The House this morning defeated SB 140, the legislation aimed at collecting state and local sales taxes on Internet sales by companies with no physical presence in Arkansas. The vote was 43-50.
Rep. Dan Douglas made another run at the bill, emphasizing that the bill is not a “new” tax because buyers, theoretically, owe a “use” tax equivalent to a sales tax on anything bought in Internet commerce. He said this wasn’t fair and recounted his own experience in his annual purchase of five pairs of Wrangler jeans for farm work (they make his “booty” look better and they’re cheap, he said.) He recounted finding a couple of pairs at local retailers, and paying the tax, then having to get the rest on the Internet, where no tax was assessed.
The bill requires any business doing more than $100,000 in business in Arkansas in a year to either collect and remit the tax or to provide a report to the state of those who made purchases in the state. This reporting requirement has encouraged retailers in other states to collecte the tax. Amazon, the largest on-line retailer, March 1 began voluntarily collecting the tax in Arkansas, where it has no physical facilities.
Rep. Stephen Meeks argued it was a federal issue. Indeed, the legislation anticipates a federal lawsuit will be necessary to determine whether it’s constitutional to require collection of the tax. But it’s based on some Supreme Court commentary that it might be ready to reconsider past precedent on the issue.
Also, he said: “Do we really want these companies telling on Arkansas people?”
Rep. Charlie Collins said the bill had “common sense at its core.” As it is, he said, the state is “aiding and abetting” non-compliance with the law.
This was the first vote in the House on this bill. But other versions of Internet tax collection bills have had mixed receptions in the House and Senate, passing one or the other but not both. The Koch-backed Americans for Prosperity has led the fight against any mechanism to collect the tax.
Rep. Bob Ballinger said the bill would discourage business development in Arkansas, under the theory, I gather, that it’s an incentive to know that if you move to Arkansas you can shop online without paying sales taxes.
That does it for this session. No potential to annex this money for the variety of purposes many had eyed it. During debate, Douglas mentioned that the Department of Finance and Administration had said that several other Internet merchants had registered to collect and remit taxes in the state, but said they didn’t intend to do so unless the bill passed.