A city of Little Rock legal filing indicates the voluntary payments of sales tax on purchases made through Amazon is producing about $1 million a year in sales tax revenue for the city.

It’s a boost, but not nearly the answer to lagging revenue in the city, it seems to me.

By law, organizations must collect and remit sales tax in Arkansas only if they have a physical presence in the state. Otherwise, goods bought out of state are subject to a “use” tax which buyers of the good are supposed to pay to the state, but rarely do.

Amazon has grown so much that it has begun voluntarily assessing and collecting sales taxes in states like Arkansas where it has no physical facilities. (It does not collect tax on independent businesses that operate through its website.)

The city of Little Rock has filed a friend of the court brief in a pending U.S. Supreme Court case that seeks to overturn a precedent that prevents local governments from collecting sales taxes in such circumstances. The city of Little Rock — and other local governments — have blamed the growth of Internet sales and the tax exemption enjoyed by many sellers for stagnant to declining local tax revenue. Many merchants, such as Walmart, do have presences here and do collect taxes on Internet sales. Little Rock has also been negatively affected by growth of retail outlets in growing suburban cities.

City Attorney Tom Carpenter’s brief includes this passage about tax collections:

According to the most recent estimates of the U.S. Census Bureau, internet sales comprise 8.9% of all  sales in the United States. The 2016 sales and compensating use tax figures for the City of Little Rock was $115,125,614.00. An additional 8.9% of this figure for internet sales is $10,010,923.00. However, this $10 million figure would be reduced by state statutory caps on compensating use tax receipts, and by the exemption of certain purchases from any sales or use tax.

In 2017, however, Amazon decided to voluntarily collect sales tax on some of its sales The State of Arkansas created a special code to capture these sales.

For nine months the City of Little Rock collected approximately $500,000.00 for only its 1.5% compensating use tax [the name given to a tax collected on goods purchased out of state]. When the City’s approximately 50% of the 1% Pulaski County compensating use tax is added, and the amount is annualized, the figure is essentially $1 million a year in additional revenues. Yet, as already pointed out to this Court, Amazon represents at most 60% of this internet sales market.

If the tax were applied to all Internet sales not currently taxed (and some is, not just Walmart but others)  would have more money — perhaps $600,000 more based on Carpenter’s figures— to pay for important things. The brief lists firefighting equipment and youth programs.

I was surprised to see the city was able to identify income from Amazon. The state has said payments by individual businesses are shielded by state law. Revenue figures for this year, and anecdotal comments by legislators, have indicated, however, that the Amazon payments haven’t been the boon some have anticipated. In Little Rock, $1 million is a lot of money, but not even 1 percent of a $258 million city budget in 2017.

PS: A state DFA spokesman says it has NOT created a code to identify to cities the amount they are receiving from Amazon. That specific information remains confidential. Little Rock has devised its own means of estimating that, he said.