The state Senate approved a bill Monday aimed at persuading Seattle-based Amazon and some other companies that have no physical presence in Arkansas to collect taxes on their sales to Arkansans and remit the receipts to the state.
The Senate voted 23-9 to send Senate Bill 140 by Sen. Jake Files, R-Fort Smith, to the House for further consideration. The House has a similar bill.
Files, chairman of the Senate Revenue and Taxation Committee, said SB140 is based on legislation enacted in South Dakota that led Amazon to begin to send sales-tax receipts voluntarily to that state based on its sales in South Dakota.
"This is not a tax increase or a new tax," Files told senators. Arkansans already owe these taxes in the form of use taxes based on their purchases from out-of-state retailers, he said.
Files said it's estimated that his legislation could increase state tax revenue by anywhere from $32 million a year from Amazon alone to $100 million a year, and he wants the increased tax revenue to be used to cut taxes in the future. He later told reporters that he expects more than 40 states to be collecting sales tax from out-of-state sellers by the end of this year.
Files' legislation -- backed by Wal-Mart Stores Inc. -- "helps a lot of different businesses" and it's false to suggest it only helps big businesses, he said.
But Sen. Bart Hester, R-Cave Springs, who voted against the legislation, said he worried "at the end of the day if the people of my district have more money coming out their pocket because of a bill we passed.
"We don't need more revenues as a state. We have a spending problem, not a revenue problem," he said in an interview.
Washington, D.C.-based Americans for Tax Reform President Grover Norquist urged lawmakers to oppose the bill in a letter sent to Senate Revenue and Taxation Committee members last week.
"Requiring businesses to remit taxes to a state where they have no physical presence is simply unfair, as out-of-state employers and their employees will not use or benefit from any public service, program or project funded by Arkansas' sales tax," Norquist said in his letter. "SB140 and other efforts by state and local tax collectors to reach beyond their borders present constitutional concerns as well."
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 into Arkansas, or have sold products and services 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 the state believes meets the criteria of the bill, the finance department said.
The finance department said it didn't know the revenue impact from out-of-state sellers volunteering to begin tax collections because of SB140.
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 purchasers, the department said.
Files told reporters that complementary legislation to SB140 is pending action on the House floor.
House Bill 1388 by Rep. Dan Douglas, R-Bentonville, would require out-of-state retailers that don't have a physical presence in Arkansas and don't collect Arkansas sales and use taxes from their customers to notify their Arkansas customers at the time of purchases that tax is due and that the state requires the filing of a sales- and use-tax return.
The bill also would require out-of-state retailers to notify their Arkansas customers by Jan. 31 of each year of the total amount of each customer's purchases, according to the finance department. By March 1 of each year, these retailers would be required to file with the finance department annual reports of sales to each customer, showing the total amount paid during the preceding calendar year.
The bill includes penalties for out-of-state retailers and facilitators that fail to comply with its provisions, the department said.
A Section on 02/07/2017
