Internet sales may not be the whole story on local tax collections | Arkansas Blog

Tuesday, January 17, 2017

Internet sales may not be the whole story on local tax collections

Posted By on Tue, Jan 17, 2017 at 7:42 AM

click to enlarge WHO NEEDS LITTLE ROCK: Major retailers in Alcoa Crossing in Bryant draw shoppers who once had to commute to Little Rock. Our theory is that this helps explain lagging sales tax revenue in the capital, along with Internet commerce.
  • WHO NEEDS LITTLE ROCK: Major retailers in Alcoa Crossing in Bryant draw shoppers who once had to commute to Little Rock. Our theory is that this helps explain lagging sales tax revenue in the capital, along with Internet commerce.

I wrote Sunday
about the Little Rock City Board's push to talk to congressmen, including recalcitrant local U.S. Rep. French Hill, on pushing for a federal law to encourage collection of local sales taxes on Internet sales.

I also wrote that some states, most recently Louisiana, had passed state laws that had prompted Amazon, the major online retailer, to begin collecting and remitting state and local sales taxes. Sen. Jake Files of Fort Smith, a Republican, has said he intends to introduce similar legislation in Arkansas today. It would be a boon to local and state governments, maybe $100 million worth. The idea will be fought as a new tax when it only guarantees collection of a use tax already authorized but not collected and not voluntarily remitted by online customers.

Further reporting on this topic this morning in the Arkansas Democrat-Gazette sent me to state tax records because of the moaning about the Internet's impact on the city. When Little Rock passed a sales tax increase in 2011, it expected a 2 percent annual growth in the revenue. It hasn't come close, with a rise of only .5 percent expected for 2016. Mayor Mark Stodola and City Director Dean Kumpuris want to blame the shortfall — which is pinching all areas of city government — on the loss of commerce to the Internet.

Make no mistake, Internet commerce is punishing not just sales tax collections but also local merchants. But I don't happen to think it's the full story in Little Rock. For some anecdotal idea of what I mean, let's look at a year-to-year collection of sales taxes for the most recent two full years available, 2014 and 2015. They are compiled by the state Finance and Administration Department, which serves as collector of all sales taxes and then redistributes the money to the various entities. Increase in local tax revenue from year to year, 2014 and 2015, when Little Rock tax income rose 3.9 percent:

Bentonville 16.4%
Rogers 6%
Conway 2.6%
Cabot 4.4%
Bryant  9.5%
Benton 23.4% (it increased its sales tax in April 2014)
Fayetteville 9.7%
Springdale 8.7%

(Figures for all of 2016 are not yet available.)

Is the Internet Little Rock's only problem? Why have other cities done so much better? Might a general lack of growth and loss of commerce to growing suburbs with expanding major retailers also contribute? I've argued that for years.

I've also argued broader growth issues should be considered when city officials neglect or, worse, tear down the local public schools and drive people elsewhere. I've said the same when city officials enthusiastically get behind plans to move commuters home to the suburbs faster (and further damage the city with wider freeways), so they'll have more time to shop in their local shopping centers.

City Director Kumpuris says the city is in crisis. Indeed, but the Internet is not the only maker of it. We are helping our own demise. They have the web in Bentonville, Bryant, Fayetteville and Springdale, too.

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