The state Senate Revenue and Taxation Committee on Wednesday advanced legislation aimed at persuading Seattle-based Amazon and some other out-of-state companies that have no physical presence in Arkansas to collect taxes on their sales to Arkansans and remit the receipts to the state.
Committee Chairman Jake Files, R-Fort Smith, said his Senate Bill 140 is modeled after similar legislation enacted in South Dakota that ultimately led Amazon to voluntarily pay taxes to that state on its South Dakota sales.
"It's about fairness. A lot of brick-and-mortar stores are feeling the unfair sales [tax] issue," he told the Senate committee. Brick-and-mortar stores in Arkansas are collecting sales tax from their customers and remitting the money to the state, while many online out-of-state retailers don't do the same.
Files said his bill could help the state collect anywhere from $32 million to $100 million in sales taxes, and he wants to use the additional revenue to finance future tax cuts.
After the committee meeting, Files said his bill is aimed at inciting Amazon "to do something, and in every state where it has passed, Amazon has voluntarily decided to collect."
Gov. Asa Hutchinson later told reporters that "it is my understanding, I was told today, that Amazon is starting to pay sales tax in every state, except for five.
"So I hope we're not the last ones to have that fairness in terms of that big marketplace and the market that Amazon has," the Republican governor said.
Hutchinson said he has to review Files' bill before taking a position on it.
"My commitment is if we have a significant infusion of new money from the E-Fairness initiative [across the nation] then that needs to be put in a lock box for income tax reductions," he said.
The out-of-state companies affected by SB140 would include those that either have gross revenue exceeding $100,000 from sales delivered into Arkansas, or have sold products for delivery into Arkansas in at least 200 separate sales transactions, in either the previous calendar year or current calendar year, according to the state Department of Finance and Administration.
To enforce the collection requirements of SB140, the state may file a lawsuit in circuit court against any company that the state believes meets the criteria of the bill, the finance department said.
An out-of-state company having no physical presence in Arkansas would be required to collect and remit sales taxes after a favorable result from the lawsuit filed by the state, the finance department said.
That same type of out-of-state company that meets the sales volume criteria of the bill could voluntarily register with the department to collect and remit sales tax, the department said. The revenue impact of those voluntary tax collections is unknown, the finance department said.
Michael Lindsey, Wal-Mart Stores Inc.'s director of public affairs and governmental relations, said the bill would create an "even playing field" for retailers.
But Josh Waters, an attorney for the Conduit for Action group, warned that the bill would drive up prices for consumers and lead to state government having more tax revenue.
A spokesman for Amazon on Wednesday didn't return a phone call or reply to an email seeking comment about SB140.
Last month, U.S. Rep. Steve Womack, R-Ark., said legislation will be introduced this year to make it easier for states to collect taxes on Internet sales that are owed by consumers but typically go unpaid.
Under current federal law, a state can force a business to collect sales taxes it is owed only if the business has some kind of connection to that state -- a physical store, office or warehouse within its borders, for example.
Because purchasers are failing to pay the taxes voluntarily and businesses can't be compelled to collect the money, state and local governments are missing out on billions of dollars in revenue, it has been estimated. Owners of traditional retail stores, which already are required to collect the tax, say the current system gives an unfair advantage to their online competitors.
Many in Congress agree. The Marketplace Fairness Act of 2013, which would have required major online retailers to collect and remit sales taxes, passed the Senate 69-27 in May of that year, only to die in the House Judiciary Committee.
A Section on 02/02/2017