Bill To Collect Online Sales Taxes Fails Before Arkansas House Panel

Feb 14, 2017

Members of the House Revenue and Taxation Committee during Tuesday's debate over the proposal to require online retailers to collect Arkansas sales taxes.

An effort to collect sales taxes in Arkansas from online retailers has been rejected by a House committee. For more than an hour Tuesday, members of the House Revenue and Taxation Committee heard arguments for and against the bill, which was passed last week by the Senate.

Curtis Ferguson speaking to the committee Tuesday.

Curtis Ferguson, owner of Ferguson Furniture in Benton, argued that not requiring online companies to charge a sales tax gives them an unfair advantage.

"The internet sellers are eating our lunch. When you could buy it for 10 percent less and the average profit margin of the type business I'm in is six to 10 percent, you're going to wipe it out right quick. So if they're relieved of the tax and I'm not, then it makes a huge competitive difference," Ferguson said.

He noted that many furniture stores have gone out of business in recent years as online purchases have been on the increase.

But David Ray, state director with the conservative political advocacy group Americans for Prosperity, argued the bill is unconstitutional.

David Ray with Americans for Prosperity speaks to the House Revenue and Taxation Committee.

"For the past 25 years the Supreme Court has held under Quill Corp. v North Dakota since 1992 that absent Congressional action, states cannot force companies without a physical nexus within their boarders to collect and remit sales tax on behalf of the state," Ray said.

He noted a similar bill is facing a legal challenge in South Dakota, which, like Arkansas, is part of the 8th Circuit Court of Appeals, and suggested Arkansas lawmakers should wait to see how that case is resolved.

The backer of the bill, Republican Sen. Jake Files of Fort Smith, acknowledged there were some problems with the legislation, but asked for passage so that it could get further debate in the full House.

Sen. Jake Files, sponsor of the bill, speaking to the committee Tuesday.

"As you well know, there's a lot of misinformation. People can sit down here and say this is a new tax and this is that, but we have heard testimony very clearly is that this replaces an existing tax, while there may be an increase in revenue," Files said.

By a vote of 6-2, the proposal was rejected by the committee.

Last week, after the Senate passed the bill, Amazon said it would begin collecting sales taxes from Arkansas customers.

Meanwhile a similar bill by Rep. Dan Douglas, a Republican from Bentonville, is expected to be considered Wednesday by the Senate Revenue and Taxation Committee.