Overview
Arkansas recently expanded its sales and use tax exemption to make the state more competitive for data center projects. The 2025 amendment (Act 548) lowered the investment threshold from $500 million to $100 million, opening the door to mid-sized facilities while maintaining higher incentives for hyperscale projects exceeding $2 billion. Unlike many states, Arkansas explicitly prohibits cryptocurrency mining operations from qualifying for data center tax benefits, though separate legislation protects digital asset mining from discriminatory local regulation.
Incentives
Sales and Use Tax Exemption
Arkansas exempts qualified data centers from all gross receipts and compensating use taxes on equipment, construction costs, services, and electricity.[1]
- Standard tier: Minimum $100 million investment within five years and $1 million in aggregate annualized compensation over the first two years
- Large data center tier: Minimum $2 billion investment within ten years, $3 million in compensation over two years, and operations across two or more non-adjacent locations connected by fiber[1][2]
- Contractor payroll now counts: The 2025 amendment clarifies that indirect compensation paid by contractors qualifies toward the payroll threshold[2]
Requirements and Conditions
Cost-Benefit Analysis
Before the Department of Finance and Administration can issue a tax exemption certificate, the Arkansas Economic Development Commission must complete a positive cost-benefit analysis.[1][2] This gate-keeping mechanism ensures the state receives a net benefit from the foregone tax revenue.
Annual Certification and Clawback
Qualifying firms must certify their investment and compensation annually. If compensation falls below the required thresholds or investment targets are not met, the exemption certificate is revoked.[1]
Cryptocurrency Mining Prohibition
Facilities that are “primarily engaged” in adding virtual currency transactions to a distributed ledger cannot qualify as data centers under either tier.[1][2] This restriction applies only to the tax exemption program, not to the operation of crypto mining businesses generally.
Utility and Grid Rules
Crypto Mining Tariff
Entergy Arkansas’s “Large Power High Load Density Service” tariff specifically targets cryptocurrency mining operations. These customers must take service on an interruptible basis and are barred from accessing other standard tariffs and riders.[4] The Arkansas Public Service Commission approved this tariff structure in 2023, effective December 31, 2023.
Protection from Discriminatory Rates
The Arkansas Data Centers Act of 2023 (Act 851) directs the Arkansas Public Service Commission not to set unreasonably discriminatory rates for digital asset mining businesses, subject to public entity utility exceptions.[3] This provision aims to prevent utilities from singling out crypto operations with punitive pricing.
Local Zoning
Digital Asset Mining Protections
Act 851 bars local governments from imposing special sound limits on home-based digital asset mining or imposing requirements on digital asset mining businesses that do not apply to traditional data centers. The law also restricts discriminatory rezoning targeted at crypto operations.[3]
What to Watch
- Utilization data: With Act 548 less than a year old and the reduced $100 million threshold opening eligibility to more projects, the first round of certifications will reveal whether the program attracts new investment or primarily benefits projects already in the pipeline.
- Cost-benefit methodology: The Arkansas Economic Development Commission’s unpublished criteria for approving exemptions could shape which projects qualify and whether the state uses job quality, local hiring, or other non-statutory factors as decision points.
Sources
[1] State of Arkansas, “Act 548 of the Regular Session (HB1444): An Act to Amend the Sales and Use Tax Exemption for Data Centers,” approved April 10, 2025, https://arkleg.state.ar.us/Acts/FTPDocument?path=%2FACTS%2F2025R%2FPublic%2F&file=548.pdf&ddBienniumSession=2025%2F2025R (accessed 2026-01-07).
[2] Arkansas Department of Finance and Administration, “Fiscal Impact Statement: HB1444 (as engrossed 2/27/2025) – To Amend the Sales and Use Tax Exemption for Data Centers,” March 2, 2025, https://arkleg.state.ar.us/Home/FTPDocument?path=%2FAssembly%2F2025%2F2025R%2FFiscal%20Impacts%2FHB1444-DFA1.pdf (accessed 2026-01-07).
[3] State of Arkansas, “Act 851 of the Regular Session (HB1799): Arkansas Data Centers Act of 2023; Regulation of the Digital Asset Mining Business,” approved April 13, 2023, https://arkleg.state.ar.us/Home/FTPDocument?path=%2FACTS%2F2023R%2FPublic%2FACT851.pdf (accessed 2026-01-07).
[4] Entergy Arkansas, LLC, “Large Power High Load Density Service (Rate Schedule No. 69),” Arkansas Public Service Commission tariff sheet, effective December 31, 2023, https://www.entergyarkansas.com/wp-content/uploads/2024/11/eal_lphlds.pdf (accessed 2026-01-07).
[5] Sales Tax Institute, “Arkansas Expands Sales & Use Tax Exemption for Data Centers Under Act 548,” October 9, 2025, https://www.salestaxinstitute.com/resources/arkansas-data-center-tax-exemption-expansion-2025 (accessed 2026-01-07).