Sales-tax collection bill falls short in Arkansas House committee

Measure targets out-of-state firms’ sales data

Rep. Joe Jett, R-Success (left), chairman of the House Revenue and Taxation Committee, talks to Reps. Reginald Murdock, D-Marianna, and Michael John Gray, D-Augusta, about Senate Bill 140, which pertains to sales and use tax collections on online sales.
Rep. Joe Jett, R-Success (left), chairman of the House Revenue and Taxation Committee, talks to Reps. Reginald Murdock, D-Marianna, and Michael John Gray, D-Augusta, about Senate Bill 140, which pertains to sales and use tax collections on online sales.

The state House tax committee balked Tuesday at recommending legislation that would require out-of-state companies to collect taxes on their sales to Arkansans and pay the money to the state.

Senate Bill 140 by Sen. Jake Files, R-Fort Smith, also would require out-of-state companies that don't collect and remit sales and use taxes on their sales to Arkansans to report each year to the state Department of Finance and Administration the name and address of each Arkansan who purchased items from the companies and how much the company was paid in total by each Arkansan. The legislation is aimed at persuading these companies to collect taxes.

The legislation also would require the new Tax Reform and Relief Legislative Task Force to review the amount of revenue collected under the measure and recommend the use of these tax revenue, such as reducing income tax rates or funding programs.

A 2012 study suggested the state could collect taxes from $30 million to over $100 million a year from out-of-state companies, even though the Finance Department doesn't know how many purchases are made by Arkansans from out-of-state retailers, said Paul Gehring, assistant revenue commissioner for policy and legal.

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The House Revenue and Taxation Committee's 6-2 vote for SB140 fell five votes of the 11 required for approval. Nine committee members didn't vote on the legislation, including eight House Democrats and a Republican, and three others were absent.

The action came after House Democratic leader Michael John Gray of Augusta fell one vote short of the 11 votes required for his proposed amendment to earmark $25 million of the new revenue for rural fire and police protection grants, a pre-kindergarten program, after-school grants, and the Medicaid program to further reduce the waiting list for disabled people. The committee's vote was 10-7 for Gray's proposal, with one member not voting and two members absent.

Gray told lawmakers that his amendment would fund "needs that have been glaring for more than one session."

But Files said Gray's amendment would add "a poison pill" to his bill that he doubted would be able to clear the 100-member House with 51 votes.

The tax committee is made up of 10 Republicans and 10 Democrats. The House has 76 Republicans and 24 Democrats.

Seattle-based Amazon.com Inc. announced Friday that it would begin collecting taxes on its sales to Arkansans on March 1 and remit the money to Arkansas' government.

After the committee meeting, Files said he plans to figure out what it would take to get 11 members to send his bill to the House.

"I was very disappointed that a lot of members just chose not to vote at all. I think it is important that we come down here and we hear debate and then we take a position. And for them not to take a position was disheartening, and I think it doesn't do service to the process either," Files said.

Seeking a two-thirds vote from the House to yank his bill out of the tax committee is another option, Files said.

Gray, who didn't vote on SB140, said he respects Files' disappointment.

"Anytime you run a bill and it doesn't pass you are going to have some disappointment," he said. "I think what he didn't realize is it is really out of respect for him that people didn't want to give no votes."

Gray said he proposed his amendment "to have some conversation about where the state revenue is going. Are we going to continue to not to address these very important needs and just spend revenue in other places?"

Gray said that there was bipartisan support for his amendment.

Files told the committee that his bill is modeled after legislation in South Dakota that ultimately led Amazon to start collecting sales tax on its sales to people in that state and remit the collections to South Dakota.

The out-of-state companies affected by SB140 would include those that either have gross revenue exceeding $100,000 from sales of products and services delivered in Arkansas, or have sold products and services for delivery into Arkansas in at least 200 separate sales transactions, in either the previous or current calendar year, according to the Finance Department.

Existing U.S. Supreme Court case law provides that an out-of-state or remote seller must have "nexus," meaning a physical presence in a state, to be required to collect that state's sales and use taxes on in-state purchases, the department said.

Metro on 02/15/2017







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Randy Lann, executive director of Arkansas Homefurnishings Association, shows an old Sears catalog while speaking to the House Revenue and Taxation Committee in support of Senate Bill 140.

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