Arkansas set to join Streamlined Sales Tax
Posted on Thursday, December 27, 2007
Arkansas’ participation in the Streamlined Sales Tax Project should benefit Fayetteville, though there is no way to estimate the potential impact.
“ It should help most municipalities as far as the collection of sales tax, ” Paul Becker, city finance director, said.
The Streamlined Sales Tax Project is a collaborative effort by state governments, which participants argue will simplify and modernize the collection and administration of sales and use taxes. Arkansas was made a full member of the Streamlined Sales Tax governing board in a vote during a meeting in September.
Prior to that vote, Arkansas had been one of seven associate member states, which hadn’t yet amended their laws pursuant to the agreement. Arkansas and Wyoming became full members at the same meeting, but the status won’t be official until Jan. 1, according to the program’s Web site.
To become a full member, Arkansas’ tax laws had to be amended to be in line with other participating states. Among those changes were the removal of the cap on purchases of $ 2, 500 or more.
Becker said the cap will still apply to motor vehicles, mobile homes and air and water craft. Rebates will be offered for certain purchases by businesses, governments and nonprofit agencies, he said.
In addition to removing the cap, Becker said taxes will be paid to the municipality at the point of delivery rather than the point of sale. The goal is to capture Internet and mail order sales, which often doesn’t happen because business argue that the varying tax laws make it an undue burden.
In 2006, 561 businesses voluntarily registered for the program, which equated to more than $ 1 million in tax collections for the period of January to October. The state stands to gain about $ 100 million in initial collections, if it is allowed to collect tax on all remote sales, according to a publication of the Arkansas Department of Finance and Administration.
Becker said while he expects the changes in sales tax collection will benefit the city, he hasn’t included any estimates in his projections for the 2008 budget. His budget predicts sales tax collections will increase by 2 percent during this year.
Even at a 2 percent growth rate, Becker said that will mean the city’s revenue will be what it was in 2006.
Becker said states will still have to work with businesses to get them registered with the program before such sales will be taxed.
“ Sooner or later, (registration is ) going to happen, ” he said.
Becker said it will take time to see how the changes will affect the city’s sales tax revenue because there is no way of knowing how many purchases will be affected.
“ Speaking conservatively, Streamlined will have no effect, but it could go either way, ” he said.
City Attorney Kit Williams said the city didn’t have to take any formal action because of the state’s participation in the program; the city will just be affected by the changes in how the sales tax is collected.
Williams said virtually everything to do with sales tax is handled at the state level. He said the city doesn’t even get information on the sales tax generated by specific businesses within the city.
Sales tax revenue generally fluctuates monthly, Williams said, so it will be difficult to tell whether the new system has an impact on the city. It should level the playing field for local businesses, in the sense that online merchants won’t as easily have the advantage of not charging sales tax for Internet purchases, he said.
Williams said regardless of the how it is accomplished, the city is hoping to see sales tax growth return.
“ We hope we’re through with the negative numbers, ” he said.
County Attorney George Bulter said that while state law supersedes local laws, the Washington County Quorum Court amended its ordinances to be consistent with the changes made by the Arkansas General Assembly.
Butler said the amendment brought county law into conformity with the state’s regarding single transactions and deferred to the statute regarding the cap. A provision for the rebate, where the $ 2, 500 cap remains, was also added, he said.
Ultimately, though, any questions that come up regarding sales tax will be for the state, Butler said.
“ We’ll tell them what we know, but if it’s questionable, we’ll tell them to call Little Rock, or we’ll try to find out, ” he said.
For more information about the program, go to www. streamlinedsalestax. org.
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