Sales tax collection bill passes House

Rep. Dan Douglas (R-Bentonville)
Rep. Dan Douglas (R-Bentonville)

A bill that would require shoppers to pay Arkansas sales tax on online purchases passed in the House 54-26 Tuesday.

House Bill 1388 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. Arkansans would be expected to remit the sales tax with their income tax returns.

"We don't have the goose that laid the golden egg," said Rep. Dan Douglas (R-Bentonville), lead sponsor of the bill. "If you want to fund pre-K, you have to vote for this bill. If you want to fund highways, you can vote for this bill. If you want to do tax cuts, here's the money."

But some lawmakers were not convinced.

"This actually is a tax increase ... I mean, it's something they haven't paid before," Rep. Johnny Rye (R-Trumann) said during questions.

Douglas said, "It is something they have evaded paying before... It is due and owe-able and payable. We have just been enabling people not to follow the law."

Sales tax was established in a 1941 law. In 1949, a law was passed to collect use tax on goods used within the state but sold by out-of-state sellers, mainly through catalogs. Online purchases are the modern equivalent of catalog purchases, and therefore should be taxed according to the 1949 law, according to supporters of the bill.

Online sales nationwide are expected to climb to $523 billion by 2020, according to industry publications.

"That is a lot of money, and it's only going to increase because more people are shopping online all the time," Douglas said.

Another bill aiming to raise state revenue through the collection of sales and use tax on online purchases passed in the Senate Monday. Senate Bill 140, filed by Sen. Jake Files (R-Fort Smith), would require online sellers that gross more than $100,000 or process at least 200 separate transactions to collect sales tax.

Both bills are based on laws in other states. The Senate bill is based on a bill in South Dakota, which is being litigated. Amazon began collecting sales tax on purchases made in South Dakota after the law was passed.

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 refused to hear the case, allowing the appellate court’s decision to stand.


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