The city and county each adopted a resolution earlier this month in support of federal and state legislation requiring out-of-state retailers to collect and remit sales taxes from online purchases.
The resolution, introduced by the Arkansas Municipal League and Association of Arkansas Counties, calls for local governments to support the Marketplace Fairness Act filed in the U.S. Senate in April. It also asks the governor to convene a special legislative session to consider the issue.
A bill requiring the collection and remittance of sales taxes by retailers without a physical presence in the state was defeated in the Arkansas House, 50-43, on the last full day of the Legislature's 2017 regular session. Senate Bill 140 required retailers with more than $100,000 of annual sales occurring during a minimum of 200 transactions to collect and remit sales taxes.
In lieu of collecting and sending sales tax proceeds to the state, the bill gave retailers the option of providing an annual report to the Department of Finance and Administration listing the name, address and total purchase amounts of each of their in-state customers.
Retailers would have been required to notify their customers the information had been transmitted to the state.
The Senate passed SB 140 by a 23-9 margin, with Bill Sample, R-District 14, of Hot Springs, and Alan Clark, R-District 13, of Lonsdale, voting in the affirmative. Three members of Garland County's House delegation -- Laurie Rushing, R-District 26, of Hot Springs, Les Warren, R-District 25, of Hot Springs, and Bruce Cozart, R-District 24, of Hot Springs -- supported the bill.
Mickey Gates, R-District 22, of Hot Springs, and Marcus Richmond, R-District 21, of Harvey, opposed it.
The Hot Springs Board of Directors unanimously adopted the sales tax resolution without debate, and the Garland County Quorum Court adopted an amended version following a lengthy discussion.
County Finance Committee Chairman Matt McKee, District 9 justice of the peace, questioned putting the onus on businesses to collect sales taxes when the law already provides they be collected through individual income tax filings.
Sales taxes are already levied on online sales through the state's Compensating Tax Act, which requires uncollected sales taxes on out-of-state purchases used, stored, consumed or distributed in state to be reported on income tax filings.
"While this may already be law, (the Marketplace Fairness Act) is going to drag revenue out of the private sector and give it to the government," he said. "I think there are some counties and localities that want that revenue, and the state wants that revenue.
"I'm not necessarily in favor of doing it this way. But it's already the law. It doesn't matter whether or not we pass (the resolution). It's law."
Supporters of assessing sales taxes on internet sales have said that in addition to increasing revenues for state and local governments, levying the tax on online sales also fosters parity between electronic and traditional commerce.
"The playing field, as it currently stands, favors out-of-state internet retailers that exploit a pre-internet loophole, allowing them to evade collecting state and local sales taxes even though they sell the same products in the same communities as local merchants do," the resolution said.
The resulting increase in brick-and-mortar-retail activity will create jobs and grow the local economy, the resolution said, but McKee challenged that logic.
"You're not going to create more retailers by charging their competition sales tax," McKee told the committee.
The quorum court adopted McKee's amendment that struck language from the legislative-intent section of the resolution, removing the clause that said taxing online purchases would "encourage more local retailers, create jobs for local workers and infuse more money into local economies throughout the state of Arkansas."
The amendment was adopted by voice vote, with District 3 JP Denise Marion voicing the lone dissent. The amended version of the resolution was adopted unanimously by roll-call vote.
"I'm not arguing with the fact that if it's the law, these companies should be paying taxes," McKee told the quorum court. "What I'm arguing with is some of these specific whereases. I didn't mean to make a huge deal out of it, but if I'm going to vote for something it should at least be accurate.
"It's going to take money out of our local economy. That $10 that would've gone to Sonic or wherever you go eat downtown is now going to the state treasury. The sales tax isn't our local economy."
County Judge Rick Davis said local governments will have to find alternative revenues if sales taxes from online purchases continue to go uncollected.
"With the way everything is turning to online sales, when our revenues continue to drop because they're not collecting sales tax, we'll have no other choice but one," he told the quorum court. "We'll have to add a millage to furnish the services that we're mandated to furnish. Rural counties are really struggling. Their tax revenues are down."
Information provided to the city board prior to its vote cited U.S. Department of Commerce data showing online activity accounted for 8.1 percent of all retail sales last year. The board's information packet said since March 1, when Amazon began collecting sales taxes on items it sells in Arkansas, receipts are up 7 percent compared to the same time last year.
Local on 07/25/2017