Amazon tax bill rejected on the third attempt as legislative session nears end

The third time was not a charm for controversial legislation that would allow Amazon.com and other remote online retailers to collect and remit possibly hundreds of millions of dollars to fill state budget coffers.

Senate Bill 140, sponsored by Sen. Jake Files, R-Fort Smith, was defeated for the third time in the House Revenue and Taxation Committee on Tuesday as lawmakers hastened to pass last-minute legislation before the end of the 91st General Assembly.

The bill was rejected in nearly the same fashion as two early hearings, where the Democratic Party’s newly elected chairman, Rep. Michael John Gray of Augusta, attempted to attach a so-called hostile amendment on SB140 served as a foreshadowing of the measure’s eventually failure.

Rep. Dan. Douglas, R-Bentonville, the House sponsor of SB140, spiced up the meeting with a sermon-like admonition to his fellow committee members on the House panel to pass the so-called Amazon tax bill on the third try.

“We don’t need to beleaguer this a whole lot, we’ve all been down this road and we all know what (SB140) does. I just want to say this; there are no deals on the table – this is an up or down vote right here and it either lives or dies in this committee and its over – today,” Douglas said. “And we can either put the money in the general revenue (fund) and fight over then or we (want) have the revenue for this. It’s up to ya’ll, it’s up to this committee.”

Douglas then appealed to the House panel that it was their duty as legislators to pass law that would level the playing field for Arkansas retailers that compete with online retailers who don’t currently pay sales and use taxes.

“We need to look at what we here for, and that is doing the business of the state of Arkansas and enacting our laws in a fair and equitable manner,” Douglas said. “We have business and retailers that are the backbone of the economy of this state that are suffering due to unfair competition with online retailers that are collecting and remitting sales taxes.”

Before Douglas’ speech, the committee rejected an amendment by Rep. Michael John Gray, D-Augusta, that would set aside $25 million collected from the online sales tax for the Medicaid trust fund, education and afterschool funding, and the remaining half to a “miscellaneous agencies” account for rural fire and police grants. Another caveat in the bill would allow any Internet sales taxes collected over the amount of $110 million to be to cut taxes of Arkansans in the 4.5% income tax bracket.

Gray’s measure was an exact copy of an amendment he proposed to SB 140 before the same House committee twice in February, which the panel rejected in party-line voice votes. After Gray failed to attach his amendment to the bill, lawmakers then summarily rejected the measure because there were not enough affirmative votes to get it out of the 20-member committee, split evenly between Republicans and Democrats.

Gray, the Democrat Party’s newly elected chairman, said after SB140’s third failed vote that many voters still see the bill as a tax hike. He said Gov. Hutchinson has passed nearly $300 million in tax cuts, shifting the state’s sales tax burden onto the back of the state’s low and middle income taxpayers.

“It is easy to get in here and talk about all legalese language and understand that there is a big part of the public that still sees it as a tax increase,” said Gray. “I think you are looking at members who are saying we can go back and tell our people we took part in what looks like a tax increase, but ‘we did this and we did that so we could fund this and fund that’ without knowing where that increase and notion of an increase may go.”

Gray added: “It is going to be hard for some of us to go back home to our constituents.”

BLUE RIBBON TAX PANEL UP NEXT

Files, who did not attend Tuesday’s committee hearing, first presented his bill to the House panel only three days after online retail giant Amazon said it would begin collecting sales tax on Arkansas online purchases on March 1. The bill was originally approved by the Senate in a vote of 23-9 after Files told fellow lawmakers his legislation would allow the state DF&A to potentially capture between $30 million and $100 million in uncollected sales and use taxes.
Since then, the bill has been stuck in the House committee as Democrats and Republicans have come to a head on state tax policy.

After several lawmakers from both parties said SB140 is dead, Senate and House lawmakers have this week entered into discussions on the creation of the Arkansas Tax Reform and Relief Legislation Task Force, the Blue Ribbon panel created on Feb. 1 after Gov. Hutchinson signed his $50.5 million plan that will offer a break on income taxes to Arkansas wage-earners making less than $21,000 a year.

Under the emergency clause of Act 79, the governor’s tax cut plan would take effect just ahead of the next General Assembly in January 2019 and a Blue Ribbon task force to reform taxes would begin holding scheduled meetings within 30 days after sine die adjournment of the 2017 session.

The legislative work group, which would include 16 members of the legislature or their designees, would be tasked to file a preliminary report with the governor, House Speaker and President Pro Tempore on the task force’s activities, findings and recommendations by the end of 2017. A final draft of the task force recommendations must be completed by Sept. 1, 2018.

Files and Sen. Jim Hendren, R-Gravette, the primary sponsor of the governor’s tax cut plan, have said the Blue Ribbon panel should put a 5-year sunset provision on all tax exemptions. According to a 2012 Department of Finance and Administration analysis, tax exemptions in the Arkansas tax code amount to hundreds of millions of dollars or more than $1 billion, depending on interpretations.

The discussion on state tax policy is highlighted by several reports showing Arkansas’ tax code near the bottom nationally on a number of fronts. Earlier on Tuesday, the Joint Budget Committee approved several amendments and allocations that are part of the state’s Revenue Stabilization Act (RSA), which is amended each biennium to prioritize state spending.

In November, Gov. Hutchinson laid out a $5.5 billion budget for the state through fiscal year 2018, highlighted by his tax cut proposals, efficiency measures and economic development and education initiatives. The state’s current budget forecast under the RSA is $5.49 billion.