Amazon said Friday that it will begin collecting sales taxes next month in Arkansas, which lawmakers say could generate as much as $100 million to help lift the state’s lagging revenue and potentially fund future income tax cuts.
Arkansas will be the latest state where the e-commerce giant has relented after years of resisting efforts to collect taxes in states where it doesn’t have a physical presence. Amazon spokeswoman Jill Kerr said the company will begin collecting the sales tax on March 1, but declined to elaborate on the move.
The decision, first reported by Little Rock television station KATV, comes days after Arkansas lawmakers advanced separate efforts to force Amazon to begin collecting sales taxes. A Senate-backed proposal would require Amazon and similar out-of-state companies to begin collecting sales taxes. A state House-backed measure would require Amazon and similar companies to tell Arkansas customers they owe the state sales tax and provide a list to finance officials of purchases made by state residents.
The first sales taxes collected by Amazon will be paid to the state in April. State finance officials declined to comment on Amazon’s decision or the expected revenue from the move, citing a state law that bars them from commenting on the specific status of taxpayers. Republican state Sen. Jake Files, who proposed the Senate-backed bill, has estimated it could bring in between $32 million and $100 million a year.
Files said his proposal is still needed to recover funds from other out-of-state companies.
“I think it’s a good move for fairness, but it doesn’t complete the fairness circle,” Files said.
Files’ measure is modeled after a 2016 law in South Dakota, where officials last month said Amazon agreed to begin collecting sales taxes. The state House bill is modeled after a Colorado law that the U.S. Supreme Court let stand last year. The proposals had the backing of Bentonville-based Wal-Mart, but faced opposition from conservative groups such as Americans for Tax Reform.
To avoid collecting taxes, Amazon has historically relied on another high court ruling that predates the era of online shopping. That 1992 decision bans states from forcing out-of-state retailers to collect taxes if they don’t have a physical presence in the state. But the company has shifted recently, with Amazon this winter collecting sales taxes in at least 10 states where it hadn’t previously. Neighboring Oklahoma announced last week that Amazon would begin collecting sales taxes there starting next month. Amazon currently collects sales taxes in 38 states and the District of Columbia, according to the company’s website. Prior to Friday’s announcement, Amazon collected or was preparing to collect sales taxes in every state bordering Arkansas. The decision could raise hopes about Arkansas’ finances. Gov. Asa Hutchinson told several state agencies last week to prepare for possible budget cuts after finance officials said the state’s revenue was $57 million below forecast. Hutchinson, a Republican, repeated his desire Friday that any additional revenue from online sales go toward further cutting Arkansas’ income tax. Hutchinson last month signed into law a measure cutting the state’s income tax by $50 million and forming a task force to recommend further cuts before the 2019 legislative session.
“This strengthened revenue stream will allow us to continue to make progress in cutting the income tax rate, making Arkansas more competitive with our surrounding states, and putting money back into the pockets of hardworking Arkansans,” he said in a statement.