Springdale Looks at New Side of Streamline Tax

Springdale has changed its mood in regards to the streamline sales tax.

“What we’re trying to do is shift our view from what hurt us in the short term to starting to encourage our Congressmen to do whatever they need to do to adopt the Internet tax,” said Wyman Morgan, Springdale’s administration and financial services director.

Morgan was referencing the Streamlined Sales and Use Agreement, a federal program designed to standardize sales tax rules nationwide. Ultimately, the agreement will allow states to collect sales tax on Internet and mail-order purchases, which previously have been exempt.

Under such guidelines, said John Theis, Assistant Revenue Commissioner for the Arkansas Department of Finance and Administration, the state could reap as much as $100 million a year in new revenue, with about 30 percent of that total divided among its cities and counties.



Those kinds of numbers are a welcome sight for cities like Springdale, which has been hit hard by the Arkansas streamline code that went into effect Jan. 1, 2008. The code was enacted so Arkansas will benefit when the federal program becomes law.

The $100 million estimate is based on work performed by economists from the University of Tennessee, which Theis deemed “the most thorough analysis of the tax loss from remote commerce that has been produced.” The 30 percent figure reflects the amount of current state and local tax collections that are attributable to local taxes.

Theis also indicated the bill could be introduced any day now. Only states with streamline legislation in place will profit.

Under streamline tax rules, goods are taxable by the city to which they are delivered rather than by the city where the sale occurred. Sales tax for an item purchased in Springdale but delivered to Fayetteville, for example, is collected in Fayetteville.

The result, Morgan said, has been a drop of nearly 8 percent in sales tax collected by Springdale over the past 12 months. By comparison, he said the overall amount of sales tax collected in Washington County is down just 0.6 percent, while Benton County has seen an increase of about 2 percent.

The streamline tax was the last part of a triple-whammy that dealt a body blow to Springdale’s economy. First came Sam’s Club’s departure for Fayetteville in the fall of 2006, a move that was followed by a major dip in the local construction industry. Morgan estimated that 13 percent of Springdale’s sales tax revenue stems from its construction industry.

Another example of the ways in which the streamline tax hurt Springdale is its numerous furniture stores. Morgan said he talked with owners of a handful of furniture store owners who estimated as much as 60 percent of their sales are outside Springdale’s city limits.

Morgan believes the streamline tax also “probably has made accounting a nightmare” for local companies’ bookkeepers, who now must track deliveries for accounting purposes. That can be an especially slow and tedious process in places like a short stretch of state Highway 264 that contains three sets of city limits.

A continued decline in sales tax revenue also could hamstring Springdale’s efforts at dressing up its infrastructure, especially monies dedicated to road improvements. Morgan said sales tax dollars drive those kinds of projects.

All the bellyaching hasn’t solved anything, though, and Morgan said last month’s sales tax revenue totals were an encouraging sign that things have leveled in Springdale. Sales tax revenue was down 3.45 percent in Springdale during that period, he said, while Washington County and Benton County showed dips of 3.17 percent and 7.13 percent, respectively.

Morgan pointed to continued development in Springdale and the possibility of the city passing Fayetteville in terms of population in the 2010 census as other positives. Now he’s just waiting for “the Internet tax” to become a reality.

“Personally, I think we’ve endured the worst of it,” Morgan said, “and that when Congress passes this thing, we’re all going to benefit.”