House passes bill requiring Amazon to inform buyers they owe tax

Out-of-state sellers such as Amazon would be required to send notices to Arkansas consumers that they owe sales taxes under a bill passed by the Arkansas House of Representatives Tuesday.

House Bill 1388 by Rep. Dan Douglas, R-Bentonville, would require retailers without a physical presence in Arkansas to notify purchasers at the time of purchase that sales taxes are due. Vendors would be liable for a penalty of $5 for each violation.

The bill passed the House, 54-26, with six legislators voting present. It now goes to the Senate Committee on Revenue and Taxation.

Under the bill, sellers who do not collect Arkansas sales or use taxes would be required to send purchasers a notice by electronic communication or first-class mail by Jan. 31 showing the amount of purchases made the previous year. It would include, if possible, the amount of each purchase and whether the purchase is tax exempt.

Sellers would be required by March 1 to file an annual report of sales to each purchaser to the Department of Finance and Administration, including the purchaser’s name, amount paid, and shipping addresses.

In arguing for his bill, Douglas said the measure merely facilitates the collection of an existing tax. The sales tax was created in 1941, while the use tax for out-of-state sellers was passed in 1949 after legislators realized Sears was selling products to Arkansans without charging a tax – similar to what is happening now with online sellers, he said.

He said online sales are growing and that the state is losing $150 million in tax collections annually – $35 million from Amazon alone.

Douglas, who represents Bentonville, corporate headquarters of Walmart, said the bill was needed to provide fairness to brick-and-mortar retailers who must add the sales tax to the price of their products while out-of-state sellers do not. If an Arkansan purchases a chainsaw chain at True Value or at the company’s website, they are charged a tax, he said. If they purchase one from Amazon, they do not. He said Arkansas is one of only six states where Amazon is not adding a sales tax, and that’s because Arkansas has not required it to do so.

“It’s a fairness issue,” he said. “Main Street in Arkansas today 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 referenced efforts by U.S. Rep. Steve Womack, R-Ark., to pass the Marketplace Fairness Act empowering states to require online vendors to remit sales taxes. That bill has not been passed.

Douglas’ bill is based on a Colorado law he said had been declared constitutional by the 10th Circuit Court of Appeals, with the Supreme Court refusing to hear the appeal. Another bill, Senate Bill 140 by Rep. Jake Files, R-Fort Smith, would require businesses with Internet sales of more than $100,000 a year or 200 transactions to remit sales and use taxes. That bill is based on a South Dakota law that has been challenged in court. It passed the Senate 23-9 Monday.

In a press conference Tuesday, Gov. Asa Hutchinson said he is monitoring both bills. He said Douglas’ bill “makes some common sense” because it facilitates a current tax. He said Senate Bill 140 is “more complex.”

He said that when he served in Congress in the 1990s, a movement to tax online sales nationally was resisted so the online marketplace could flourish.

“We have today succeeded in that objective,” he said. “And so now the focus returns to more fairness in our tax code and in the collection of taxes, and I think that’s what both of these bills are designed for, and I support that fairness.”

Douglas said current laws are allowing taxpayers to evade paying taxes, a Class C felony, which drew a rebuke from Rep. Kim Hendren, R-Gravette, who voted against the bill. Hendren asked why the system should be made fairer by increasing tax collections rather than raising them and said the change should be considered in the context of overall tax reform. He said he recently had been stopped by a police officer for speeding but not given a ticket. Should he pay the amount to the state voluntarily? he asked.

“How can I vote for this when I don’t practice what I preach?” he asked.

Rep. Bob Ballinger, R-Hindsville, said he was voting against the bill because Arkansas taxpayers have a higher tax burden than taxpayers in many other states.

“When you put this on their back, they are going to feel it,” he said.

But Rep. Jack Fortner, R-Yellville, said a local hardware store owner had asked him to vote for the bill by saying that, when someone needs basic supplies on a Saturday morning, they’re not going to want to order it online, but an online retailer can sell a tool cheaper than he can because it doesn’t have to add the tax.

In other business, the House passed House Bill 1144, by Rep. Mark McElroy, D-Tillar, which would allow automated cameras on school buses that will photograph drivers and their license plates if they pass a stopped school bus with its stop sign out and lights flashing. The photographs could be used in court. McElroy, who said he drove a school bus for four years, said it’s difficult to catch or prove a driver has illegally passed a school bus. The bill passed 88-1.

The House also voted 27-53 against House Bill 1280 by Rep. Mark Magie, D-Conway, which would prohibit the use of tanning beds by minors. Magie, a physician, said tanning is a carcinogen that contributes to melanoma. He read a letter from Erin Wheatley Parker, Miss Arkansas 1998, who said she used tanning beds while competing and since has had melanoma removed.