Arkansas DOR properly assessed withholding pass-through tax
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Wednesday, May 1, 2019

Arkansas DOR properly assessed withholding pass-through tax

By Payroll and Entitlements Editorial Staff

The Arkansas Department of Revenue (department) properly assessed withholding pass-through tax against a corporate income taxpayer as the taxpayer failed to establish it is not required to withhold income tax on its nonresident members' income. Generally, under Arkansas law, pass-through entities are required to withhold income tax on a nonresident member’s share of income that is attributable to sources within Arkansas and distributed to the nonresident member unless an exemption applies to the taxpayer. One such exemption is applicable to those nonresident members who have a pro rata or distributive share of income of the pass-through entity from doing business in or deriving income from sources within Arkansas of less than $1,000 per year. In this matter, although the taxpayer claimed that none of its partners was receiving Arkansas distributable income greater than $1,000 but failed to provide documents which prove each partner’s share of income. It was noted that for tax years at issue, the taxpayer failed to provide separate state K-1s for each of its members establishing its claim. Accordingly, the taxpayer’s protest was denied. (Arkansas Department of Finance and Administration, Dockets Nos. 17-483, 17-484, 17-485, 17-486, April 4, 2019.)

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