LITTLE ROCK — A bill aimed at collecting sales taxes on Internet purchases cleared the House Revenue and Taxation Committee on Thursday after being stalled there since early February.
In a voice vote that was not unanimous, the panel gave a “do pass” recommendation to Senate Bill 140, which had failed in three previous votes and had been declared dead by a co-sponsor. No one asked for a roll-call vote.
Lawmakers plan to wrap up the session Monday, so the clock is ticking for the bill. It goes next to the House, and if it passes there it will still need to go back to the Senate for concurrence in a House amendment.
As originally filed by Sen. Jake Files, R-Fort Smith, SB 140 would have required an out-of-state seller with no physical presence in Arkansas that sells more than $100,000 worth of products or makes at least 200 transactions in Arkansas in a calendar year to begin collecting sales taxes on purchases in the state.
The bill cleared the Senate in that form, but it later was amended in the House tax committee to allow a seller either to collect the tax or to report purchases to the state for tax collection purposes and notify customers in Arkansas that they are required to pay a tax to the state on those purchases under a previously existing — though little followed — state law.
The largest online seller, Amazon, agreed earlier this year to begin collecting sales taxes in Arkansas, and it said Monday it will begin collecting sales taxes in all 50 states. Many other online sellers are not collecting taxes in Arkansas, however.
The U.S. Supreme Court ruled in 1992 that a business must have a substantial physical presence in a state to be required to collect state taxes. SB 140, like similar laws in some other states, is based on the premise that a business’ substantial economic presence in a state justifies requiring the business to collect state taxes.
Before Thursday, the bill was blocked in the House tax panel by Democrats whose attempts to amend the bill were repeatedly rejected. Democratic committee members wanted to add language directing Internet sales tax revenue to specific needs such as early childhood education and rural police and fire departments.
Rep. Reginald Murdock, D-Marianna, offer another amendment Thursday that would direct revenue to specific needs, with highways included for the first time. The committee voted it down as well.
Files told the committee the bill “gives us an opportunity, as you all know, to levelize the playing field for our local mom and pop businesses.”
Jacksonville Mayor Gary Fletcher testified that Main Streets across the state need the bill.
“Cities live on sales tax,” he said.
House Minority Leader Michael John Gray, D-Augusta, a member of the committee, said he believed the Democrats on the panel, who account for 10 of its 20 members, achieved something despite being unable to amend the bill.
“What we accomplished here was having a conversation about other needs and other priorities in the state,” he said.