Besides proposals to cut the state’s top individual income tax rates, the recommendations of the Arkansas Tax Reform and Relief Legislative Task Force include:
SALES AND USE TAXES
• Require out-of-state online sellers that don’t have a physical presence in Arkansas and have more than $100,000 in sales or at least 200 separate transactions a year in Arkansas to collect and remit sales and use taxes. Also repeal a provision in state law that would reduce the 4.5 percent individual income tax rate based on sales and use tax collections by these sellers. The state Department of Finance and Administration projects that requiring these out-of-state sellers to collect sales and use taxes would raise about $35.3 million a year.
• Expand to all carwashes the sales tax exemption for services provided. (Exemption now is only for coin-operated carwashes where the labor is performed by the customer or mechanical equipment.) Expanding this exemption is projected by the finance department to reduce tax revenue by $1.8 million a year. Another proposal would create a fee paid by all carwash operators based on the amount of water used. The department was unable to estimate revenue from the proposed fee because it doesn’t have information on the amount of water used or business operations.
• Repeal the exemption on sales of four-wheelers and all-terrain vehicles used as farm equipment and machinery. Replace it with a tax rebate. The aim is to limit the potential for abuse of this exemption.
• Repeal all exemptions for named nonprofit entities, including the Boys and Girls Clubs of America, 4-H clubs and FFA clubs, and creating a generalized exemption. The aim is to eliminate any potential constitutional issues relating to special legislation for specific entities.
• Repeal the exemption on the sale of any publication, other than newspapers, through regular subscription. The proposal is contingent on passage of a law requiring out-of-state sellers without a physical presence in Arkansas to collect and remit sales taxes. The finance department projects this repeal may raise about $1.5 million a year.
• Limit to 3 percent the total sales tax rate levied by a county for general purposes; capital improvements; capital improvements of a community college; food and lodging; and economic development. Would not affect counties that now have total tax rates exceeding 3 percent.
• Limit to 4 percent the total sales tax rate levied by a city for general purposes; capital improvements; the temporary acquisition, construction or improvements of parks; food and lodging; and economic development. Would not affect cities that now have total tax rates exceeding 4 percent.
• Review all sales and use tax exemptions at regular intervals.
Northwest Arkansas Democrat Gazette
by Michael R. Wickline
August 23, 2018