Legislation aimed at collecting online sales tax advances

Sen. Jake Files
Sen. Jake Files

Two bills aimed at raising state revenue through the collection of sales and use tax on online purchases cleared their first hurdles this week.

Senate Bill 140, filed by Sen. Jake Files (R-Fort Smith), passed on a voice vote in the Senate Revenue and Tax Committee on Wednesday. It would require out-of-state sellers who do a certain amount of business in Arkansas to collect sales and use tax.

House Bill 1388, which passed on a voice vote with some dissent in the House Revenue and Tax Committee on Thursday, would require out-of-state online retailers, who do not already collect sales and use tax in the state, to warn Arkansas customers that a sales or use tax was due. Online retailers would also have to send the customer an annual statement detailing the online purchases and taxes owed and would have to send an annual report of sales for each customer to the Arkansas Department of Finance and Administration.

Rep. Dan Douglas (R-Bentonville), lead sponsor of HB 1388, said, “It’s really a simple bill. It’s about catching the state of Arkansas up with the future.”

The two bills are modeled after legislation passed and litigated in other states. The House bill is modeled after a Colorado law that was upheld by the 10th U.S. Circuit Court of Appeals. The U.S. Supreme Court denied to hear the case, allowing the appellate court’s decision to stand.

The Senate bill is based on legislation adopted in South Dakota. Online retailers sued after the law went into effect; their suit is pending.

Arkansas SB 140 requires online sellers that gross more than $100,000 in at least 200 separate transactions to collect sales tax. Amazon began collecting sales tax on purchases made in South Dakota after the law was passed.

The revenue impact of both bills is unknown, according to Department of Finance and Administration. The full Senate was expected to consider SB 140 on Monday. The full House was expected to consider HB 1388 the same day.

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