Northwest Arkansas Democrat-Gazette
Online sales tax measure gets third strike from panel
A bill aimed at persuading out-of-state companies to collect taxes on their sales to Arkansans and pay the money to the state failed to clear the House Revenue and Taxation Committee on Tuesday for the third time in the past month and a half.
The committee’s 9-6 vote on Senate Bill 140 by Sen. Jake Files, R-Fort Smith, fell two votes short of the 11 required for approval on the 20-member committee. Five committee members didn’t vote.
The vote came after the panel missed approving a proposal by House Democratic leader Michael John Gray to earmark some of the projected revenues. His amendment failed 9-7 with four members not voting. Gray, of Augusta, proposed earmarking $25 million for rural fire and police protection grants, after-school grants and pre-kindergarten programs, and to reduce the list of developmentally disabled people awaiting services.
SB140 would require the Arkansas Tax Reform and Relief Legislative Task Force to review the amount of money raised and recommend to lawmakers how to use the funds, including reducing income tax rates or funding programs. State officials have said they don’t know how much the state would collect under the bill.
The House tax committee is comprised of 10 Democrats and 10 Republicans, while the House is comprised of 76 Republicans and 24 Democrats.
SB140 is backed by WalMart Stores Inc. and the Arkansas Homefurnishing Association, while it’s opposed by the Americans for Prosperity and Conduit for Action groups.
After Tuesday’s meeting, the bill’s House sponsor, Rep. Dan Douglas, R-Bentonville, said the bill “is dead.”
“It’s really disgusting to me that the members of the General Assembly do not care about fairness in our taxes in the state of Arkansas. We have committed every one of our instate brick-and-mortar retailers to an unfair disadvantage by allowing these online retailers not to collect and remit sales tax,” he told reporters.
“If we want our brick-andmortar stores to go out of business and not pay property taxes and not hire local people, this is a good way to do that,” Douglas said.
But Gray said that “to many outside the Capitol building, this is seen as a tax increase.
“People are posting things online, not paying taxes and see it as an increase,” he told reporters. “So if we are going to go back to our people and try to explain why this is not a tax increase, why they should have been paying it all along, we’ve got to go back and say, ‘Here’s what you are paying for.’”
Gray said he respects retailers’ argument that rejecting this bill perpetuates unfair competition with online sellers.
Four days after the Senate approved SB140, Amazon announced Feb. 10 that it would collect taxes on its sales to Arkansans beginning March 1 and remit the money to Arkansas state government.
During the committee’s meeting, Rep. Charlie Collins, R-Fayetteville, said Amazon founder Jeff Bezos “didn’t get to be the third-richest person in the country collecting taxes that were not due, so any notion that this is a tax increase and not a tax enforcement action is balderdash.
“There are many priorities for the money. Some people think highway funding. Some people think pre-K. Some people think tax cuts. All wonderful ideas. There is no way to divide the pieces if you don’t have the pie,” he told his colleagues.
Douglas said SB140 mirrors a South Dakota law now before that state’s Supreme Court and that ultimately will be before the U.S. Supreme Court.
SB140 states the U.S. Supreme Court should reconsider its doctrine that prevents states from requiring remote sellers to collect use taxes — sales taxes on goods and services delivered for in-state use — and “it is necessary for this state to pass a law clarifying its immediate intent to require collection of sales and use taxes by remote sellers and permitting the most expeditious possible review of the constitutionality of this law.”
But Josh Waters, an attorney who represents the Conduit for Action, a conservative business group, urged lawmakers to vote against SB140.
“To pass a law hoping the U.S. Supreme Court is going to maybe a year from now change the law, I don’t think that is the right way to go about this,” he said. “I think it is very clear that this is unconstitutional and this would serve as a test case when we already know in South Dakota there is a test case going forward.”
SB140 would require outof-state companies without a physical presence in Arkansas to collect sales and use taxes based on its sales to Arkansans if the seller’s gross revenue from sales subject to the state’s sales and use taxes exceeds $100,000 or the seller had at least $100,000 in transactions subject to the state’s sales and use taxes in the previous calendar year or the current calendar year.
If these companies don’t collect these taxes and remit them to the state, SB140 would require them to report each year to the state Department of Finance and Administration the name and address of each of their Arkansas purchasers and the total amount paid by each Arkansas purchaser to them, and provide notice to each Arkansas purchaser that the information has been provided to the finance department.