After a debate mostly concerned with a portion of the bill attempting to equalize tax burdens on car washes, the House Revenue and Taxation Committee today endorsed SB 576, a major tax bill aimed at raising sales tax revenue on Internet commerce and providing millions in corporate tax cuts.
Most of the debate was about a compromise amendment to tax car washes based on water usage. Currently automated car washes pay no sales tax, while those that add some human services pay a tax. The bill passed with a higher tax in the Senate. A House amendment has now reduced a car wash tax based on water usage. It’s a method some car wash owners said was still discriminatory. But the argument wasn’t enough to defeat the bill today, as it had done in an earlier House committee meeting. It got a “do pass” today on a voice vote.
Little was said about the long-sought required collection of sales taxes by “remote sellers,” or Internet merchants. The bill applies to those doing more than $100,000 of business in Arkansas. It’s expected to be a boon to both the state and local governments, where declining brick-and-mortar retail has impaired sales tax revenue.
Bigger ticket items are corporate tax cuts — touted as making Arkansas more competitive by Randy Zook, head of the Arkansas State Chamber of Commerce. Those parts of the bill reduce the top corporate income tax rate from 6.5 to 5.9 percent, allow extended carryforward of losses and provide tax cut benefits in the way multistate and financial corporations report income.
Here’s the latest detailed analysis of financial impact.
* In the second year of implementation, but the first full year of impact, the Internet sales tax will produce $46 million in new taxes.
* Car wash revenue overall will drop by $1.6 million, with a tax increase for some car washes offset by tax cuts for others.
* The operating loss carryforward will cost the state $7 million in 2026 and increase in succeeding years to an annual tax cut of $70 million by 2032.
* The cut in corporate income tax rates will save corporations $9.8 million, $29.5 million and $39.4 million over the next three years, or almost $80 million cumulatively while retail consumers will be paying cumulatively more than $120 million to Internet merchants.
If the bill passes the House it will have to return to the Senate for concurrence in amendments.