(LITTLE ROCK) Internet retailers with no in-state physical presence will be required to collect Arkansas sales and use taxes on purchases, thanks to a new state law that took effect July 1st.
Act 822 also will require marketplace facilitators, such as Amazon and eBay, to collect and remit the applicable Arkansas taxes on all sales conducted through the marketplace.
State officials estimate that the online sales-tax provisions will raise about $35 million a year more for the state and about $11 million more a year for cities and counties.
But some others question whether state officials are lowballing their projections.
The provisions requiring the collection and remittance of the taxes were tucked into Senate Bill 576 by Sen. Bart Hester, R-Cave Springs, which is now Act 822. The law also eventually will cut the state’s top corporate income tax rate; extend the net operating loss carry-forward period for corporations; and overhaul the taxation of commercial carwashes.
Randy Lann, Executive Director of the Arkansas Home Furnishing Association, said he expects the online tax provisions to mean some small furniture stores that otherwise would go out of business in Arkansas will survive and larger furniture stores will expand in the next two years.
Arkansas has lost 40-50 furniture stores because of business going to online retailers such as Wayfair. The state now has 240-250 furniture stores, he said Friday in an interview.
Arkansas’ adoption of these online tax provisions is long overdue and most other states have adopted similar measures, Lann said.
Forty-two states have enacted remote-seller provisions, said Scott Hardin, a spokesman for the state Department of Finance and Administration.
Act 822 won’t apply to every out-of-state Internet retailer. It applies to those that meet at least one of two conditions:
• It is limited to those that have gross revenue from any sales of products and services delivered into Arkansas that exceeds $100,000 in the previous calendar year or the current calendar year, according to the finance department.
• The law also will apply to retailers that have sold goods and services for delivery into Arkansas in at least 200 separate transactions, the finance department said in its legislative impact statement.
“These thresholds are identical to those imposed by South Dakota, which were upheld by the United States Supreme Court in South Dakota v. Wayfair [in June 2018],” the finance department said.
In a 5-4 ruling, the high court overturned a 1992 precedent that barred states from requiring businesses with no physical presence in those states to collect sales taxes.
According to the finance department, Act 822 “provides that the tax collection responsibility would not be applied retroactively, and businesses would be subject to the provisions only upon the effective date of the act.”
That means out-of-state retailers will begin collecting the sales and use taxes on Monday and then remit the taxes in August, so any changes in revenue won’t show up until the state’s monthly revenue report for August is released in early September.