THE ISSUE: Amazon will now collect sales taxes in Arkansas. THE IMPACT: Many local businesses, while unsure of the exact affect it will have, say that they approve of the measure because it levels the playing field, since their customers must pay sales taxes on purchases. The move will also mean more sales tax money for Arkansas.
Local merchants welcomed news on Friday that online retailer Amazon will start collecting sales tax on purchases in Arkansas.
Arkansas is one of a few states that still does not tax online sales of out-of-state companies, but two separate bills were proposed recently in the legislature to change that.
The news was first reported Friday by Little Rock television station KATV, according to the Associated Press. An Amazon spokesperson told the AP the company would begin collecting sales taxes in Arkansas March 1.
Local retailers applauded the announcement, saying it could lead to more business.
“I think that’s the only fair thing to do,” said Jane Judkins, who owns KeepSakes Jewelry & Gifts in White Hall with her husband, David. “Some people won’t want to have to pay that, and hopefully it will help the local retailers.”
More people shop online each year, Judkins said, which makes it harder to compete. She said jewelry stores are not as hard hit from online competition, because people still want to see the product in person before buying and because local stores often offer in-store repairs. But other sectors, such as clothing, have seen large effects.
“It affects all the local retailers,” Judkins said. “That’s why so many, even big companies like Macy’s and Gap are closing stores everywhere, because you can order it online.”
Michael Gutman, store manager at Sissy’s Log Cabin in Pine Bluff, said business was going well ahead of Valentine’s Day, but he welcomed the announcement.
“I think it’s probably good news,” Gutman said. “I think it levels the playing field. I don’t consider Amazon to be our competition. But it is competition for retail in general. So I think it is good in that sense.”
WOW Wallace Flowers & Gifts owner Timothy Wallace also said the change would likely not impact his business very much.
“Amazon doesn’t really sell freshened silk baskets [and things] like that,” Wallace said. “So it doesn’t really affect us in that area as much.”
Freddie Herron, owner of electronics and entertainment store Double Header in White Hall, welcomed the change.
“I think it would be great,” Herron said. “My deal is, every time somebody spends money on the internet, a lot of them aren’t getting taxed on the product.”
He said taxing online purchases could bring more customers into stores, increase municipal tax revenue and possibly lead to more retail jobs.
The 1992 U.S. Supreme Court decision Quill Corp. v. North Dakota forbid states from ordering retailers to collect sales tax unless they had a physical presence in the state.
But Amazon and other retailers have faced increasing pressure to pay sales taxes. Amazon collects sales taxes in 38 states and the District of Columbia, according to the AP.
A bill supported by the Arkansas state senate would require Amazon and similar out-of-state companies to collect sales taxes, according to the AP. A separate measure supported in the house would require such companies to notify residents they owe taxes and provide a list of their purchases to state finance officials.
Governor Asa Hutchinson said in a statement that the voluntary decision by Amazon reflects a trend in which online retailers “recognize the practicality and fairness” of sales tax being treated equally between online and in-person purchases. It also would allow him to continue his goal to cut income taxes.
The state’s revenue is $57 million below forecast, according to the AP, and Hutchinson recently told several state agencies there may be budget cuts. The legislature passed a $50 million tax cut for low-income residents in January and Hutchinson has pledged to make further cuts in the future.
“This strengthened revenue stream will allow us 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,” Hutchinson said.