LITTLE ROCK -- An effort to collect Arkansas sales taxes from online retailers failed before a House committee on Tuesday, days after Amazon announced it would relent and begin charging the sales tax on its customers in the state.
The proposal to require out-of-state companies without a physical presence in the state to begin collecting sales taxes or send information about purchases made by Arkansas residents to the state failed before the House Revenue and Taxation Committee on a 6-2 vote. The measure needed at least 11 votes to advance to the House floor.
All but one of Democrats on the committee declined to vote on the measure after their proposal to direct $25 million of the additional revenue from online sales toward needs such as pre-kindergarten, after-school programs, rural fire and police departments was rejected. Gov. Asa Hutchinson and other Republicans have said any additional money should go toward further cuts in the state income tax.
"These are all needs that have been glaring for more than one session, and this is new revenue that will address them," House Minority Leader Michael John Gray told the panel.
The bill that failed Tuesday merged separate House and Senate measures that were aimed at collecting up to $100 million in tax revenue lawmakers say the state is missing out on from Amazon. The e-commerce giant announced Friday it would begin collecting sales taxes in Arkansas in March, but supporters say the legislation is still needed to recover tax revenue from other online companies.
To avoid collecting taxes, Amazon has historically relied on a 1992 U.S. Supreme Court ruling that bans states from forcing out-of-state retailers to collect taxes if they don't have a physical presence in the state. But the company has shifted recently. Amazon currently collects sales taxes in 38 states and the District of Columbia, according to the company's website.
The lawmaker behind the online tax bill called Democrats' plan to earmark revenue a "poison pill" that would likely doom its chances in the majority-Republican House and would have made defending the proposal in court difficult.
"I'll do what we need to do to get this bill out of committee, but I do think it brings up constitutional issues that if challenged bring a whole other wrinkle to this story," Republican Sen. Jake Files told reporters after the vote.
The legislation would have applied to out-of-state companies without a physical presence in the state that sell more than $100,000 worth of products or make at least 200 transactions.
The legislation has the backing of Bentonville-based Wal-Mart, as well as state retail groups who say they're at a disadvantage with online companies. Conservative groups such as Americans for Tax Reform have opposed the proposals.
State Desk on 02/15/2017