Revenue & Tax - Senate

Capital and we have a large group of the farmers the in the committee room today Act the Senate ag is not me today and we've got quite a few farmers in here obviously tax revenue affect everybody's especially them but the my friends the new and old welcome to the Rev and tax. Glad to have you all here I know some in the sum of one sitting out there too is debatable about the character but we're glad to have you all. Thank you for what you do okay members the first item on the agenda is going to be house bill twelve ten representative Paul you're here to present that. Do you need anyone to come to the table with your you just going to try it by yourself. Okay. Okay. All right represent hope you're if you don't mind just state your state your name for the record and your Welcome to begin thank you so much Delia hock District seventeen western Benton County glad to be here this morning the bill before you was brought to me by parents of a young man was diagnosed with down syndrome at a very early age and is now an adult and they were concerned that every five years they are required to recertify and that indeed he still has that developmental disability down syndrome what this bill does it doesn't change any revenue or tax implications they are allowed by a certification by a physician or a licensed psychologist or to Four to five hundred dollar tax credit every year toward the expenses that they incur what this does is just eliminates the need that we have now currently in law that they have to re certify that every five years what they were concerned about is when they're gone who will help John make sure that this is done for on his behalf every five years since this time I've been approached by many who have a childhood disability is very much like cerebral palsy autism and down syndrome and that is often diagnosed at a very early age and continues throughout their life so what this bill does very simply is just eliminates the recertification requirements that they must do that every five years and there is no Tax implication or impact fiscal impact. Okay members does anyone have any questions on this. I do well you go head first in. Thank you Mr and thank you it's a good bill and. I'm I'm satisfied that does exactly what you intend to do I'm just concerned with when I look at the language you were removing that somehow somebody may interpret that needs to be done every year because you know we following tax years and this language it that's been stricken specifically. Senate that the certification is good for five years so now do we have anything this this is the certification is good on going or could it be assume that now the certification would be an annual certification every time you file your taxes my understanding is that one that that they keep records of those that are certified so they would not have to do this on an annual basis I have not been contacted from any of the agencies that said we need to make sure and clarify that that there's not a need to do that on an annual basis at least we'll have it on record that our intent is for to be on going thank you senator. And my question is this a very good bill with what you're trying to do I just wanna make sure we don't have any unintended consequence yes Sir and I heard you mention down syndrome we I think we all understand that that's not going to go a cerebral palsy not going away but the bill's broad that it does say developmental disabilities. Whenever somebody's determined to be that is that always determined to be lifetime or there's some other cases or possibly that that would go away. And we would needed needed to be that brought so from the definition of a developmental disability they have to be diagnosed with that before the age of twenty two so it's not something that would be contracted after a childhood And so from the definitions medically from what I understand this diagnosis is once identified does not change I'm not we we had a question in the in the house what about miracles well yes I do believe in miracles there could be a miracle but outside of Americal their diagnosis would not change in care and to your question of whether there be other developmental disabilities that we could be possibly added to that list then that would just expanded my. My understanding would expand the definition of developmental disability as it is defined by the medical profession and no mine mine was what was are all of them always laughed. My understanding is yes on the definition of a developmental biz disability it is a lifetime diagnosis okay and with that statement I'm fine it's just that something I did not know yes any other questions. Okay is there anyone anyone in the audience one speak for against the bill. Your clothes I'm close for the bill okay to have a motion with motion by Senator call will we have a second by Senator pity all in favor say aye opposed Like sign here knowing that does pass thank you so much elections. Okay members the next bill on the agenda is going to be a House bill till ten twenty seven of. Tensions Senator Johnson's here it also on this particular one Mr gearing you mind coming to the table because I just want you to give us a statement because we didn't actually have the green fiscal impact sheet if you would just to. So we can get you on record that there's not impact on this that you all have seen. Thank you Mr chair Paul Goehring DFA idea if they did review house bill ten twenty seven to determine if a fiscal impact statement was necessary this bill does not pertain to any any tax that we would need to administer or provide a fiscal impact so we did not issue a fiscal impact statement for this bill okay thank you Mr during Senator Johnson you want to Recognize yourself and you start whenever you're ready thank you Mr chairman committee of house bill ten twenty seven is bill that that passed overwhelmingly in the house representative ray is done a great job of researching this and was kind enough to allow me to be co sponsor advertising promotion taxes are the only. Local tax that doesn't require a vote of the people and what this would do would be to change that The. The bill simply would require voter approval of any new not existing new advertising promotion taxes or increase in the current rate and that's it there's no other substantive change of one if the size that again it would owner it every I hate to use the word grandfather in a case like that but existing a big taxes would not be effective only new ones or increase of. What about. I thought I had a. That's okay don't worry about it is a. I would I want to mention that taxes you know the kind of start out little and they take can't tend to grow I might mention that the total restaurant tax in little rock north little rock Fayetteville hot springs is higher than it is in forty seven of the city of the nation's fifty largest cities it's higher than what you would pay in a restaurant in north New York City Los Angeles San Francisco Washington DC Memphis or even Las Vegas of representative right worked with several groups on it made amendments to address concerns from the Municipal League as well as the Little Rock convention and visitors bureau and both those groups have indicated their neutral on this legislation I want to mention one last thing about it that FOR a and P. taxes have led to controversy and this is another reason why the voter should have the last word on this of those one case that the representative ray found where they had issued over a half million dollars in no bid contracts call Jett mmhm. Of a twenty five thousand dollars Chevy Malibu was given as a gift to convention bureau director and hundreds thousands of dollars have been channel to businesses owned by a and P. commissioners of course that's a separate issue with maybe another bill to fix some of those things but that is of what the bill does is primarily it is it is totally about if the future not looking back any increase or a new AMP tax would be subject to voter approval and I'll be happy to answer any questions. Thank you Mr I just would like to know the effective date and if there's going to be a rush between now on the effective date to try to get some in place very good questions Senator and there is an emergency clause of that was the something that the representative ray added and I think he actually said the only area including emergency clause because it's come to my attention and reaction to this bill some cities may be racing toward implementing any tax just to try to beat the clock and that's wrong he wants to ensure that this legislation passes that goes into effect immediately thank does have emerged measure. Thank you senator. Any other questions. I have one okay just just process yes Sir okay so when I try to read through this few minutes ago the so if if I understand right if somebody wants to institute one of these new taxes they're going to go to the quorum court is that correct or city council depending on the situation are we for sure that it is the city council well it's it's it's affecting both of them if it's a county wide obviously to go to court court centric role right now I understood that I guess I'm I guess I missed the part because that was going to be my question because it appeared like to me that it would always go before the quorum court. I believe that's the only because the the quorum court of. Let me find if you look at section. On page two of the ones is twenty six seven seventy four five oh two that's related quorum court and if you go to section two about the line fifteen a Page three that's where it is speaks to our cities cities and counties so it does cover both counties and municipalities. In effectively the same way Mr. Senate question because one of our first thing this up all will the county was going to have sole authority over that and then the of the city council was not going to be able to weigh in but not sure but we had you have separate section code word and I like to that someone had that you had to do it in both places to make it universally. Any other questions Senator Petty. Thank you Mr so just having served on the city council I want to ask a couple questions just to to make sure we don't create some unintended consequences this applies only to new taxes so if there's a was a temporary sales tax for example that is set to expire. But they want to extended and do another project with that require. The expiration of that tax and then a new tax under what is being proposed here so for example we uh in our in our city we we had to have the citizens voted to build a new library and and an edition to the senior center and some other things with a special sales tax and then we happen to in our case we happened to choose to let it expire but in in some instances they asked the voters to extend it so they can build a new you know Parker or whatever where are those situations gonna come into play here Sir Petty thank you for that question because it allows me to make a distinction between the advertising promotion taxes And the local option sales tax which is you know is a city council member member currently has to be referred to the voters the a and P. taxes the tax that is not referred to the voters until this bill takes effect of in the instance that use you stated of. It would have to be submitted to the voters that this bill does not address what I would call the general sales tax A proposed to the voters by the city council it doesn't affect that part of it all that's a separate thing we we generally just call that the local sales tax and that can be city or county it can be temporary it can revenues can go to a general fund or to go to a specific thing oftentimes are used for a bond issue for example in Pulaski County what is now Simmons arena was paid for they didn't bonded they actually had a twelve month sales tax for the county that paid for the arena but it was not it just happened not be bonded but it could have been but this is a this has no effect of that portion that is controlled by what I would call the general sales tax portion of the law that applies to counties and municipalities this is strictly about advertising and promotion tax which currently is the only of local sales tax that does not require voter approval what we're doing here is we're not looking back on anything that's already in place but we're it from this point forward once the bill takes effect to raise or to create a new tax it would require a vote of the people in that in this case a municipality thank you for that clarification that's what I thought the case was but and this is specific to the a and P. tax yes only thank you yes Sir. Any other questions for the members. So anybody in the audience wants to speak for this bill. Three one wants to speak against it. You clothes senator Johnson yes from close we have a motion. Okay we have a motion centre Payton second by Senator crow all in favor say aye opposed is passed thank you Mr chairman thank you Committee. Okay members next item on the agenda is going to be house bill thirteen seventy nine center Kroll are you going present that. Yes Sir Mr hearing your. You come to the table also. If you all would please introduce yourself and then you're a you can proceed Steve Kroll Senate district three Paul hearing DFA. this bill would require taxpayers to file their sales tax in use returns by electronic filing if the tax taxpayers averages a monthly tax liability five five thousand dollars or more during the preceding fiscal year D. if they would be able to waive requirements for electronic filing if the electronic filing would cause a hardship to the taxpayer D. if given a currently has ninety five thousand sales and use accounts twenty percent twenty six percent of them file paper reports seventy four percent of them file electronically this would affect the approximately eight hundred sixty five active accounts in a two thousand nineteen the General Assembly found that the Arkansas tax law should be modernized computer and software options are made it neither diff difficult or burdensome to collect and remit sales tax other states adopted this is Mississippi requires electronic filing of tax payers the twenty thousand dollars or more. Tennessee requires electronic filing if the taxpayer is averaging five hundred dollars per month this is going to get date go into effect on general one twenty twenty four and there is no revenue impact. You have anything to add Mr Gareth I know Mister chairman I'm happy to answer any questions about the bill okay members do you have any questions in regards to this. You. Senator Johnson you're recognized so in the bill it says the Secretary may may waive. The if the secretary determines it's a hardship on the taxpayer's do that electronically. So where is the taxpayer in that equation of secretary as all the levity so certainly we with the DFA I understand they're going to be some areas of the state that have limited connectivity to the internet perhaps they don't have the investments in in computer technology to file electronically perhaps they have a a bookkeeper within the business that's has always been filing on paper we want to be is accommodative as possible to those taxpayers if they are one of those men hi eight hundred sixty five accounts that would be subject to the electronic filing we want to be as generous as possible that the hope for this legislation is just you have this electronic filing requirement in place in order to achieve greater efficiencies we also believe that once I'm taxpayers that are traditional paper filers as some of them we help a a portion and we'll see how straight forward and easy a process that we have using the A. taps System the Arkansas taxpayer access point but anyone that that would request a waiver we we're going to be as generous as possible to help them out. Thank you Mr. And if I understand this right. This is monthly gross receipts tax liability so you're talking about a taxpayer who is a very large amount of the of sales that would be probably a in neighborhood of fifty thousand dollars a month and taxable sales. About a six hundred thousand dollar a year in sales business or greater. Any other questions. Anyone from the audience when Speaker for this. Anyone will speak against it. You closing your grow close to pass motion all right we have a motion by Senator crow do pass we have a second. The second by Senator Payton all in favor say aye. Any oppose. Graduations. Senator Pitsch chairman being recognized to present House Bill fourteen thirty five. Mr gaining just a yes Sir thank you. If. Senator paid if you recognize yourself and the. Then you can proceed. Thank you Mr Genpei Senator district twenty nine so we go from one extreme to the spectrum to the other from five thousand per month to this bill which is dealing with two hundred thousand dollars per month so this bill it amends the time period used to calculate the sales tax prepayment requirements for businesses businesses under current law businesses that collect sales tax and have an average sales of two hundred thousand per month are required to make prepayments of sales tax based on the average sales of the preceding year the preceding twelve months the current Arkansas law it has potentially have some compliance challenges for businesses that That because of the first pre payment of a calendar year is due before the businesses December tax return is due in this bill would allow taxpayers to determine if July or in July if they will be required to make the prepayments in the next year beginning in January and this is a technical clean up bill without changing the the practical effect of the sales tax prepayment system and and using the preceding fiscal year we all are familiar with fiscal years Eliza St budgeting and provides sufficient time to make accurate prepayment calculations and and planning before the first premade pre payment is due in January there's no change in the number of businesses that would be required to make prepayments or increase the amount of the prepayments the Emergency Clause is necessary to ensure that the new calculation method will be in effect at the beginning of the next fiscal year for the business to perform it's calculations going forward so it It allows for proper planning without unintended consequences of of of being in noncompliance because you don't know what that previous twelve months it looks like so with that I'll pause and see if there any questions anything else that Mr hearing I do and thank you very much a center Petty for sponsoring legislation what we're really trying to do here is to give taxpayers more time to make this determination if they're going to be subject to the prepayment requirement as it currently exists the a taxpayer would have to make this determination if they're going to be subject to the prepayments or that they have a different pre payment schedule in a very limited period of time you would be ending your calendar year in December let's use two thousand twenty two as an example you'd be ending your calendar year in December of two thousand twenty two and this would affect under current law how you're going to be filing your December report in December. Twenty two as well as in January two thousand twenty three what this bill does is gives these taxpayers more time so when they make a make their determination about their if they're subject to the to the hundred thousand dollars a month and they're going to know in actually in July of two thousand twenty two that they're going to be subject to prepayment starting in January of two thousand twenty three but this bill actually effective two thousand twenty four but just for the purpose of the example we're wanting to give six more months for the taxpayers to plan and adjust that they're going to be subject to this already existing requirement in the sales tax law to but not be happy to answer any questions. Senator Payton you're recognized Sir. Thank you Mr chairman I really appreciate you really getting down to the not gotten on that fiscal year because that's what was concerning me part of what was concerning me so let's say business as a fiscal year that ends in April. It's still this will for more time not less time to make the adjustment how we how the the bill is designed is to mirror that the timing of the state's fiscal year so it is July through the end of June it's actually specified in in the calendar but we use in terms of describing the bill it would not depend upon the business is actual fiscal year it's actually the the twelve month period that would begin July one in in in the end of June so for if this bill were to be approved by the General Assembly and become an act this is a taxpayer and it's not gonna go into effect until January one two thousand twenty four so taxpayer within no based upon their Sturch twelve month period of sales that began in July of two thousand twenty two through June of two thousand twenty three what their obligations are going to be beginning January one of two thousand twenty four just to be clear we're talking about taxable retail sales that's right because the language that I'm seeing here in the code. Says An average net sales. Of more than two hundred thousand so you know business could have a million dollars worth of of Wholesale sales monthly right and there My I mean this might be construed to apply to a if if part of their sales of a very small portion of it so we're taxable. And they're gross sales were over two hundred thousand dollars a month but but most of that is wholesale then we've got to make sure. That we delineate that so and that's and that's considered that's consistent with how we are that we are not including exempt sales in the calculation so that's how it's currently being administered but but I certainly as I ask the questions ballot because you're gonna have a large businesses that have a tremendous amount of wholesale sales they're not none of that is changing under this bill I just like for the language of the of the code is not necessarily this bill. I specify that but certainly not on the record thank you yes Sir. I'm sorry out do you mind if I ask for in in that same vein which is where I thought you were going to head because this is what I'm about to say is where we I had most questions let's just say something happens and. On July and and we've got a retailer that has two stores in the close one of. What what and and therefore they wouldn't be applicable to how is that going to be implemented through and and and adjusted and not force them to prepay if it doesn't apply would you comment on that the happy to thank you senator so this this issue does come up from time to time with that with the made perhaps a business that has either closed or may be sold off their operations and now they're a smaller smaller business we get contacted the sales tax department to have a modification or each of their pre payment schedule for to take them off of pre payments altogether so that that certainly does occur from time to time we also understand that during the pandemic some businesses either their sales increased considerably or decrease considerably which modify their whether or not they were subject to the law and we're always open to speak with those taxpayers in accommodating and anything that has happened with their business that would affect their being subject to the the current law. Senator days thank you thank you Mr up do we have an idea of how many businesses this is estimated to impact in a follow up to that if we have the estimation what what is this going to do to. To the the the planning of general revenues it sounds like we're intent to give time in in the bility to plan for the businesses what is it going to do from a tax preparation or budget planning side on our side in that may be a part of if we know how many businesses is estimated to ensure and so there is good not going to be any greater number of businesses that are subject to the prepayment requirement there there is no revenue impact I'll be happy to get the actual number of businesses that are currently subject to the existing law don't have that in front of me but perhaps. someone within our team. Two thousand two thousand senator they are currently on the subject of the prepayment and they doubled that amount would not increase under this law. And then from a planning perspective it helped me understand that with what that would impact maybe a timing maybe with with what is intended to hear that affect that at all on our side it's not effecting state budgeting at all there's no greater number of of taxpayers that are going to be subject to this requirement under this bill all that it's doing is it's giving those businesses more time to plan so as they which they will know at the end in July of this year what they're anticipated pre payment schedule is going to be for the next year but as as the law currently stands you have two options you have the option of having a **** up planned pre payment schedule where forty percent is due on the twelfth another forty is due on the twenty fourth and then the remaining balance of your sales tax you remit with your report in the next month option two is is that that business just since then eighty percent or more of the of the actual tax that's collected by the twenty fourth of the month and in a true up when they filed the report on the following with by sending in either the twenty percent or some amount that's less than twenty percent. Just to follow up because I think I understand what Senator diss saying so the administration of this sales tax system method whatever you wanna call it is a separate undertaking then the financial projections or the state budget purposes I I I agree and this would not affect that and that would not affect the collections of state revenues in the timing of those revenues as they're coming in and being sent in by the businesses thank you thank you senator. Other questions. Anyone notice will speak for the bill. Anyone will speak against it. You closing your Petty. I am closed and I would appreciate a good vote okay make a motion do pass Senator traded making a motion do pass Senator days a second all in favor say aye. Any opposed. Graduation is passed thank you Sherrin thank you members the committee thank integral thank you senator Patty. Okay with that. Okay with that is to do any of the any other members have anything else to come before the. Committee. Okay. We're adjourned.