FILES: Aims for tens of millions in additional revenue via enforcement of sales tax on out-of-state online retail.
Senate Bill 140, the proposal by Sen. Jake Files
to require out-of-state sellers who do significant business in Arkansas to collect sales and use tax, passed out of the Senate today.
It's on to the House for the so-called "Amazon tax
," targeted at online retailers who currently dodge state sales taxes in practice (in theory, customers are supposed to voluntarily pay sales tax owed on purchases in Arkansas from Amazon, but few do). Gov. Asa Hutchinson
has argued that the measure could eventually lead to tens of millions of dollars in revenue.
That's if it holds up in court. If enacted, the bill would go against current court precedent. Amazon and other retailers has long taken advantage of a 1992 Supreme Court ruling that bars states from forcing out-of-state sellers lacking a physical presence to collect tax. However, many believe this ruling — made in a vastly different economy than today's heavily digital retail landscape — is ripe for a challenge. Court cases take a long time, so even if the state is successful, it could be a while before this is ever actually enforced.
On the merits, it's a little hard to come up with arguments for why a duly passed sales tax should hit purchases at brick-and-mortar stores in state but not out-of-state behemoths selling online. Americans for Prosperity and other right-wing groups oppose the tax, presumably because it does amount to a de facto tax increase in terms of what's collected (though it doesn't put a new tax on the books). Ultimately, consumers are the ones paying, and they would pay more if this was enforced.
Wall Street will be watching
the progress of this bill closely, as it potentially could have a significant impact on the business model of Amazon and similar companies.
Walmart supports the sort of approach proposed by Files. It has brick-and-mortar stores in every state, so it has not been able to take advantage of the tax loophole like Amazon.
The bill passed 23-9 with two not voting and one absent. The opposition was made up of the GOP's Tea Party wing.
See more on the bill from Ibby Caputo and the Arkansas Nonprofit News Network