LITTLE ROCK — A bill that would require Internet sellers to tell their Arkansas customers they owe taxes on their purchases cleared a Senate committee Wednesday.
In a voice vote that was not unanimous, the Senate Revenue and Taxation Committee gave a “do pass” recommendation to House Bill 1388 by Rep. Dan Douglas, R-Bentonville. The measure is one of two different proposals in the Legislature aimed at collecting sales taxes on Internet purchases.
Under Douglas’ bill, which passed in the House earlier this month in a 54-26 vote, a seller that is based out of state and has no physical presence in Arkansas would be required to notify every Arkansas customer at the time of a purchase that under existing Arkansas law, the customer is required to pay the state a consumer use tax on Internet purchases.
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 and 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.
A separate measure, Senate Bill 140 by Sen. Jake Files, R-Fort Smith, would require large out-of-state sellers with no physical presence in Arkansas to collect state sales taxes on purchases in Arkansas. The bill has cleared the Senate but stalled in the House Revenue and Taxation Committee.
The largest online retailer, Amazon, recently said it will begin collecting sales taxes on Arkansas purchases in March. Files and Douglas say their bills are still needed because other online sellers are not collecting taxes in the state.
David Ray, state director of Americans for Prosperity, testified against Douglas’ bill Thursday, saying, “Even if a small number of state personnel are devoted to this effort, the cost could quickly outweigh the revenues being collected.”
Ray also said the proper way to see that taxes are collected on Internet purchases would be for Congress to pass a federal law.
Retail store owner Curtis Ferguson told the committee that Arkansas-based retailers cannot compete with out-of-state retailers who do not collect sales taxes on Internet purchasers.
“It’s costing retail stores their livelihood,” he said.
Douglas admitted that his bill is not the ideal way to address the problem.
“Ideal would be for Congress to get off their butts and do what they didn’t do. They’re not doing their job up there,” he said.
Douglas told reporters later he hopes both his bill and Files’ will become law.
“If one of them doesn’t work, the other one will do it,” he said.
Files, who is chairman of the Senate tax panel, told reporters he expected his bill to be considered again Thursday in the House tax panel and said he was optimistic it would get out of the committee this time.
Files’ bill stalled previously after Democrats unsuccessfully pushed to amend it to direct tax revenue to needs such as early childhood education and rural police and fire departments.