LITTLE ROCK — A bill to require out-of-state sellers like Amazon to notify customers in Arkansas that they owe state sales taxes on their purchases cleared the House on Tuesday with three votes to spare.
In a 54-26 vote, the House approved House Bill 1388 by Rep. Dan Douglas, R-Bentonville.
The vote came a day after the Senate voted 23-9 to approve a bill to require large out-of-state sellers to collect state sales taxes on Arkansas customers’ purchases. The House bill goes next to the Senate and the Senate bill goes to the House.
Under Douglas’ bill, a seller that is based out of state and has no physical presence in Arkansas would not have to collect sales taxes in Arkansas, but the seller would be required to notify every Arkansas customer at the time of a purchase that under existing Arkansas law, the customer is required to file a tax return and pay sales taxes on purchases from the seller.
Failing to provide the notification at the time of a purchase could be punished with a fine of $5 for each failure to provide notice.
Also, by Jan. 31 of each year, the seller would have to provide each Arkansas customer with notice of the total amount the customer spent on purchases from the seller in the previous calendar year or face a fine of $10 for each failure to provide notice.
The seller also would have to provide to the state Department of Finance of Administration an annual report of sales to each Arkansas customer, listing the customer’s name, the amount spent and the delivery address or addresses. Failing to comply could be punished with a fine of $10 for each customer whose information is not reported.
Douglas told House members that Arkansas law has required residents to pay sales and use taxes on purchases made in the state since the 1940s and said his bill would not create a new tax.
He said a person in Arkansas who buys an item in a store in the state or online from a company with a presence in the state pays an Arkansas sales tax, but a person who buys the same item from Amazon, which does not have a physical presence in the state, is not charged a sales tax at the point of sale.
“Is that fair? Is that equitable?” he said.
Rep. Kim Hendren, R-Gravette, said the constituents who have contacted him about the bill do not support it.
“Nobody’s asked for the bill,” he said.
Speaking in support of the bill, Rep. Fred Allen, D-Little Rock, said it should not be seen as raising Arkansans’ taxes.
“This is not a tax increase. Any time you buy something in the state of Arkansas, you pay taxes on it,” he said.
Rep. Bob Ballinger, R-Hindsville, said that although a sales tax on Internet purchases is on the books, Arkansans largely are not paying it now, so it would feel like a tax increase.
“When you put this on their back, they are going to feel it,” he said, adding that the bill would provide the state with evidence of Arkansans’ non-payment of taxes, effectively turning them into criminals.
Douglas said his bill would help Arkansas businesses.
“Main Street in Arkansas is bleeding, and they are bleeding because they are at a disadvantage to the online retailers who have chosen to do business in this state,” he said.
On Monday, the Senate approved Senate Bill 140 by Sen. Jake Files, R-Fort Smith, which would require an out-of-state seller 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 in the state. The measure also would allow the state to take a seller to court to recover sales tax revenue.
Files has said that collecting sales taxes on Internet purchases could generate tens of millions of dollars a year for the state. He has said that if his bill does not become law, by the end of the year Arkansas will be one of six states in the nation where Amazon does not collect sales taxes.