Arkansas has specific regulations governing the taxation of wages for both resident and nonresident remote employees, characterized by distinct employer obligations and sourcing rules.
Employer Withholding Obligations
- Employers in Arkansas are required to withhold state income tax from the wages of both resident and nonresident employees. The withholding requirement depends on the employee’s earnings and the employer's status (whether exceeding certain thresholds or not) (Document Reference: [5]).
- Nonresident employers, those engaging in temporary business activities within the state, must withhold and remit taxes on wages, requiring monthly returns payable to the Secretary of the Department of Finance and Administration (Document Reference: [5]).
Sourcing of Nonresident Wages
- Nonresident wages are sourced based on the portion of earnings attributable to work performed within Arkansas. Specifically, a nonresident who performs duties both inside and outside of Arkansas will only pay Arkansas income tax on the income reasonably allocable to the work conducted in Arkansas (Document Reference: [3]).
Reciprocity Agreements
- Arkansas does not have reciprocity agreements with other states. Nonresidents are subject to Arkansas income tax on their Arkansas-sourced income without exceptions from reciprocal arrangements (Curated Facts).
De-minimis Threshold
- Arkansas does not explicitly list a de-minimis threshold for it to apply; however, employers may not need to file a withholding statement if the wages for agricultural labor are below a specific amount (e.g., under $600) (Document Reference: [9]).
Local/City Wage Taxes
- Arkansas does not impose local or city wage taxes, simplifying the tax landscape for both employers and employees with regard to wage taxation (Curated Facts).
In summary, Arkansas mandates income tax withholding from both resident and nonresident employees, sources nonresidents' wages based primarily on in-state work performed, lacks reciprocity agreements, does not have a defined de-minimis threshold for general employment, and does not impose local or city wage taxes.