SPRINGDALE : Officials say alter sales tax measure
Posted on Saturday, November 22, 2008
SPRINGDALE — Arkansas ’ streamlined sales tax law may bring more money in to city and county coffers, but “it’s too burdensome on small businesses,” said state Rep. Bryan King, R-Green Forest.
King and several other Republican lawmakers, including Rep. Jon Woods of Springdale, plan to draft a bill in the next legislative session to change two parts of Arkansas Code 26-52-521 — or to repeal the law entirely.
The law, which went into effect Jan. 1, requires sales taxes to be collected at the point of delivery for items purchased via the Internet, catalog or otherwise shipped to the customer. Arkansas is one of 19 states that are full participants in the Streamlined Sales Tax Project, a federal program intended to eventually collect sales taxes on all Internet purchases.
Legislators want to postpone the effective day of Arkansas’ participation until all 50 states are on board, King said. The second change is the provision that the sales tax be paid at the point of delivery instead of the point of origin.
“I’d say the Republican caucus is on board with it,” King said, “and I’m working on several Democrats.”
John Theis, assistant revenue commissioner at the state Department of Finance and Administration, said changing the point-of-delivery part of the law might violate the Commerce Clause of the U. S. Constitution, which requires in-state participants be treated the same as out-of-state participants.
“I’m not going to sit here and say it’s unconstitutional,” said Theis, “but it raises concerns.”
When the plan hit the floor of the General Assembly five years ago, it was promoted as a way to eventually bring $ 100 million a year in sales taxes into the state from out-of-state Internet purchases. But it’s the intrastate purchases that seem to be riling Republicans. The law takes from some Arkansas cities and gives to others depending on whether those cities have manufacturing or consumer bases.
“We’re more of a delivering city than a receiving city,” Woods said of Springdale.
Springdale has several furniture stores and lumber yards that deliver products to customers in other cities, he said. The sales taxes that Springdale collected on those products up until Jan. 1 has since been collected by the city or county where the customer received the goods.
Before Jan. 1, National Home Centers paid all of its sales taxes generated by the Springdale lumber yard to the city of Springdale. So far, Springdale has received about 30 percent of the sales-tax revenue generated by that business because 70 percent of its products were delivered to customers outside the city, said Brent Hanby, the company’s chief financial officer.
“The majority of the money is just not going to Springdale anymore,” he said.
Springdale is the only Northwest Arkansas city that has had declining sales-tax revenue over the past couple of years. The city’s sales-tax revenue dropped 8 percent from $ 25. 5 million in 2006 to $ 23. 4 million in 2007. From January through August, Springdale’s sales-tax revenue dropped 7 percent from $ 15. 8 million to $ 14. 7 million.
Sam’s Club moved from Springdale to Fayetteville in September 2007, affecting both cities’ sales-tax revenue. The average Sam’s Club brings in about $ 75 million a year in sales. Based on Springdale’s 2 percent city sales tax, the store would have brought in an estimated $ 1. 5 million in annual sales taxes for the city.
Theis said there’s no way for Springdale officials to know if the decline in sales-tax revenue is because of the streamlined sales tax law. Springdale actually could benefit from the law, he said. It removed the sales-tax cap on single-item purchases over $ 2, 500, except for cars, boats, mobile homes and airplanes. It would require 1, 132 participating companies that sell products via the Internet to pay Springdale sales taxes when they ship items to Springdale in addition to paying state sales taxes.
So far, Theis said, the streamlined sales tax has brought in $ 3. 25 million in state sales taxes and $ 1. 17 million in local taxes. He noted that other states have had a problem with the point-ofdelivery section. Texas and Ohio don’t participate because of it, Theis said.
“This is a headache for bookkeeping, too,” said Doug Sprouse, a Springdale mayoral candidate and owner of Sprouse Upholstery, a business that often ships products outside the city.
“All I’m asking is that we look at delaying parts of this law until this Internet thing is worked out nationwide,” he said.
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