time to concentrate on its core responsibilities, according to Hardin.

“It was a transition that made sense for all parties,” he said.

The department and the secretary of state’s office

began working together to transfer the responsibility immediately after the passage of the legislation in 2019.

The secretary of state’s office previously used a third-party vendor for franchise tax collection, and the Department of Finance and Administration will have its own system.

“We appreciate the ongoing support and assistance from the secretary of state’s office throughout the transition of franchise tax to DFA,” Finance and Administration Secretary Larry Walther said in a written statement. “We look forward to serving Arkansas companies in this new capacity.”

The deadline for filing a franchise-tax report is May 1. Beginning Jan. 1, they may be filed through the Arkansas Taxpayer Access Point at atap.arkansas.gov.

The Arkansas Taxpayer Access Point has been in use for several years, but the system is set up for 2021 so that there won’t be any additional charge to franchise taxpayers, Hardin said.

In the past, taxpayers were subject to an additional cost that varied depending on the amount of the filing.

The Department of Finance and Administration will use email to notify companies that already have registered franchise tax accounts with the secretary of state’s office.

They will be sent a hard copy of a franchise tax return.

Companies in Arkansas that must file franchise taxes include banks, legal reserve mutual insurance companies, insurance companies with authorized capital stock, limited liability companies, non-stock corporations and stock corporations.

About 150,000 companies pay franchise taxes each year in Arkansas. Franchise tax collections totaled $28 million in 2019.

For more information, businesses can visit dfa.arkansas.gov/franchisetax.