The Senate on Monday sent the governor legislation that would make several tax code changes, including requiring out-of-state online sellers to collect sales and use taxes from in-state purchasers.
The Senate voted to 31-3 to approve Senate Bill 576 by Sen. Bart Hester, R-Cave Springs, after concurring with the House-approved amendments to the bill.
Under SB576, out-of-state remote sellers without a physical presence in the state would be required to collect and remit sales and use taxes on annual sales of more than $100,000 from products and services delivered into Arkansas, the state Department of Finance and Administration said of the bill. Alternatively, such sellers would be required to collect sales and use taxes if they sold products and services for delivery in Arkansas on at least 200 separate transactions.
These thresholds are identical to those imposed by South Dakota that were upheld by the U.S. Supreme Court in 2018 in South Dakota v. Wayfair, the department said.
These out-of-state sellers would begin collecting the tax July 1 under the bill, the finance department said. The sales thresholds would apply to the previous calendar year or the current year.
SB576 also would require "marketplace facilitators," such as Amazon or eBay, that sell or facilitate sales for their participating sellers, to collect and remit applicable state sales taxes on all purchases through the marketplace, according to the finance department.
The finance department projects that these requirements would raise $32.4 million in revenue in fiscal 2020, over 11 months, and $35.3 million in fiscal 2021, based on a full 12 months. The department also forecasts the bill would raise $10.8 million for cities and counties in fiscal 2020 and $11.8 million in fiscal 2021 because of local sales taxes.
According to the department, SB576 also would:
• Change the state's sales and tourism tax provisions to provide that "accommodations intermediaries" would be required to collect and remit Arkansas taxes when furnishing an accommodation in the state. That's projected to raise $3.1 million in state tax revenue in fiscal 2020 and then $4.2 million in fiscal 2021.
• Reduce the state's top corporate income tax rate from 6.5 percent to 6.2 percent for income exceeding $100,000 for tax years starting on or after Jan. 1, 2021, and to 5.9 percent for income exceeding $25,000 for tax years beginning on or after Jan. 1, 2022.
SB576's corporate income tax cuts would reduce state tax revenue by $9.8 million in fiscal 2021, $29.5 million in fiscal 2022 and $39.3 million in fiscal 2023 and beyond.
• Extend the net operating loss carry-forward period from five to eight years for losses occurring in the tax year starting Jan. 1, 2020, and to 10 years for losses in tax years beginning on or after Jan. 1, 2021, according to the finance department. That is projected to reduce state revenue in fiscal 2026 by $7.8 million and eventually $70 million in fiscal 2032.
• Change the apportionment formula for multistate corporations from three factors to a single-sales factor. That's projected to increase revenue by $357,000 in fiscal 2021 and $714,270 in fiscal 2022 and beyond.
• Provide a carwash-related sales-tax exemption and levy monthly water usage fees on operators of tunnel carwashes and automatic carwashes. The fees would be calculated on eight-tenths of the total aggregate number of gallons of water used during the month and levied at four-tenths of a cent per gallon on tunnel carwashes and at two-tenths of a cent on automatic carwashes.
The changes are projected to reduce state tax revenue by $3.3 million a year.
A Section on 04/09/2019
Print Headline: Senate forwards Internet tax bill to Hutchinson