Panel endorses Plan B for road funds

In proposal, some Internet sales-tax revenue could go in pot; governor opposed

Road proponents have a Plan B for highway funding — a bill that would earmark for highways the money Arkansas generates from state sales taxes applied to purchases made on the Internet.

House Bill 2085 by Rep. Johnny Rye, R-Trumann, won a recommendation Tuesday from the House Public Transportation Committee. The panel generally supports steering more money to highway construction and maintenance.

The committee’s endorsement came a day after Rep. Dan Douglas, R-Bentonville, fell six votes short of the twothirds majority he needed for the House to expunge its earlier vote defeating House Bill 1726. HB1726 would refer to the 2018 election ballot a proposal to issue bonds for highway maintenance; the bonds would be repaid by another proposed use of the state sales tax — applying it to the wholesale price of fuel. If voters approved that bond plan, sales taxes on fuel would raise about $200 million in the first year.

But with HB1726 languishing, Rye and other committee members turned to HB2085. It would reserve the first $15 million collected under the legislation for general revenue, with everything above that amount going to the Highway and Transportation Department.

But unlike HB1726, the administration of Gov. Asa Hutchinson actively opposes HB2085.

Walter Anger, deputy director and revenue commissioner for the state Department of Finance and Administration, said his agency opposes the bill because it is impossible for the agency to distinguish revenue from Internet sales versus other sales.

“That money is not identifiable,” he told the committee.

HB2085 would apply only to revenue from sellers having no physical presence in Arkansas. Determining that would be a gargantuan task, according to a legislative impact statement Anger’s agency filed with the committee.

The agency has about 75,000 registered businesses that collect and remit state and local sales and use taxes. Of those, more than 16,000 are out-of-state sellers “collecting and reporting in the same manner as in-state sellers,” according to the statement.

“DFA has no knowledge as to the out-of-state-sellers that have or do not have physical presence in Arkansas and cannot make the distribution of revenues as provided without gathering significant information from out-of-state registered sellers,” the statement said.

Scott Bennett, director of the state Highway and Transportation Department, said the bill addresses money “that has yet to be collected.”

He is referring to a decision by Amazon, the online retailer, to remit sales taxes on purchases made by Arkansans beginning March 1. As a result, state officials say the state could collect anywhere from an extra $30 million to $140 million annually, particularly if other online retailers follow suit.

“It will go a long way to meet our federal match,” Bennett said, referring to the way most highway projects are funded. Typically, the federal government picks up 80 percent of the cost with the state required to pay the balance.

Under the most recent federal highway bill, the department is set to receive an extra $250 million in federal money over five years. But Bennett has said his agency doesn’t have the money available to match the additional money.

Rep. Marcus Richmond, R-Mena, the committee’s vice chairman, when told that if the bill wasn’t passed, the money would become surplus revenue to be “divvied up” by lawmakers and the administration, expressed his frustration.

“This money will go down a black hole,” he said. “It never will go to highways. It’s time to develop a backbone and see if we can do something for our roads.”