Internet sales tax bill fails to pass House committee

Sen. Jake Files

A bill aimed at collecting sales tax on online purchases failed to pass an Arkansas House committee on a 6-2 vote Tuesday. The measure needed 11 votes to advance from the House Revenue and Taxation Committee. Eight Democrats abstained from voting on the bill, along with Committee Chairman Joe Jett (R-Success). It's customary for the chair to refrain from voting except to break a tie.

Senate Bill 140 would require online sellers that gross more than $100,000 or process at least 200 separate transactions to collect sales tax. The bill already passed in the Senate. Last week, Amazon announced it would voluntarily collect sales tax on Arkansas residents starting in March.

Sen. Jake Files (R-Fort Smith), lead sponsor of SB 140, said, “It’s important that we come down here, we hear debate and then we take a position and for them not to take a position was disheartening.”

House Minority Leader Michael John Gray (D-Augusta) proposed an amendment to Files’ bill that sought to earmark $25 million of the collected revenue to be added to the Medicaid Program Trust Fund, and to fund rural fire and police protection grants, pre-K education and after school programing. The panel rejected the amendment.

Gray was one of the Democrats who did not vote for SB 140 in committee. He says he’s not holding out hope that his amendment will be incorporated into the bill.

“I’m just holding out hope that there can be some discussion about how this revenue can be spent,” he said.

Gray is not alone in wanting to determine how internet sales tax money will be designated before it’s even collected. Rep. Andy Davis (R-Little Rock) filed a bill last week that would designate some of the projected online sales tax revenue for tax reductions.

Files said, “You can’t just start tagging distribution funds. There’s a whole lot of needs out there … what I think might be a good use of funds is different from somebody else.”

Files said he thinks Gray’s amendment would lead to the bill being killed on the House floor, but he said he’ll “do what we need to do to get the bill out of this committee.”

Democrats hold 10 seats in the House Revenue and Tax Committee, giving them more power on that committee than any other in the legislature.

Lawmakers have speculated that sales tax collected by out-of-state online sellers could bring anywhere from $35 million to $150 million in revenue, but, according to the Department of Finance and Administration, the revenue impact of SB 140 is unknown. There is no record of what Arkansas taxpayers are buying on the internet.

This reporting is courtesy of the Arkansas Nonprofit News Network, an independent, nonpartisan news project dedicated to producing journalism that matters to Arkansans.

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