Revenue & Tax - Senate

And now because the Senate Revenue and Tax Committee to order and or purpose bill will be. Of house bill twelve oh nine Senator Dismang Thank you Mr chairman this bill is actually the result of work is going on for a couple sessions now there is you know federal tax law changes which I limited the SALT deductions the individuals there was some discussion about maybe we should try to do something on the state level to remedy that were assist taxpayers so they can fully utilize those deductions last session there was not guidance from the IRS or the feds and what they would allow if that was something they would entertain since then there has been guidance given by the feds related to allowing a taxation to occur at the into the levels on LLC your service corporation a pass through entity level in in so we're pursuing that now should be a benefit to taxpayers the reality is that results in I think the revenue impact about four million dollars of additional revenue to the state but an estimated fifty million dollars for the tax savings on the federal level for those same taxpayers so kind of kind of an interesting idea and one that likes a lot of the smart CPA's got together in and figured out how to move forward there are eight other states that have a similar provisions and then a number of others that are pursuing it I right now again so it's a win for our taxpayers actually assist in in our budget in revenues and then again that that bigger benefit on the federal income tax on. Related again to the the salt elections which is state and local tax deductions okay are there questions. Mr Gehring. Members. Yo this is Karen usual sleaze the in the revenue impact there's a. Increase. Good morning Rick please good morning thank you Mr chair members of the committee all gearing Arkansas department of finance administration. And Mister chair you are correct DFA has scored the house bill twelve zero nine to have a potential positive revenue impact of four point two four million dollars and the reason for that is is that we did an analysis of those entities that file these a pass through return. and did look to see what entities would potentially benefit from this law change and which used to elect to be taxed at the entity level under the bill they would be taxed at a flat rate of five point nine percent otherwise if that income passed through to the individuals that were members of the entity or shareholders they would be paying tax based upon the progressive tax system that we have here in Arkansas so based upon the analysis that we did we would estimate that approximately four point two four million dollars would be collected an additional a general revenue as a result of those entities electing to choose to be taxed. At the entity level I'd be happy to answer any questions or other questions from Mr gearing. Senator Ingram. where is that break point on it let's see the thing is what ten thousand the salt yes we're does that figure out that that break point is that makes sense to set this up is waiting. Is it is it is that the eighty thousand dollars is that it for income is that where it becomes invitations to take advantage of it. The. Yes it is we put into the revenue impact the the difference is the approximately two hundred and thirty nine dollars the difference between being tax the five point nine percent level versus somewhere in the four and a half percent range by being taxed at the progressive tax system in our income tax brackets in twenty six fifty one two oh one but. Not all entities are certainly going to elected do this because they're not going to have a benefit because they don't have the state and local tax liability that would make this change necessary but certainly we did an analysis of all the returns that we return it the pastors that we do get information on and based upon those that we saw that would have a potential benefit from electing to do this that's where we're getting our analysis where we would think this four point two million would be. Received an additional collections okay. Your other questions Senator Rapert. Thank you Mr chairman now disclosure I do have an S. corporation as well so I guess I should make that which may apply to a bunch of us in here again but I'll on page two the bottom there Mr hearing it talks about the legal analysis on this. Because I again and listen to this but I'm just trying to to square this and and maybe you can hit it again so it makes clear. I know that you make this change so that it will square may be harmonized so to speak with the federal situation is a true statement. And then the next thing though is I'm trying to square how change which results in a net revenue increase here. Has anything to do with my federal taxes at maturity so explain that again because it it seems a little bothersome to I'm just I don't want a gotcha situation if you have referred income generated income and then ultimately as those pastors passed an income down to you mmhm you have to pay individual income tax which is limited to ten thousand dollars worth of a benefit on your federal return okay if it's captured inside the entity level and it's deducted then on the federal turn at the entity level then that's where the benefit comes to the taxpayers all right so so again and and I understand that that's basically again on the escort signed people taking distributions obviously there taxable to them out of an S. Corp so well the distributions themselves are not taxable it's actually you're taxed on what happens inside your pro rata share of the profit and loss for that as corporate with you because that is so yeah I did actually sure isn't enough currency Court when you're taking dividend distributions that those would be taxable in a you know it's not advantageous and that's why or typically and that's why most people are setting up LLCs or ask for okay so again three times to make sure I've got it the increase so. So who's bearing the increase of the of this is and so are you saying that the increase on the state side we more than compensated on the reductions on the federal side is that what I'm hearing corrected tune about fifty million dollars if not more estimated by some individuals that them calculations and the reason when he's talking about progressive so that what that means is not these aren't the right numbers but you know zero two hundred dollars is taxed at two percent and you know a hundred dollars a thousand dollars is taxed at three percent we pay your taxation each one those levels as it tears its way up into your queue middle of tax rate or your marginal that is right word is not five point nine percent it's some average of all of those when it comes out and so they're paying a lower tax rate on lower income and since it's a flat five point nine which I would support because it's simple and our tax code may change in regards to individual income taxes then then that's where it's it's taxed at a higher marginal rate than it would be on the individual level. And but those and to think from the consumer side of it from citizens out of it there here in this discussion they hear that there's an increase this year is there anybody out there that would not benefit from the federal side that's a question I wonder was or anybody that somehow oddly enough not the deputy hers could not actually enjoyed the federal a large number of individuals will not benefit and they will not this election so it's nothing it's mandated for the taxpayer to do okay this is the four point two is only calculated on those that received with that the DFA perceive that there is going to be a benefit if they make the election it's an annual election it's not required I mean something that you know those entities there CPA's gonna sit down and say Hey for this year this makes sense for us to move forward with this next year it may not make sense for them to move forward you know with the same. So that's exhorted because when you say there's still gonna be optional for them they get a choice which with a representative based upon our own individual situation hopefully they'll choose the right path thank you for your answers thanks. Senator Ingram I mean basically if you don't have to saw captain the it it's it's a moot point anyway correct that's right in in the fade Tax all changes or we're great for simple fine filing filing for I mean it and payors simple tax return filings you know turn it into a one page it limited the need to do you know do utilize itemized deductions but the trade off is that they capped some of those itemized deductions which really pigeon holed a number of our you know taxpayers here in the state particularly on salt So yeah it's it's I think it could be a win win again it's an election if someone wants to pay additional income tax here in the state and utilizes take advantage the fed's that says it's great to do and so we're going to move forward if that's will committee. Are there other questions members. Senator Johnson you have a question. Senate is my simple question was there any opposition that's kind of what Senator Rapert was alluding to but specifically did anybody come in and say we got a problem I mean I would say two years ago I was hesitant personally because the guidance wasn't clear or didn't exist on the federal level once that became apparent and that was something they were going to allow I'm not aware of anyone that's in opposition and there's really no reason that anyone should be since it's an elective when the electorate any negative votes in the house I don't mind the last person will devote the account on the house side to make my decision willing I believe so Sir thank you senator thank you Mr. Are there other questions. Senator Teague census bill has no revenue impact I will accept your motion what is your motion. I have a motion do pass and the second from senator Johnson. Is there discussion on the motion. Seeing none all in favor. Opposed. Congratulations. Your. Bill has passed and We will now move to Senate bill three thirty six Johnson. In center Johnson you do have so you do have. A witness to. If. Well. Senate center take where you pass now. Well that law. Senator Johnson I would prefer that you let our staff person thank you he wanted you will take take deal with these brand I thought I'd like to see what is before please say so that we related in rank you Mr chairman but these are samples of of billion and I will describe him as a get into my testimony. This is sort of show and tell. With. Thank you. Get top for us. No That happened be the go going there. Let's let everyone get a quick look in worst start out with the bill. Thank you. Sir John go ahead. Thank you Mr chairman mark Johnson Senator district fifteen I'm also joined by representative do you Haak from northwest Arkansas you can introduce yourself and take your number. Take a few risks. Mr chairman of the Senate bill three thirty six is identical to a bill that I brought two years ago It's a very simple bill in that it treats. Gold silver bullion and currency as a. Thank the commodity that it is a not a tangible personal property that should be subject to sales tax in committee met most states it is not taxed in because of that that we have a problem that is hurting economic development in Arkansas but you see these these tangible personal property this is one ounce of gold this is managed by the United States government and it to. has a value that you can pick up now you can go online you say to pick up the Wall Street journal and tell what the spot price that was any given time and this is a one ounce of platinum the same kind of thing this is what people buy for investment purpose now this this is one kilo two point two pounds of silver and again these are investment vehicles you could on these not just in your general investment portfolio you can even on them in your IRA in a recognized as such for for tax purposes of. Arkansas we treat this the same if you bought a lamp or a Tyrer whatever anything you buy it's it's a consumable it's something you actually use that's not what these things are these are investment vehicles are from a court inside it's important realized that there many many thousands of coin collectors in the state and they are around the state and and around the country and they some of them are very serious and want to go to shows and and and buy and sell these things it's a it's a a business is very very exciting to see happen if I used to collect points because I was collecting pennies and sticking them in the little blue binder somebody off probably did that but the serious collectors that they see this not just as it's it's a hobby but it's also investment. By taxing these we are hurting our economic development and I'm I'm I want to a. Allow the main witnesses to speak and then I'll close and and wrap this thing up but we're pleased to have some real experts talk about it not just on the industry and what it does but also what to. Has happened in states that have been wise enough to repeal their tax on this and how it's actually probably been a real revenue plus those school numbers that are little more difficult to quantify but when you know you have economic activity when this is is repealed. Mr chairman I hope that the cost range convention center will host to host a regional coin show and we'll have more tourism company in Arkansas I know that we have people now that want to buy these things but they're going to go Senator Hickey to Texarkana Texas invite because the margins are so slim on this this stuff because the price does fluctuate that our sales tax makes it a poor investment and it did it just is totally thwarted the economic activity there also dealers around the country that will they'll sell you one or more these and they'll put it in their vault and store it for you because you never took possession of it the state of Arkansas you have the investment advantages of it but to you wouldn't be paying Arkansas sales tax because it it never comes to Arkansas so there's a. It's a unique product in that it is money. it is but money was for centuries in course now we I think the plastic version is a whole lot easier to carry around or the paper version in this bar but this is what we're doing so we're taxing money and I don't mean income tax I mean the physical money so this is to bring us in line with states that have have wised up and saying that it's not a real positive for the state I think we can can show in many ways that it will be a net benefit a net revenue benefit not to mention the the peripheral activities and job creation that could possibly come from it so I want to ask your representative hockey she'll wants to comment further and then we'd love to have our witnesses come up but I can assure you that will be relatively short their testimony. Thank you senator Johnson I'm just in support of this bill for our constituents I think that this is a great investment opportunity and thirty nine other states are currently doing it the way we are proposing so I think it's right in line with our goals to increase economic opportunities for our citizens thank you. Which of. Who would you like to bring up and speak I'd like to bring Mr Heller up first if I could and then just take them in order after that Mister chairman okay. Members we do have a hand that. If. If you would state your name for the record. Patrick Heller. The you can give us your test on place okay thank you Mr chairman and members of the committee and Patrick Heller from Lansing Michigan after working for seven years as a certified public accountant day became owner of the largest queen in precious metals dealership in Michigan. in a pen receive twenty national awards over the years including national coin dealer of the year in two thousand twelve. because of my experience as a certified public accountant when the state of Michigan was considering the adoption of coins and precious metal sales tax exemption bill I met with representatives from Michigan treasury and the House and Senate fiscal agencies as they had no readily available information and how much sales taxes were collected on the sales of recordings in precious metals and they use my three different calculations mounted up slightly for their fiscal reports. When tax laws change of people injured financial behavior. in the case of sales of coins and precious metals if they become exempt from sales and use tax the tax collections declined from those sales but what we found in the case of Michigan and the industry council for tangible assets national trade association confirmed in a two thousand sixteen survey of two thousand fifteen tax collections that sales taxes and other business tax collections actually increase once a state adopts this exemption. that's counter intuitive so you need some more information first off dealers normally sell a good amount of merchandise that affected by these exemptions examples include antiques jewelries sports Kurds on the old days beanie babies have the supplies and the like two thousand sixteen survey found that the increase because you have more customers coming into your store in this merchandise still taxable on average replaces two thirds of the tax expenditure. But when a business has more customers coming in they hire more employees. the Michigan treasury in the nineteen nineties did a study and calculated that thirty eight and a half percent of payrolls are spent on merchandise on which Michigan sales tax is collected. In the state of Michigan the industry employment more than doubled and the increase in sales tax collections just from the payroll increase more than covered more than one hundred percent of the tax expenditure from the exemption. In addition we found a significant increase in the number of businesses in Michigan did exemption was adopted in nineteen ninety nine the about half of the increase was from totally new businesses and half was from existing businesses expanded their product line Izzy's businesses expand they hire more people and the the results when you have more business is doing more business is you pay more business income taxes. Just wanna hear more payrolls the state collects more income tax from individuals. And last you have the hospitality industry the two thousand sixteen survey confirmed that dealers tend to avoid it tending trade shows in the twelve states that still have sales tax on coins and precious metals. And instead they go to shows in the states that do have such exemptions indeed national organizations such as American and Hispanic association in their site selection criteria require that they will only host their major shows in states with these sales tax exemption. by the way not only are there five states no sales tax and thirty three that have enacted specific exemptions there's also current exemption legislation pending in Tennessee and Hawaii and Hawaii it is passed out of two committees and it's gone to a Senate committee for consideration and Tennessee L. was passed out that passed out of a the first committee that they took a neutral position on the bill and their ultimate decision depends on budget considerations. the first to all just to give an example of the significance that this makes two days ago customer the lives about twenty five miles from a store sentence a bank wire for five hundred twenty five thousand dollars to buy gold. companies margin on the transaction the seven thousand eight hundred dollars had that been subject to Michigan sales tax sales tax would be thirty one thousand five hundred which means that customer would never have bought the merchandise from our customer instead they would have purchased it from say at a New York broker to have the gold stored in vault and Delaware or they would have bought shares and exchange traded gold exchange traded fund or they would have bought New York comics commodities contract. or they could have bought a certificate of deposit of gold in the faults in the Perth mint in Australia or the royal Canadian mint and I to what Canada or the royal mint in the suburbs of London England none of those transactions would of created any sales tax collections for the state of Michigan and the similar thing happens here in Arkansas that yeah because there's sales tax in the state on such products. Affluent customers especially by an alternate means to make the acquisition without patronizing Arkansas businesses and not creating any tax revenues for the state of Arkansas. Now there's multiple reasons for. That these products should be exempt the most important one is that these are not consumption items and sales taxes apply to items that are consumed. The Internal Revenue Service actually considers these to be capital assets investments and expected collect income taxes when they're sold for a profit of the even require when dealers by some of these products to file a ten ninety nine B. form that's not a sign of a consumption product. The common question asked in the very state legislators is well for grant this exemption then what if somebody says we should expand the exemption to cover other things people considers investments such as our work or antiques and in my written testimony a list about ten reasons why this is the place to draw the line and in every state of the thirty three states have granted this exemption that is where they have drawn the line. By the way because of the impact of the Wayfair Supreme Court decision my company now is registered to collect sales taxes in the states of New York Ohio Tennessee and Texas it happens at Texas and New York have such widespread claim in billion exemptions that are trade there with customers is virtually unchanged but Ohio and Tennessee do charge sales tax which means we no longer make sales to customers in those states. that would also play in the case of Arkansas dealers that that may have customers in other states that have sales tax because of the way for decision they won't buy from Arkansas dealers or dealers and any state if they're going to have to pay the sales tax. Last I have some examples of states in the past have had this kind of exemption and removed it and then what happened. In the nineteen nineties the state of Colorado remove such an exemption it was quickly brought back up in the legislature passed overwhelmingly. The governor vetoed it primarily because in Colorado it's the state removes a tax the the legislature can that put it back at it can only be put back on by a vote of the electorate. so he the governor vetoed it in fact he vetoed it twice and after the second to veto the legislature went through an overrode the governor's veto to put it back at. The state of Florida also removed this exemption in the nineteen nineties where upon the Orange County convention and visitors bureau which is where a Landau as did a study and said the hospitality industry because of lost trade shows is has lost sixty million dollars a year in revenues which is about two point four million in tax collections which is more than the tax expenditure of the sales tax exemption so Florida quickly put that back in. Ohio had an exemption and loss that in two thousand five within six months virtually every quench on the state was canceled and one hundred queen dealerships either closed or laid off staff or moved out of state to a state that had no sales tax or the did have a sales tax exemption. so that took a lot more work that that was resumed. perhaps most relevant to this body is at the and early two thousand sixteen the state of Louisiana because of declining oil and gas tax revenues passed a bill to suspend for twenty seven months over two hundred eighty sales tax exemptions and tax credits. During the time that the suspension was in effect the state Senate Revenue and fiscal affairs committee held hearings and each one of these exemptions and credits to decide whether two they should be killed permanently whether they should be allowed to come back after twenty seven months or whether they should be changed. One of the First the exemptions considered was the queen of precious metal exemption I explained the sensitive nature of the The industry to small changes in price and that explain that the be a lot of jobs lost and sales tax collections would actually further decline in Louisiana if this exemption was not restored the chairman of the committee senator John Palmer L.. Did not like what I had to say and in fact the next day and then Orleans time picky on he was quoted knocking my testimony. It turned out that may explanation of how tax collections would further decline came true. And the next year Senator morale was one of the three champions in the legislature to re establish the exemption or substantially the same exemption and was one of only four exemptions and tax credits that were put back into place the next year of these kinds of actions would not happen if the legislature is in general felt that getting rid of these tax exemptions would result in net increase in tax collections. I'm prepared for any questions you may have. Senator Johnson would you like your other witness to come forward now if you if you would rather Mr when we we could have the Committee ask questions of Mr Heller first I think you will be the witness that is probably the most to answer questions the others I don't think we have quite as long as. But however I'll do it exactly stated that way but Senator Hickey. My manager's going to be more specific issues I want to make sure under understand understand some things about this and most of minor will be on page two probably starting back your own line four and further but before I go into that. Quickly if you don't mind Silver dollar what happens what happens with the silver dollars if somebody wants to to trade a silver dollar see we have intrinsic value here. Is just the calendar what's not taxed how how does that all play how does that all play for that for two particular then the state of Arkansas on actually and every other state I'm sorry. According to this bill if this bill House path out what would what would transpire with that ten Arkansas Code steamer could go to an Arkansas dealer and purchase said there would be no sales tax paid and the amount of the purchase price okay so even though you're asking I think Senator Hickey about the definition of intrinsic value in this bill is that correct that's right because from my standpoint. You know that's what I'm trying to figure is the intrinsic value what's and I know and I understand that that doesn't that that's on an exchange of any certain day that particular calendar that as a dollar stamped on it. Is the intrinsic value just a dollar the changing alley refers to metal content okay which does differ from legal tender face value. Okay based on the high the the actual what the market would be on it Senator is that a fair statement yes it does. And then on line five. I think I understand works is we is sold based on the intrinsic value of the corner currency as a precious metal which is basically. What we just we're we're talking about I just want to get clarity but then it says work collectible item. I'm confused AS one S. as what that means so does that mean that if you have a ten thousand dollar Coleman. That none of none of that's going to be taxed either. That is correct because of because of the collectible value of it yes the United States mint makes a number of collectible coins and charges well above the middle value and. So you have people to purchase them and the IRS expects when those are sold that if it sold at a profit they will collect income taxes nine okay. And then just the last thing was for sure from my own line eight I say were we were we try to make an attempt it says that it will not include any items that have been incorporated into jewelry I don't know if that's brought in the. if you put a claim or in get into jewelry that is a consumption purchase so that's why that would be subject to sales tax and I understand but if it's the meeting that we if you don't mind but if it's made into something other than jewelry the you know the first thing that comes to mind is just these and this is a sorry example but those pennies that the machine or whatever. No stamps they charge an extra fee on that what I'm wondering is is if if we should say not only jewelry but possibly any other item that was made to made into that would have a. It was used to create a marketable value. Or something of that nature that's more for centre Johnson right there on his own of were brought enough aside we're going with this Senator Hickey let me say the simple you're you're going in a little more complex that the simple thing is if if I go to Mr Heller shop and he has one of these with the made into a necklace that I can buy from my wife please don't give any ideas but if he did then that would be fully subject to sales tax now if you took all of your penny analysis because we've got the one down on the first floor that stamps opinion says Arkansas state capitol if you assume that if you did that with. Maybe something a little more value out of. One dollar gold piece or something like that then it would then become a. Eight eight eight is an item subject to sales you will be absent due to sales tax at that you because there is no longer you know if sold because of its it's the it's called content or as collectible by it's actually become a product like I said like a lamp or a canticle Christian. And that's my job and that's where I'm going I just don't know of our language here is because we say that's made into jewelry and I understand you're not supposed to do face the currency or whatever but we know that that happens but if that was made into a Cup for lack of better words it was a usable items. Or a shot class or whatever you might wanna say. Here are we brought enough by just saying jewelry or should we also includes some other items if well it includes a anything when it talks about the read it collectible item it is or collector one rather than its former representative values a medium exchange let's take it let's say we take this this bar silver Senator Hickey we make it into a little cups for when the call of the what's that for permitted you lips or something like that this would become a taxable item when it sold in Arkansas because of that it's it's no longer a eight a medium exchange investment item it becomes clear enjoyable personal property that would be taxed just like the example of the necklace made from from go. Correct that that's correct mind specifically as it relates to the language in the bill on page two line eight. Yes civically we've we've just. Instead of saying what we just said. We will totally eliminate the jewelry in the bill I I understand what you're saying and agree with what you're saying but as far as in the bill we just had listed the work jewellery and not those other items yes the reason for that is that jewelry is the primary use of altering coins if you have an elongated sent machine the normal prices fifty cents plus you put in your own penny the total amount of sales of that is not material button jewelry it can be. Thank you. Senator Dismang. Yeah and and so I am for the sponsor I'm trying to make sure I understand starting on page four three line six because the sentences are committed try to interpret what this means I guess what I mean and I'm this for this whoever's presenting or whatever I usually Center it's just two page bill you said Page for two lines two lines for I'm sorry okay and I'm gonna get to that but I mean I understand if you're buying and selling as a capital investment. You know for for those purposes so you put in your IRA or you know that's an account is managed by somebody and I get not paying sales tax at that level I'm not even sure how that works but if I want to go buy a bunch of silver and take it to my banking but it's a process by which the recorded on my race statement as part of this plan I understand that and. Can rationally see why that doesn't count towards you know should be subject sales tax what I what I don't it's when we get into the coins that it's harder for me to kind of kind of figured out of this is one example and may tell me it's wrong because the metal contents different but it would have to take that gold bar right there don't over the gold bar with the silver bar not take it to mature and say Hey I wanna have this melted down and turned into something well the only thing I want to pay sales tax may not pay sales tax on this is a service that's related to you know making it whatever it is and something that would be not mean if I'm going to have in as opposed to buying them out right to this product from the juror subject to a hundred percent of sales tax I'm going to really only the M. pesos tax on the I mean there's nothing that would prevent that and that's where that build our that silver bar was never intended to be a capital investment per se it was something that was purchased to turn into something else in a pawn shop to routinely going to take pressure meant precious metals melt them down turn them into things like that that have been resold it so it gets for it is very confusing yes and then on probably the most confusing thing I see is three if you read this sentence as it's written I'm going back over for referencing back is cold coin or currency means a coin or currency and then we can skip all the way to three sold based on intrinsic value of the coin or. Currency is a precious metal or collectible item rather it in its current form for represent value as a medium of exchange. I think what what I understood the testimony to be was is that collectible would be subject to sales tax it's the gold or silver or whatever it is that would not be but the way that it's written we're saying that collectibles so you know a coin that's gonna misprint stamp on it or or whatever that has a higher value would still not be subject to sales tax not reading that wrong. Comment on that yeah you're you are reading it correctly that a coin sold of a collectible value safe was that five thousand dollar claim that might be made of copper so it's inconsequential metal day. yeah that would be exempt from sales tax not just in either the access over mental value so that that's what we're getting into the gray area to me because then if I taken manipulated goin to drive it's value that I'm not going to be subject to sales tax as opposed to buying gold or silver platinum whatever it may be as an investment to hold on to that I'm later going to be kept you know pay capital gains on yes it's actually quite sensible the question that you're asking the Internal Revenue Service and the tax people for the state of Arkansas consider these to be capital assets when they're sold at a profit the federal government and state government want to collect income taxes on it these are purchased overwhelmingly except by accident to be preserved in the condition in which there a choir they're not required to be you consume basically. and then the you do have the United States mint selling a number of products that have collectible value. quiz United States mint does not charge sales tax anywhere it makes the sales. but it's just consistent with the language and if it has its legal tender status by some government in the world. is it does it says that you're not going to use it is a legal tender like me if I have a stamped coin that has some rarity to that makes it worth more I'm not gonna go to Kroger and use it I mean it's a completely different I guess is that collectible item rather than answer form that has me a little bit thrown because I can follow the argument all the way through. That these are you know retirement investments or investments for you know in our capital investments but then when we get to the other that are then marbled we shouldn't we shouldn't tax money and we should it's when we get to this collectible deal that we get into the gray area and in my opinion but again that's just and so what I'm saying is for whoever else is going to come forward and present I mean I would like to. Try to figure out what we're doing to make sure that we're not creating some loopholes Mr for instance again this is if you don't mind a minute. If there's no sales tax where's the paper trail for the capital investment to begin with I mean for anyone if if I'm want to go to a show and I got point a specific one B. and we swap one's worth you know or we thought to going for one or whatever where's that transaction ever how do they have basis in that you know transaction I guess we trouble active the original. It's a there's more to I think this is Goshen special we get into these collectibles as opposed to just the precious metal side thank you. That that's good observations the goes back to that the government street diss capital assets and the forms that may be sold or exchanged where the dealer does not have to do a ten ninety nine B. form it would be incumbent and the taxpayers to self report. And just like with use tax collections I'm sure there's not a hundred percent compliance. Senator Rapert. Thank you Mr chairman Unless you set it on Mister noted walk out for a moment how many states currently do not tax. There are five states that do not have sales taxes at all you got last Corrigan and Montana New Hampshire and Delaware there are thirty three other states including most of the twenty most populous sixteen of the twenty that do not have or have some sales tax exemption. The definitions in each state may vary a little bit quiet in precious metal and currency sales K. well it's over seventy five percent of the population of the country right well I would add to that is will course these members know that previous service for me investments financial services so in addition is not just our race they can only exchange traded funds with gold silver and precious metals you can on that in a regular account there is no barrier whatsoever it's just a retirement account I want to make sure that state it is so that you have people they can also buy those assets in exchange traded funds and that format we're as you stated the man how Los they never take physical receipt of it because their charges to do that their costs associated with the physical receipt and so what you really what we really are doing in many respects is that we are creating a barrier for people that just want to have the physical asset as opposed to somebody that want to take a position the precious metal in a regular investment account we're they're not facing the same situation is that a fair statement yes you have had brokerage firms established Burgoyne investment funds typically seem to be about fifty million dollar funds where the fund makes the investment in the rare coins and then the shareholders in the fund share and the results of that may reflect someone Senator means comment right. So now I understand some of the questions that are out there and you know I've looked at the revenue impact here and see the potential that's that's there in the future myself I just you know one of the great things about this country's that were called freedom and liberty and I just don't like situation myself where there seems to be to standards there for personalized physical receipt the person that doesn't if they do have those through an exchange traded fund or another investment fund so I'm generally in favor of of the direction that you're going here and you know I just I definitely see that some of the states obviously have different you points on it I would just like to see is try to make yourself more attractive for for business and if this is the potential to do that I like the idea this is not that much of that tax exemption bill is actually more of a business development bill yeah I can see that why we've been widely repeated. Senator Ingram. All okay Senator Teague. Thank you Mr chairman Mr chairman I left earlier they can just be gone before I got back. I was obviously mistaken taken much longer and I thought it would. So this may have been discussed I have a friend who in a some sort of trade you out of that was like fifteen hundred dollars worth of junk silver. He tells me he can sell it because it's coins and not pay tax on it. Is that right or wrong that is technically not correct but it's if the amount is small enough quantity the dealer that would purchase it from whom would not have to file a ten ninety nine B. form. therefore to be up to the taxpayer to self report to gain or loss on their personal tax returns. And he wishes he'd sold it a couple three weeks ago when it was just when they were playing the game with the stocks and he didn't so I guess you'll keep allowing less no problem but I appreciate it thank you. Senator Dismang you have another question and so it was so my question is that can we talk about other states and thirty three other states that have some form of it how many have you had this alignment of someone we docked this from somewhere else reports from someone else's code who else has these provisions you know that allow for both not just press and precious metal side but also a sales tax exempt on the collectible subs and guessing that's where the depreciation in almost all of them almost all of them maybe five to that DO not allowed on the collectible sign correct okay the state of West Virginia is one state of Wyoming is one for instance the surrounding states the Arkansas Louisiana Texas Oklahoma and Missouri all exempt collectible coins. Are there other questions from committee. Senator Johnson do you wanna bring your other witness let's let's bring up are the witnesses in the order that you have on your CD if it can be done Kelly I think we can go through these these will be relatively short I think our main expert was Mr Heller and I think the rest of they want to come on up okay. One of the time. Go ahead come on a. And if you don't have anything to say that hadn't been said will. Senate. State your name for the record please Paul Mason I'm from hot springs and I'm just coming in from the standpoint of how it has impacted some of the shows that we posted one of the largest shows in the state is the tri lakes coin club they host a show. historically they have had as many as a hundred and twenty different dealers have come from several states in the past. Even. And this last year they went from. The fifteen thousand dollar that it costs them to rent the convention center down to a meeting room at a hotel with thirty five dealers so that in itself is pretty good proof that that The New cost three thousand dollars so that's pretty good proof that even the city of hot springs has been impacted not to mention the hotels that would be rented and the the restaurants that would be attended to my wife is the kind of person that if I. Medical in show she's going shopping so the revenues that would generate it actually is business building because it would help the show's tremendously and yeah I even talk to the gentleman who was over tourism in hot springs and he's he definitely noted that that was a you know something to to look at is that the shows are pretty much started to diminish greatly basically because the out of state dealers were not attracted to them used to be robust shows what's nice about Arkansas for concentric located we're also in the south so a lot of the shows in the winter time January things that nature very attractive and in Arkansas our show is not as big as the fun show which is down in Florida it's a really large trade show repairs and several people from pawn stars and things that nature they attend that it's not that big but this was the the larger show eight and I do know that it has been kind of for local businesses I have a pawn queen business and for my particular people because we're a touristy area they come through they want to buy a silver dollar and right now so we're dog can be purchased for around thirty three to thirty five dollars and they one as a memento something. They bought high springs it is an investment product they people they're privy to what they're buying they know that the silver content is what's about more so than the calendar that says on or it could be that the date on it or the minute mark or whatever has an impact on its value but it is a it's a tangible asset to them and that's what they're looking at but many times in my own store I have lost sales because of people who come through from Texas for instance and they say I can get this in Texas for XYZ less well it's nine and a half percent sales tax and when you're talking ten percent they would rather go back to taxes and get ten percent more product than to purchase for me so it's it's harm my business in that sense I'm just talking from a local businessman and it's harm shows it's harmed business it's not been a business builder there are dealers that I have talked to several and one from Pennsylvania in particular he said that he would move to hot to Arkansas this particular hot springs and started going shopping is a huge one up in Pennsylvania but he said that because we charge sales tax it's not it's not attractive the state is not tractive it's too expensive to do business with that sales tax imposed and and that's pretty much what I want to take from the standpoint of is that it's not been a business builder for us and I'm on the the front line so to speak I'm a small guy but you know I I deal with it day in and day out and so it forces me to take a lot of my product that I do get I have to go to shows that are in taxes or Missouri or in Oklahoma states don't and that's where we typically will move a lot of our both of our product and so that's not help in Arkansas it certainly doesn't help Arkansas taxpayers and constituents when they. Come in and I have to tax them an They don't charge me nine and a half percent because I took a ten dollar bill out of the bank so it's basically the same thing what this is it's just an exchange of money it's just going from one form of money which is cash over to another form and storing it and holding it there kind of a hedge so to speak and waiting for the prices to go up and then they can take a profit on it in which case the profit is definitely something has to be reported and needs to be paid tax on but as far as the sales tax itself it's just not beneficial to to the to the people on the front line that are just I'm not talk about business sometime but the people who are purchasing it and many times we get even local people who will just go to Texarkana taxes which is only two hours away from where we are and they'll purchased large quantities there and or they'll they'll take possession because the current law status where you take possession as to how the law is applied so if they go to Texarkana taxes than they don't pay sales tax there because I go by this the the sales tax code of that state so that's basically my testimony and I will be glad to take questions from anybody. Or other question mistrust. Singer thank you Sir this. If you would never. Name's Tom Poole I'm the president for the A. N. S. which is the Arkansas news is Maxis IT I deal with the coin dealers in the state of Arkansas. Right now Lou last year we did a physical deal showing how much sales tax that we have collected over the years which was two hundred and twenty five thousand dollars. The fiscal analysis that they turned in was set three hundred and thirty something thousand dollars but when I talked all the dealers that I know and had them send me their tax papers to me that's the numbers we came up with so as far as. D. A. N. S. close which is the Arkansas newsmax aside the. Our membership is down the shows are down the dealers I've talked to their businesses are down in their stores because of the lack of sales and you're talking about the collectible coins a lot of people in the state there are tears of people who collect you've got Jimmy John and Tina and Nancy coming in they by the one dollar two dollar three dollar items ten calendar items to put in their collections their beginners day or the. Me and the backbone for this hobby and for the future without them there would be no future for this business because they are the ones is going to build that enthusiasm the other one's going to have the joy they're the ones is going to have that to come up and say Hey I really enjoyed this collecting as a hobby and as an investment then they'll advance in going to other things you've got your other people who are seasoned collectors or buying silver dollars gold coins the rare dates. And they're putting them in their collections for investment purposes as well a lot of the stuff gets passed down to their family to their children two other people then you've got the one guys that ours and Rudy and people like that they're auction houses they're selling the twenty five fifty hundred thousand dollar coins and you sell some of those in your store sometimes but most dealers don't have that kind of inventory that they sell a lot of that stuff there in the media the medium range area for the people in the State of Arkansas to buy those coins and they will set them back as investment and. D. A. N. S. right now we've lost not counting the deaths of people that have died. But last year alone we only had three members join. Whereas in the past year in our prime we would have a hundred two hundred and fifty members join the ANS and take part and participation in all the shows that we would do. Arkansas we have not had a show in two years because every time I try to get participants to come from other states to go to the show to set up. We will come because you charge sales tax so we don't have the venue like Paul said earlier. In our prime when we used to have four five hundred table dealers set up has dwindled to two hundred now a hundred now we're down to twenty five dealers and out of that show the last time I talked with the dealers a third of them said they won't come back. Because a lack of participation and because of the sales tax so we are we're losing a niche in this market thank you to help us as individual dealers and business people in this state. We're losing that because we're not able to keep up with the surrounding states in the other states that don't have the sales tax. So I'm here to ask for your appeal on this to pass this because it not only helps the local businesses the recording shops but it's going to help the our Kansans in the same way. And that's what I'm asking so I'm open to any questions if you have anything. I thank you members you have any questions. Seeing none take the. With any others is so I guess will have a against this bill have no questions I thank you think there are. No I don't believe so now. And then if the if they would like to make some statements something so we'll bring them up to this point. Thank you Mr chairman Paul Goehring DFA. Divide up prepared a fiscal impact statement for Senate bill three thirty six the projected sales tax lost in the first fiscal year which BFI twenty two would be approximately seven hundred sixty six thousand dollars in state sales tax in approximately two hundred and. Fifty five thousand dollars in local sales taxes for a full year of collections which would be FY two thousand and twenty three we estimated that the state sales tax loss would be one point one five million and the local sales tax loss would be three hundred and eighty three thousand I'd be happy to answer any questions about the fiscal impact statement. Thank you have one thing so it one thing I want to get back to you on which we these definitions right because I mean I I do have a hard time meshing and I think our has that you think is the best value has capital gain value it's not inclusion you know we're providing here. It all goes back to me the collectible side and and trying to make sure I understand that so when you get back to the definitions of a coin or currency one more time. Is there a I mean are we establishing the those definitions out right right now for going occurrence years that is that somewhere else. That some Mister chair that appears to be within this definition of the the bill or I'm not aware that this is been defined elsewhere in the sales tax code okay so then we get to this is manufactured in whole or part of gold silver or other metals metal or paper okay and then we get to so we can skip to. And we go to three in its agon ago back to the on orders incidences collectible item rather than its current form. What. Are we creating a new definition for currency. Especially in the paper form. And I certainly would don't want to speak for senator Johnson but how we would treat ordinarily whether or not a transaction for currency would be subject to sales tax if there is a huge trade a twenty dollar bill for four five dollar bills obviously that's just a currency exchange but here we're talking about the transfer of tangible personal property other than a currency transaction so that's how we would currently treat. They're not a of an item would be sold and subject to sales tax would would have to be the sales price would be obviously much greater than the stated value of the currency. Insistent but we're creating a definition for currency that number one it has to be a piece of paper and then has to fit into one of the orders and one of the orders then is collectible item rather than its current form. Does that make it so that it is is it are we doing we want to do here which only targeted to actual dollar bills or. Whatever million two dollars or whatever it is or is that going outside or we creating a new definition currency that's going to go a little farther than we planned because paper to me and then as a value. A collectible value I mean that those are the two members setting that up as the definition which I know that's not your intent but I think that's that's what we're is that not what that does for my reading that incorrectly well it certainly for for our benefit if if this were to become an act we would definitely we we need to have a definition that we ran a rule or you would created if national this would this would this definition what would likely just being be incorporated into our gross receipts tax rules as stated it is of a thorough definition that provides what the General Assembly determined would be exempt and I've just from a practical an administrative aspect if there is currencies such as currency from another whether it's a silver dollar or gold coin from the United States certainly what we would be looking at is that if those transactions that were at a at a pawn shop at a coin dealer shop things of that nature if there was a transaction for four billion or four point or currency we would not be viewing that transaction is being subject to sales tax. Or if purchased from out of state or you subject to use tax okay thank you Senate is mine if I if I could touch on that a little bit as always you're keen Act catches things that some of us don't notice and while we are some disadvantages the fact that we postpone votes on these bills this would be an opportunity for me to work with you and with the affidavit to clarify I don't think we're disagreement or anything it's just that that it that those three lines on page two are not real clear on things other than say the gold bar the point is Mr Heller said somewhere we meeting any state government but state government have to draw the line and say it would if you collect care bears or for Beazer some of these things that have value because collectible but they're they're just they're they're an item and and course art is a good example I remember when that this Walton was purchasing art for a crystal bridges if the she was granted or the they are was granted an exemption from say Arkansas sales and use tax to to develop that museum and because simply because of the tourism and any other aspects it was going to bring the state as opposed to just what we would get one time on those purchases so I appreciate what you're saying I agree Mr Heller that we draw that line and and if you buy collector car collector for B. or collector cabbage patch doll or whatever that's that's gonna be different but we do need to figure out where that line is and I'll be happy to work with D. F. and I and any suggestions you and other CPA's might have all how to exactly put that line somewhere. Senator Dismang. Senator Hickey you questions yes Sir and probably the other day and I appreciate that the collectible part of this is is also were where I'm struggling but but in the and with all I know that this is outside the scope for more **** do you all know when there's been a lot of reference made to our surrounding states is specifically even my area Texarkana of but it could go to inner city Oakland Missouri where ever but. And do we know with this specific language and and what they're doing is identical to this. Or I with or maybe that's a question for Senator Johnson and we actually looked at those states to see if what we're doing compares to that because if if that's what our intention is is to try to make us more competitive with the surrounding states I think that we should at least look at that language and see what those collectibles and certain certain things are in there and what if they already have exemptions and it's or exclusions and things of that nature I think it's as a senator he getting to be very helpful for us to go we we did identify our surrounding states and how and how they were treating these transactions but I think it would also be very helpful for us in looking at at Senator Dismang questions about the how the definitions are crafted within this bill just make sure that if there's a better way to make it as clear as possible to the business and the consumer what's going to be subject to tax we'll we'll go and pull the surrounding states definitions and and look at all of them and compare them to the language in this current bill okay that that be helpful thank you Sir thank you Senator Hickey and I as a it said the Senator Dismang this is a a definition we can clarify I think and and I appreciate your idea of looking at our neighboring states of. Again Mr Heller's been a tremendous asset to us because he works in sales with all all across the country or at least the ones that they choose to do business with and follows this carefully so I think that I don't want us to get outside of one of these and one of these at in a call and. But we realize that we're touching on that when we talk about something that's intrinsic value so let's get that and I I pledge to come up with something before the time comes we actually vote on this bill. And if if if we are up. Mr rice will close of one quick comment and then we'll move on I appreciate the fact that our friends at D. F. and I try to look at that revenue impact on this and and I think a lot of times they are spot on they pretty well have the data to to analyze I don't think we have that in this case and I think the best example of this is I ran up two years ago ran Senate bill three eighty nine which was exactly the same bill and I'm not belabor this point I just want to use this as an illustration of how we're not talking about good solid numbers when we look at this two years ago the F. and I came out with the Law loss just to a state I won't get into the locals three hundred eighty three thousand three hundred thirty three dollars in twenty and twenty one five hundred seventy five thousand here we are two years later the exact same bill and that figure is gone up for twenty two two seven or sixty six thousand six hundred sixty seven in twenty three one million one hundred fifty thousand now I don't think either one of those are per se accurate and I don't think there some of these things are are very well measureable I only point that out to the committee to say that this is not. I feel solid thing lack the the pastor bill that Senator Dismang presented it we actually got this it's like here's your cow were look it up and I don't blame them for that there you know it's it's you're limited to the data that you have to analyze but only say that to they could you've heard from witnesses day talk about the dynamic impact our state's economy and tourism so as we consider this in the future I hope you'll take all that into consideration and instrument I thank you for that and for now I'm close thank you. Thank you. And we will move along to Senate bill four sixty five center and we do have a hand out of it. Okay. He will just go back. We got it from. Senator you are recognized thank you Mr chairman in this bill just simply extends the sunset on the I guess it's called a privilege tax on medical marijuana to two thousand twenty three the proceeds from that promptly go to fund the Cancer Institute at UAMS you amis's here if there's any questions of the progress they're making. Then I'd be happy to try to answer the questions but again it's just moving the day to day life for two years for them to come up. If there's questions in particular if there's not then. Let me start out this way members are there questions on this bill. You senator that. Centering number do you have a question. Okay all right. Okay. In this does not have an impact statement. Okay. You have a we have a motion for me. Senator column. Your second and simply disclaims motion. Okay motion do pass. All in favor say aye. Posebno motion pictures. okay. Senator Garner. Is Senator Garner outside. Senator Garner you are sending Senate bill four five nine. And you do understand that would since it has a fiscal impact we will not be taken about this all right proceed with your bill. Yes Sir thank you for a call me back I was trying to talk or ask questions Judiciary last major the business this is a little small build and do much for the state of Arkansas here. No. So this came out of me discussing with constituents up put on Facebook and some other social media platform asking what do you want change in Arkansas a simple question that we all for too often don't ask people directly represent. Number of issues and bills came out that some I run some I know have zero chance to pass from one tried to anyway. The number one issue I heard from all the family for people text to me call me social media is this issue they hate paying anything in we buy used car. I'm asking the questions that would actually come up so what about how much money is is called the city don't care they said they hate this one I said what about doing it at a skill system certainly House Senator Rapert and not represent paid or doing they said no we want to get rid of it overwhelmingly they said that over and over and over again in the reasons why are simple one they considered as a double taxation anytime you buy a new car you have to pay sales tax on it if you turn around so that core again and again and again the state gets that money over and over again secondly it was a bad policy was put in place this happened during former governor former president bill Clinton's years this as well as the grocery tax was a way that with a collect the revenue fortunately we pretty much cover the grocery tax and is antiquated way to collect revenue yeah I think it's another way to do it and finally. We pass a lot of things in this is tax recommended to all your different kind of tax revenue things I can tell you this people feel this one. When you go by you score specially if you're low income or middle income which a lot of people do they buy used car to save money when they have to go down and write that check for ten up twelve hundred dollars thirteen hundred dollars my cousin just bought a used vehicle for her little girl or first car Jori record within a month that city regardless. She had a right a twelve hundred dollar check to pay for the sales tax that core. Now for some occur who's a school teacher that's significant amount of money so I think this is a fair policy I think is a great policy and has the added benefit one two hundred plus million dollars out of our general revenue which is always a good thing for me with that I'll take any questions committee. Senator Johnson you have a question. Thank you Mr chairman of senator garner. We're going to be a real bill here you know the revenue impact in fact that we have lots responsibilities including being responsive to our constituents that you just alluded to we also are balanced budget state and we can qualify you and I have ways we like to see things be we got a hundred thirty five people and a governor have to figure out how to make that law and to stay within that and I I know you appreciate that I'm I'm very sympathetic this on their forget I got my first car and I paid six hundred fifty dollars for use use car VOL. What was a big that was a lot of money for me back. And I ask my mother course I was so young it was titled in a parent's name my mother went in court asking Conway registered in hi it you collected and she came home with the maddest I've ever seen her. She said thank charged me sales tax on that and if you get it was three percent at that three percent was total sales on six hundred fifty dollars which is what nineteen or something you call comprised tell me exactly what of she was matter morning the car had a Mississippi time. So it'd never been registered Arkansas also Arkansas sales tax and pay. And if that car had Arkansas title it would have been the sales tax now that I'm so understanding your constituency others being this is one I really really don't lie I remember when when governor Clinton put it all in like most things. This was we had a fiscal situation that we need to revenue up I am of the belief that we. Need to start when we're trying to cut taxes in Arkansas that we look at the ones that were pancaked on the kind of work backwards from there so I appreciate you bringing this bill I don't quite know if the total watching it go away which would be the answer in twenty twenty one but but I appreciate you bringing the bill I think the discussion is important I think if we put this on the ballot in the for this next fall I think you're pretty pass overwhelmingly so I just I want to say that while I don't. I certainly acknowledge the revenue impact and we we have to deal with this but on the other hand she said there might be a better way to do this than to hit these people course I've always said that when if we made people write a check to the IRS on April fifteenth that there be such a clamour for tax reform in this country and cutting back on government then I think we accomplished a lot of bills and some as conservatives want so. There is a reason that we do this and I I'm just to I appreciate you bring the bill I'm certainly not quite ready to vote for it yet but I did want to ask you if you would consider compare at this comparison of if you buy a home. It had two by fours and sheet rock in electrical pieces all these things that go into that home the price of that home that we're taxable items that contractor builder bought those items and Pitsch sales tax and that's your home will couple years later you sell it the new buyer doesn't have to pay any sales tax on is that correct as far as I know I'm not an accountant I never really so to House before a ball in your house but my instinct is that correct in effect that's incorrect I'll stand corrected by any the experts including our friends on the committee but so that was my real quick it's this is one of the few items that we. Repeatedly collect sales tax on it statement Sir hi thank you Sir thank you Mr thank you are there other questions. Mr. Thank you Mr chair Paul Garin with D. F. I. D. if I did release a fiscal impact statement. And on this bill to exempt I used cars in Arkansas we currently we have an exemption for up to five for use of new and used vehicles trailers and semi trailers that have a sales price of less than four thousand dollars the revenue impact and if there's would to go into effect on September one of two thousand twenty one and would be approximately one hundred ninety seven million dollars. A full twelve years of collections for Would be two hundred sixty three million dollars I did want to note that is a part of the governor's balanced budget he did have a proposal in order to reduce the sales tax burden on used vehicles the revenue impact of that for four full years approximately thirteen million dollars of the guard governors is certainly supportive of providing relief on used vehicles however the exempting all use cars would have a substantial hit to the state budget. Further questions Mr. Seeing thank you. Senator Garner as I explained it would you like to close before. Yes Sir I I can appreciate the governor and what he's trying to do what's and raping them do what that happens is when you do that you creates kind this false bowl ceiling on that so if you go by a four thousand one dollar core you have to pay sales tax on a two by four thousand dollar core is exempt and what happens is you basically create this crazy mechanism where dealerships kind of work around that that's why I think we should get rid of it now if you want to take it up to like a hundred thousand dollar used for I'm I could accept that but I think we need to be bold in this reform and I'll say this for close this is my easy bill I got a no income tax bill filing day so don't pass these one quick we get through that when I appreciate it will take place on the road with. Thank you When we start to take and decide. we will call you back if necessary. Members saying no other. Business we or adjourned till next Monday we do have a bill already five on next Monday. Thank you.