How to Start a Short-Term Rental Business in Arkansas: No State Law After 2025, City Rules, 6.5% Sales Tax Plus 2% Tourism Tax

Arkansas did not pass a statewide short-term rental law in 2025. House Bill 1445 was withdrawn by its author on April 15, 2025, and House Bill 1790 died at sine die on May 5, 2025. That leaves the rules to cities. Your city decides whether you can operate, what permit you need, and whether you owe an additional lodging tax.

The state tax layer is separate and applies statewide. Lodging furnished to transient guests carries a 6.5% state gross receipts tax and a 2% state tourism tax under A.C.A. 26-63-401 et seq., on top of local city and county sales taxes.

This guide covers the steps in the order most owners find easiest: confirm your city's rules, pick a structure, register with the state, handle local permits, and set up tax collection. It is written for owners of one to a few properties who want the paperwork right the first time.

Informational content only. This article is general information, not legal or tax advice. Ordinances change, and rules can differ from one neighborhood to another. Talk to a qualified attorney and a CPA before you sign a lease, buy a property, or form an entity.

What You Need Before You Start

Gather these items before you file anything:

• The property address and its zoning designation, available from your city planning or zoning office
• Your deed or lease, plus any HOA or condo association rules that restrict rentals
• A government photo ID and a federal employer identification number (EIN) if you form an entity or hire staff
• A business name, checked in the Secretary of State business search at https://www.sos.arkansas.gov/corps/search_all.php
• A registered agent with a street address in Arkansas (a P.O. Box is not acceptable)
• A budget for the fees covered below: $45 for an LLC filing, $22.50 for a name reservation, $50 for a sales and use tax permit, $150 a year for the LLC franchise tax report, plus your city's license or registration fees
• A separate bank account and bookkeeping system for rental income and expenses
• Insurance quotes that specifically address short-term rental use

Step 1: Confirm the Rules for Your City

Because the state sets no short-term rental rules, your city does. Start with the city clerk, the planning or zoning department, and the city website. Arkansas has 75 counties and 500 municipalities, and it is the city level that matters for your listing. Ask four questions:

1. Does the city require a short-term rental license, registration, or permit?
2. Is short-term rental use allowed in my zoning district, and is a conditional use permit required?
3. Does the city impose its own advertising and promotion (A&P) lodging tax?
4. Are there caps, owner-occupancy rules, inspections, or parking requirements?

The answers vary widely. A few examples:

• Fayetteville requires an STR business license. A Type 1 license is for owner-occupied rentals. A Type 2 license is for rentals that are not owner-occupied, and those are capped at 475 licenses under Ordinance 6672. The city says it has reached that cap, so new Type 2 applicants join a waitlist. In residential zones, a conditional use permit is required. The city also levies a 2% hotel, motel and restaurant tax, and Airbnb and VRBO collect that 2% city tax for you.
• Little Rock levies a 4% A&P tax on lodging, and its business license is based on a base amount plus the number of employees.
• North Little Rock requires an A&P permit before you can obtain a license, and that includes home vacation rentals.
• Bentonville runs a free business registry, but its FAQ says short-term rentals do not need to register "at this time", so confirm with the city.
• Conway does not impose a general business license, but it has its own short-term rental rules, so check them directly.
• Eureka Springs and Bella Vista have their own rules. Check with each city before you buy or list a property.

Step 2: Check Zoning, Your Lease, and Association Rules

A city approval does not override a private restriction. If you own a condo or a home in a subdivision with an HOA, the covenants may limit rental length or ban rentals outright. If you lease the property, your landlord's lease must allow you to host guests. In Fayetteville's residential zones, a conditional use permit may be required before you can list the home.

Put these approvals in writing. A verbal OK from a neighbor or a property manager will not protect you if a city inspector or a board later disagrees.

Step 3: Choose Your Business Structure

Most small owners choose one of two paths.

Sole proprietorship. You do not file with the Secretary of State. Instead, you record your assumed business name with your county clerk. County recording fees are set by each county, so confirm the amount with your clerk's office. The trade-off is that your personal assets are exposed to claims against the business.

Limited liability company (LLC). An LLC separates business liabilities from personal assets, which matters more once you own several properties. The formation document is the Certificate of Organization (Form LL-01). The filing fee is $45 online or $50 on paper. The Secretary of State lists anticipated processing of 3 to 5 business days for all filings, whether mailed, dropped off, or submitted online, though its FAQ says most filings are completed within two business days of receipt. In-person drop-offs currently carry a 48-hour turnaround. The Secretary of State does not offer an expedited service or expedite fee.

Your LLC name must contain Limited Liability Company, Limited Company, or the abbreviation LLC, L.L.C., LC, or L.C. Limited may be shortened to Ltd. and Company to Co. Issuing a name does not by itself give you an exclusive right to it.

An LLC carries an annual filing. The Annual LLC Franchise Tax Report costs $150 and is due on or before May 1 each year for the year ending December 31 before it. Late filing adds a $25 penalty plus interest. How the LLC's income is reported on your tax return is a question for your CPA.

A corporation is also possible (Articles of Incorporation, Form DN-01, $45 filing fee), but it adds more tax and reporting complexity. Few single-property owners need it.

Step 4: Reserve the Name and Appoint a Registered Agent

If you want to lock in a name before filing, a name reservation costs $22.50 and lasts 120 days. Reserve through the Secretary of State at https://www.sos.arkansas.gov/business-commercial-services-bcs/forms-fees/llc.

Every registered entity must appoint and continuously maintain a registered agent to accept legal papers and official notices. The agent's address must be a street address in Arkansas, and the agent must be located there. A P.O. Box is not acceptable, and an incomplete filing will be returned for correction. You can serve as your own agent if you have a qualifying Arkansas street address, or you can use a commercial registered agent. Changing the agent is filed with the Secretary of State at no fee.

Step 5: File Your Formation Documents Online

File the Certificate of Organization through the Corporations Online Filing System at https://www.ark.org/sos/corpfilings/index.php, or mail or drop it off. Confirm the name is available with the business search before you pay, and keep the filing receipt with your records. Once the LLC is approved, you can open a bank account in its name, which you will need for every later tax and permit step.

Step 6: File a Fictitious Name if You Operate Under a Brand

If your listing uses a trade name that differs from your LLC's legal name, you need a fictitious name filing. LLCs file the Application for Fictitious Name with the Secretary of State for $22.50 online or $25.00 on paper. Sole proprietors do not use the Secretary of State and instead record the name with their county clerk. A corporation must also file with the county clerk, unless its registered office is in Pulaski County.

Step 7: Register for State Taxes Through ATAP

Lodging furnished to transient guests is taxable in Arkansas. Here is how the three layers work:

• 6.5% state gross receipts tax on lodging
• 2% state tourism tax under A.C.A. 26-63-401 et seq.
• Local city and county sales taxes, which vary by location, plus any city A&P tax such as Little Rock's 4% or Fayetteville's 2%

The Department of Finance and Administration (DFA) administers these taxes under its rules, including GR-8 and GR-4. Apply for a sales and use tax account through the Arkansas Taxpayer Access Point (ATAP) at https://www.dfa.arkansas.gov/office/taxes/excise-tax-administration/sales-use-tax/register-for-a-tax-account/. The sales and use tax permit costs $50. Confirm with DFA that this permit covers your lodging activity, and ask how often you must file returns.

The most important test is who counts as a transient guest. Transient guests are those who rent on a basis other than month-to-month. A true month-to-month lease is the exemption test, not a simple night count. A guest who books 28 nights in a row on a nightly basis is not automatically exempt, so ask DFA how your specific arrangement is treated.

Do not confuse this with the separate 1% short-term rental tax under A.C.A. 26-63-301. That tax applies to rentals of tangible personal property, such as equipment or vehicles, not to lodging.

Ask DFA whether booking platforms collect state tax on your behalf. Do not assume they do. Platforms may collect some local taxes, such as Fayetteville's 2%, but whether they collect the state taxes is a question to confirm with DFA before you rely on it.

Step 8: Register for Withholding and Unemployment if You Hire Staff

If you pay a cleaner, handyman, or assistant as an employee, register for withholding through ATAP. Register for unemployment insurance with the Division of Reemployment. Independent contractors are handled differently, so have your CPA confirm how each worker is classified before you pay anyone.

Step 9: Obtain Your City License, Registry Entry, or A&P Permit

This is the step that differs most by city. Apply at the city clerk or planning office, and ask which documents it requires, such as your entity documents, property address and owner information. Some cities inspect the property before issuing a license. Ask the city for its current fee schedule and processing time, since none of those figures are set statewide.

In North Little Rock, the A&P permit must come before the license, so start there. In Fayetteville, decide early whether you will operate as owner-occupied (Type 1) or non-owner-occupied (Type 2), because the city reports the Type 2 cap of 475 licenses has been reached and new Type 2 applicants go on a waitlist.

Step 10: Build Your Compliance Calendar

Set reminders for the recurring obligations: the LLC franchise tax report due May 1 each year, DFA sales and use tax returns on the schedule DFA assigns to you, city license renewals, and any conditional use permit or inspection deadlines. Missing the May 1 deadline costs a $25 penalty plus interest on the LLC report, and city penalties are set by each city.

Tips for Getting It Right

• Start with the city, not the Secretary of State. A perfect LLC does not help if the city prohibits the use.
• Keep the lease, HOA approval, and zoning confirmation in one folder. You will need them for the city application and for any future sale.
• Use a registered agent with a physical Arkansas street address. A P.O. Box rejection can delay your entire launch.
• Open a separate bank account the day your LLC is approved, and route all booking payouts through it.
• Ask your insurer about short-term rental coverage in writing. A standard homeowner or landlord policy may exclude paid guest stays.
• Ask your local SBDC advisor for help. The Arkansas Small Business and Technology Development Center at https://asbtdc.org/ offers free advising, and the SBA's Arkansas district office lists resources at https://www.sba.gov/district/arkansas.

Common Mistakes to Avoid

• Assuming no permit is needed. The absence of a state law does not mean the absence of a city rule. Many cities require a license, a permit, or an A&P registration.
• Using a P.O. Box as a registered agent address. The filing will be returned for correction.
• Omitting the LLC designation from your name. The name must contain one of the approved entity words.
• Counting nights instead of checking the lease type. The month-to-month test controls, not the number of nights.
• Mixing up the 1% short-term rental tax with lodging taxes. The 1% tax under A.C.A. 26-63-301 covers rentals of tangible personal property.
• Assuming platforms handle every tax. Confirm with DFA which taxes platforms collect and which remain your responsibility.
• Forgetting the May 1 franchise tax report. The $150 report is due every year, even in a slow year.

What to Expect as a Result

Owners who complete the steps above before listing a property often spend the first several weeks on filings, approvals, and tax registrations. Those timelines may stretch if a city requires an inspection or a conditional use permit, and they may run faster when the paperwork is complete on the first submission.

Rental income may be possible, but no one can guarantee occupancy or revenue. Results can depend on location, season, property type, pricing, guest reviews, management, and local competition. Treat the first year as a test period, and track actual taxes, fees, and expenses against your revenue from the start.

Official Resources

• Secretary of State, Business and Commercial Services Division: https://www.sos.arkansas.gov/business-commercial-services-bcs/
• Corporations Online Filing System: https://www.ark.org/sos/corpfilings/index.php
• Business name search: https://www.sos.arkansas.gov/corps/search_all.php
• Department of Finance and Administration: https://www.dfa.arkansas.gov/
• Sales and use tax registration: https://www.dfa.arkansas.gov/office/taxes/excise-tax-administration/sales-use-tax/register-for-a-tax-account/
• Arkansas Small Business and Technology Development Center: https://asbtdc.org/

Final Word

Arkansas gives short-term rental owners room to operate, but the rules sit with each city. Confirm the local requirements first, then build the entity, state registrations, and tax collection around them. The state-level work is simple: a $45 online LLC filing ($50 on paper), a $50 sales and use tax permit, and a $150 annual report. The city work takes the most care. A CPA and an attorney familiar with your city can help you avoid costly mistakes.

This article is informational only and is not legal or tax advice. Confirm current fees, deadlines, and rules with the named agency or your city before acting.