Arkansas Enacts 'Streamlined' Sales Tax Collection Law

WASHINGTON - Arkansas has become the fourth state in the nation to enact sales tax reform legislation promoted by the Streamlined Sales Tax Project, a 32-state coalition trying to make it easier for states to tax online sales.

In approving the new law, Arkansas follows in the footsteps of Wyoming, Kentucky, and Utah, all of which enacted similar enabling legislation earlier this year. Similar bills are currently pending in 21 state legislatures.

Gov. Mike Huckabee signed the bill last week. The new Uniform Sales and Use Tax Administration Act authorizes the director of the Department of Finance and Administration to enter into an agreement with other states participating in the tax simplification effort to allow the collection of taxes across state lines and "to substantially reduce the burden of tax compliance for all sellers and for all types of commerce."

The Streamlined Sales Tax Project is pushing state legislatures to adopt such model legislation and uniform definitions of taxable items to head off possible action by Congress. Many states are worried about the growth of electronic commerce and fear that if they do not make it easier to tax out-of-state sales that currently escape taxation -- especially those transacted on the Internet -- then funding for key government services will suffer.

Although repayment of many state and local revenue bonds is tied wholly or partly to sales tax collections, financial analysts disagree on the fiscal ramifications of the increasingly popular medium of e-commerce and what its effect may be on the municipal bond market.

Huckabee signed into law a separate bill last month aimed at preventing remote-sales retailers from escaping the obligation to collect the state's sales and use tax by creating a separate corporation specifically to conduct online business. Some sources have questioned the constitutionality of Act 922, but state revenue officials have said that the law would likely withstand a court challenge.