House Revenue and Taxation Committee
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- October 2, 2026
Members were just about ready to start if you want to take your seats
Representative Frances Cavenaugh
Unverified
2:12
please. members it's 9. I'm gonna call the meeting to order. thank you all for coming here this morning bright and early with little shiny smiley faces. I appreciate it. with that the first thing that
we've got to take up is consideration of the motion to approve special expenses incurred by the committee
do we have any questions about that or discussion seeing none to have a motion motion all in favor say aye polls say nay congratulations we have passed that with that we're going to move into our main part of the agenda which is adoption of some interim study proposals the first one is going
to be ISp 2025069 bypresentative Perry and I think Representative Eaton you're going to present that if you'll go to the table and please introduce yourself for the record.
Representative James Eaton
Unverified
3:27
Good morning James Eaton district 26. thank you madam chairir. recognized to present. thank you members of the committee Representative Perry asked me to present this. you remember he had this bill going back in session he decided to pull it down. I don't think we have opposition on this what it's looking to do is to move the tax on vehicles from because now we have60 days on some
what it's doing is just move it to the point of sale so we want to move that forward to that. I think DFNA is in favor of that and I think all lenders that we've talked to are in favor of this so we're just looking to move that to an interim study. Questions just
Representative Frances Cavenaugh
Unverified
4:19
for clarification there is opposition to this study. I mean not to the study but opposition to the proposal so I don't want you to think that there is no opposition to it there is
opposition to it but not to the study but for the actual moving of the way that the sales tax is collected there is opposition to that yes ma'am and if
Representative James Eaton
Unverified
4:39
if I've alluded to no opposition, I just totally meant from those two sections sorry I didn't mean over to the intern there's no no no for it can
be studied but yes awesome members we have any questions we're only taking committee questions
Representing wooten you're recognized thank you madam chairman. on on this so we're putting the burden on the dealers to collect the tax or individuals what what whoever sells it has to collect the tax at the point of sale
we're we're asking for this to go for a interim study so this is just to send it to that but yes sir eventually thank you madam chair
Representativelunstrom you're recognized I was going to ask what the controversy was I realized p re s ent ative Hall may not know could you you alluded to that so just a question of the chair what was the
Representative Frances Cavenaugh
Unverified
5:56
controversy? the auto dealers in the state of Arkansas are not in favor of this it has been tried in other states and there has been a mixed bag of results when that happens so there's all there's opposition against it from the actual alder dealers in
the state DFNA could attest to whatever their stance would be on something like this but I'm just speaking from I know that there was opposition from multiple places thank you for that point of clarification.
I'm for putting this in an ISp do you need a motion at the proper time? Yes I move we put this into an ISP. I've got other people Oh thank you
Representative Frances Cavenaugh
Unverified
6:32
I'll come back to you thank you Representative Rye you're recognized thank you madam Chairman.
Representative Johnny Rye
Unverified
6:38
just have a question maybe someone can give me an
answer as it is right now if you buy a car you have 90 days before you have to come up with that sales tax isn't
Representative James Eaton
Unverified
6:54
that right? I'm not sure the exact time frame. I don't think it's 90 days though. think it's60 yes ok well let me
Representative Johnny Rye
Unverified
7:00
ask you this if that did change to what we have here would that be immediately upon the sale thank you Representative Johnny yes it would be immediately
Representative James Eaton
Unverified
7:08
ok thank you sir thank you madam chairriff p re s ent ative these you
Representative Les D. Eaves
Unverified
7:14
recognized thank yous and maybe Mr Garre can ask you this is there any sort of fiscal impact to the state if we were to adopt this as a as
a change to how we currently collect sales tax if you would please introduce yourself for the record on behalf
of a nonmember PaulehringdFfa you're recognized thank you madam
Speaker 50
7:45
chairirpresentative Eaves we would certainly have a fiscal impact in the regard that we would require programming changes
Speaker 51
7:51
to our system but and there would also be with the different timing of the collection of the tax with the consumers currently having a60 dayy period to remit the tax to DFfa at the time of registration if the taxes were collected at the time of purchase at the dealership on a new vehicle purchase or any type of dealer purchase be a timing issue but the amount of tax collected overall would
Representative Les D. Eaves
Unverified
8:17
not change. OK I appreciate it and and madam Chair, I don't know if anyone here on the committee is in the new car business but if they are it'd be nice to
Representative Frances Cavenaugh
Unverified
8:36
hear what their take on this would be. that would be me but and and I do on that have a question for Mrehring. the industry would have to make a substantial investment in the way that they
actually do their business. it would be a large expense to that industry. of course your physical impact would not look at that but what is the I guess take fromdFNA if the dealerships then become your point of collecting taxes. how are we going to how are you going to know that the taxes are being collected because now you're doing audits you know as they come about but when you're starting to collect sales tax on
a large item like that it's much more money being collected yes
Speaker 50
9:24
madam chair and that's a very good point. So certainly our fiscal impact would not have any data as to the implementation costs for private industry for the dealers to to make this change many of our dealers are already registered to collect sales and use tax due to the fact that the they sail tangible personal property you know accessories to vehicles they also have a a service department where taxable
repairs sales of tires, oil changes things of that nature already occurring but the there would also you know be
Speaker 51
9:58
changes in processes at the dealerships that they would definitely have to make their own programming changes and and there would also be of course the issue of that could come up that if a
Speaker 50
10:10
dealer was had the requirement to collect the tax for and then the when the person registered their car we would have to verify that the sales tax was was was paid
by the dealership but there could be circumstances where for whatever paperwork errors verifying and tying the tax collections for a specific vehicle to a a remittance from a dealer that would have to be verified the only way to verify that would be an actual audit of the
Representative Frances Cavenaugh
Unverified
10:45
see from the dealers's mess is is a question is if we're collecting it but we're not licensing the vehicle
so how are the revenue offices going to know that the sales tax has been collected on that vehicle
before they issue a tag on it. So there's a lots of moving parts so it's not just like if somebody comes in and does a RO we report that and we go on there's an actual extra step that has to happen with the vehicle and it's that registration in those two things are usually tied together when they actually pay that sales tax. so that's a process that theFNA as the government official would have
to work out plus the business would have to work out how they're going to
Speaker 50
11:27
get that reported todFNA I agree and there's also there are circumstances where vehicles are registered in Arkansas where no sales tax is due because it doesn't meet the threshold but of course we we have a review process to make sure that the documents are in order and that if no tax was actually due that's that would be the correct result so there would certainly have to be a verification process that would that would be required to ensure that the the tax that was owed on that transaction was actually remitted to the state
Representative Frances Cavenaugh
Unverified
12:00
thank you umpresentative wooten you're recognized Mreering
how how why would y'all support this?presentative Wooten, we haven't provided a with the
Speaker 50
12:13
all the res respect to Representative Eden. we haven't announced a position on this interim study proposal or or the bill when it was introduced in in the house last legislative session. so we we don't have a we don't
have a fo against a position where we're neutral on
the bill. would it not put the burden and and then like uhpresentative Kevinau pointed out how how are you going to know when the revenue office's sales tax has been paid on we can't even collect it all today by putting a temporary tags on the cars it's still at the you know at the desire of the individual to whether or not they paid the sales tax
so what's what's to guarantee us that we're not gonna lose more money than
Speaker 50
13:11
we're losing today well certainly Representative Wooten the the the existing process does require the the purchaser to come into DFfa register their vehicle and before we register that vehicle we have to collect the sales tax from from the individual we do recognize that there are individuals that fail to do so ever or within the
required60 days we do have a process where we go and collect and assess that tax from from the individual on the purchase because tax is owed regardless of whether the person comes in and registers their their car so yeah we do recognize that there is a there are circumstances where when the purchaser fails to meet their obligations that it requires effort on the part of DFA to make sure that tax is
collected but we can't force an individual to register their car, that becomes a a problem for law enforcement if a vehicle is outside their60 days has not got a a registration tag for for the vehicle and then it becomes a a
Speaker 51
14:20
a greater problem beyond DFfa as well. what we're creating we're
just adding to a bigger mass we're making a more a more of a problem if we change this
well I do know that that I understand I understand the standpoint of of
moving it but I I don't think it's the right thing to
Speaker 50
14:46
do it is a minority position in the in the United States for tax to be collected at the point of sale for
Speaker 51
14:53
example, Florida collects at the point of sale I believe also Indiana so most states have the
Speaker 50
14:59
process that Arkansas has which is the purchaser pays at the time of registration. we're we're not more certain do
we have to collect the tax in the proper manner the way we're doing it today versus what this proposal would would require we would have to do a
Speaker 50
15:18
greater ind depth study. we would have to look at those other states to see what the the scope of of their collections versus the using their process so we we wouldn't have any data at this point in order to form an opinion either way if one if one system is more effective or or not but we certainly can recognize right now there are there are individuals that buy vehicles
that do not register and do not pay the sales tax
Speaker 51
15:43
within the60 days or possibly ever or for the life of them owning the vehicle thank you madam chairman I did wantpresentative wooten I was
Representative James Eaton
Unverified
15:51
told by a member of the department that they were in favor of this with with all due respect I'm sorry I just
Speaker 51
16:00
I'll just make sure that that we have a conversation and we can talk about be happy to just just wanted to clarify that
Representative James Eaton
Unverified
16:06
I was told that yesterday Yeah I wasn't I wasn't madam
Speaker 50
16:11
chairir andpresentative Eden I I would not aware that DFA had taken a position either way on this bill or or this Ip my apologies but Representative
Representative David Ray
Unverified
16:25
ray you're recognized for your question. thank you madam Chair. Mr. Gehring, so in the title it says it uses the in the title of the bill it uses the phrase as a as affirmed by referred Act 19 of1958. I'm, I'm
Speaker 76
16:37
just unaware of what that reference is to do you know? So RepresentativeRay
Speaker 50
16:45
when the start of the 2025 legislative session, DFA also noticed that a number of the sales tax bills had that reference within those billsblr began including that language
Speaker 51
16:55
in the bill draft we had a conversation with the drafters. We had a, I
Speaker 50
17:01
had a much greater understanding of of of why that is two years ago but I don't have it today but we can certainly you've slept since then I've slept since then and but I don't recall the specific
Speaker 51
17:17
reasoning but I but I know that there was a very good reason that the bureau was including that language and
Representative David Ray
Unverified
17:22
sales tax bills well I'm sure someone from the bureau is watching so maybe they can find that answer and contact
Speaker 51
17:27
me. We spoke with M Leonard and she gave an
explanation. All right thank you Representative Luundstrom you're recognized just to motion at the proper time
when the chair calls me. are you ready for that?'ve got in the queue thank you. I haven't forgot you Representative Lynch are recognized for question.
thank you madamir Paul what this for everybody's information what is the current sales tax rate for new cars and for
Speaker 50
17:58
used cars so they are it it's a the general assembly enacted a a generally speaking a s sales tax on a new car
Speaker 51
18:06
because of the price point that they're sold at. we really don't have cars anymore that are sold for less than $10,000 that are new vehicles now there there may be some
some motor vehicles that we have a a a graduated rate system so most new cars are going to be
Speaker 50
18:28
sold at the6.5% state sales tax rate. now there's also a middle sales tax rate4.5% on certain vehicles at a certain price point and then when the the total consideration paid for a car is4,000 dollars or less there's no s sales tax collected so there's
no local sales tax on new car. there's also the
Speaker 51
18:51
locals and their they are capped at 2500 of the purchase price.
so it can go as high as like some parts of Lone Oke County is 11%
Speaker 51
19:01
on sales tax shouldn't because of the cap on the sales on the on the
2500 of the purchase rate on the used cars that Mreyton Senatoreyton has run that bill several times I think that's down like3 or4% right? on used cars think it's4.5 but I'll have to show
OK so the new cars where you get the the big
Speaker 51
19:27
lick then that's correct because they don't most news cars are sold greater than that reduced rate. thank you Representativeyer recognized thank
Representative Johnny Rye
Unverified
19:40
you madam chairman. Paul, let me ask you this at this point the bookkeeping first of all you got60 days but on top of that you got bookkeeping that's done throughdF andA that's correct yes. OK now if
this did occur and this took place in the dealership of the car dealership would that would they not have to hire
Speaker 51
20:08
extra people to to do that work it's certainly possible those those dealerships that whether they could absorb in their existing processes in their sales departments and their financing departments whether they could also account for this additional collection s responsibility but I can certainly understand if especially a
small operator that had to have additional duties. a small dealer that they may need to hire additional staff it would just be a business decision that that individual dealer would have to
Representative Johnny Rye
Unverified
20:42
have to make follow could that lead to the price of a vehicle being more expensive since that that work would be done locally at the dealership We we could certainly understand
Speaker 51
20:53
that whatever drives costs in a business can can drive also the ultimate price sold to a consumer.
Representative Richard McGrew
Unverified
21:00
thank you Paul thank you madam sherman. Representative Mcgrew you're recognized thank you chairman. a couple of questions one do we I don't know if DFNA does but do we know how many people are buying cars that are not we're not collecting that tax because they don't register them that's one question the second one there's I know there's dealerships that offer to pay the sales tax how was that handled? so for the first question so
Speaker 50
21:31
what DFfa's processes are is that we we look at temporary tag we get temporary tag data to verify whether or not that temporary tag can be correlated to a vehicle registration. we do have some data that we'd be happy to share with this committee as to the number of cars we car purchases that we've ended up assessing I just don't have that in front of me right now and so could you repeat your second question? I'm sorry
Representative Richard McGrew
Unverified
22:02
I know some dealerships and and the chairman may know this more than you offer to pay the sales tax at the time of purchase is an incentive to get them to buy.
Speaker 50
22:13
how was that handled do you know well certainly I understand so certainly there are there are quite often times where a
Speaker 51
22:20
purchaser when they are going to finance a vehicle at a at a dealership we'll ask the dealership about the possibility of financing their sales tax as a part of the financing of
Speaker 50
22:33
the entire vehicle purchase and how that typically works is that there is a check cut when the vehicle transaction has been completed from either the and of course the chair probably knows this process a lot better and so if I'm making any mistakes but there's gonna be a check cut either from the financing bank or the dealership or some entity to the department of finance anddministration to cover the sales tax on the
transaction and possibly also the any type of registration fees that are necessary. thank you very much
for clarification normally what happens is if a customer decides they want to finance it into their contract or they want the dealership as
Representative Frances Cavenaugh
Unverified
23:16
agreed to pay all of it or a portion of it when they receive their paperwork from the dealership with their title and their bill of sale and their ir their finance contract there will be a check in there that is made out to the department of finance Administration to pay that part of the sales tax that's been agreed to.
Representative Rick McClure
Unverified
23:36
uhpresentative McCluary recognized thank you madamir we got a question that I'm in the middle of now my wife wants a new car so she has a healthy appetite of everything she's looking at is50,000 plus so when I figured that out that's about3,250 dollars sales tax that I got to pay within60 days plus my first payment is gonna be due within60 days and I haven't registered it. I haven't, I haven't got it assessed who actually owns the
car because I have a sales contract but I haven't I don't have registration I haven't paid my taxes yeah I certainly understand so there's
Speaker 50
24:17
certainly it was that you would be the owner or the purchaser would be the owner of the car and then if there's financing in place for that vehicle they would have a a financing or a lean interest in in the motor vehicle. so you would be the the registered or the the the owner even though
that you have not yet applied for registration or received a title for that vehicle from
Speaker 51
24:41
the state but you would be in possession potentially of the manufacturer's certificate of origin and the bill of sale and and all of the documentation that you received at the dealership to demonstrate that you were
Speaker 50
24:53
the rightful owner but you just haven't registered the vehicle with the state so what happens
Representative Rick McClure
Unverified
25:00
if I have buyers remorse and decide I can't afford that3,200 dollars sales tax right upfront and I can't finance that because I didn't
roll it in is there any way for that person to back out since it's in limbo between the sales contract registration and you see what I'm saying? yeah so
Speaker 62
25:19
I mean there's certainly sometimes that the dealer will rescind
Speaker 51
25:25
the sale rescind or cancel the sale and take the vehicle back and and they'll just consider the the the deal to be a nullity that was entered into by the parties.
Speaker 50
25:39
but most often it's it's where the person gets buyer's remorse possibly does not ever register the vehicle maybe even sells the vehicle to a third party, and never paid the
Speaker 51
25:48
sales tax. They still owe the sales tax on the on the transaction the trans the the tax was owed at the time
Speaker 50
25:56
of of purchase. so baring that the the sale was rescinded or canceled the the debt is still owed to the state for the sales tax Representative McClure kind of
Representative James Eaton
Unverified
26:06
to touch on that also from the insurance perspective that
certainly adds questions if the lien holder isn't added so at the point of sale if the lien holder isn't a part of that and you had do have buyer's remorse you've you have it insured and you
decide to crash the car, who gets paid? that's kind of that is a good
part of this bill that would get cleared up a little quicker about actually you get the money you signed it and he just said you owned it so that's hopefully that would clarify that some I think that's a good part of this and for
Representative Frances Cavenaugh
Unverified
26:41
clarification the way that it works is when you purchase a vehicle and the MSO or the title is assigned over to the new buyer you become the legal owner at that time so that is what that that is what shows who ownership is. So even if you might not have registered yet even in the60 days or you decide you don't do it for some reason. you're still the owner because that that the instrument that shows ownership has been transferred to you so the new owner is then the one that is
held liable. most dealers buy policy we'll fill it out, put the lien holders's information on the back of themsO or title that's what secures their lien on it the other thing is most what dealers do will file what we call a direct lien with the state of Arkansas which puts that lean out there directly with the state so if they tried to go somewhere else and trade it in if they want to try to get a title that lien is going to be out there and they're gonna have to get a lien release from that lien holder. that's just for people who kind
of understand the process. any other questions? seeing nonepresentative Lunstrom if you'll get in the queue you're recognizing Representative Luundstrom madam chairir yes could clarify
Representative James Eaton
Unverified
27:56
one thing DFN a possibly didn't say they were in favor of this. I should state my my question to them better I ask if they oppose this they said that they they did not so that I just want to be clear on to the committee that I wasn't trying to mislead anyone saying or put words in their
mouth. first I ask just said they didn't they didn't oppose this sopresentative Eaton do you want to close for your yes ma'am I am closed and appreciate the committee for
your time and questions. you Representative Lindstrom you're recognized. I move we do pass the ISP of2025069 on to research. I have a
motion due pass by Representative Lundstrom. any discussion on the motion seeing none all in favor say aye polls say nay congratulations your study is passed.
Representative Frances Cavenaugh
Unverified
28:49
thank you umpresentativeRay, I think you're up next and it's going to be ISp 2025071. if you'll introduce yourself for the
Representative David Ray
Unverified
29:13
record please. Thank you madam chairir uhpresentative DavidRay, House District69, colleagues this
interim study proposal is from House Bill1636 from the 2025 session. Many of you were cosponsors of that bill after the bill did not pass in the 2025 session. I thought it would be good to just refer it to interim study so that members could continue to have conversations about the idea of phasing out the state's excise tax on soda I really don't think any of the underlying factors have changed since 2025 when this bill was presented
and and so we debated it quite a bit then so I won't go into a lot of detail but I'll be happy to answer any questions that anybody has about the proposal and just appreciate the opportunity to keep that conversation going.
thank youpresenting rootton you're recognized thank you uhpresentativeRay are you a consultant or other you are do you represent the Arkansas beverage Company sir group
the second question is didn't just get defeated in the in this very committee in the last session. No, sir, it
Representative David Ray
Unverified
30:32
was passed by the committee and it fell on the floor
OK felled on the floor and I mentioned
Representative David Ray
Unverified
30:37
that in my in my presentation just now. right thank you one
is this dedicated to the funds from the excise taxx on soda go into
Representative David Ray
Unverified
30:46
the medicaid trust fund medicaid trust fund is it going to be replaced
this proposal House Bill1636 from 2025 did not replace the revenuestead it allowed for a gradual fiveyear phase out of the soda excise taxx contingent on revenue triggers in the trust fund is that is that the only money that's
given to the trust fund? No sir. there's
Representative David Ray
Unverified
31:17
several other revenue sources that go into the trust fund I believe there are 8 or 9 in total
this is one of those one more follow up is is the fact that it failed at the floor the reason because of the fact that the revenue was not replaced going into the trust fund as a result of the passage of this bill. I couldn't answer that. Every member that voted no probably
Representative David Ray
Unverified
31:48
had their own reasons for doing so. OK thank you thank you madam chairman. p
Representative Johnny Rye
Unverified
32:09
OK thank you Mr Chairman Representative David, let me ask you this on the tax itself that's changed a tremendous amount since 1994. how much does that generate
Representative David Ray
Unverified
32:25
each year do you know that's a good question because in 2017 when sorry the the excise sorry the excise taxx itself yes
Sorry if we were back in session I would have had this on the tip of my tongue. I believe it is somewhere in it's somewhere in the40 to50 million dollar range annually and I apologize I don't have that number in front of me. I I may have it and just can't put my finger on it but I believe it's somewhere in that range. uhpresentative, I I
Representative Johnny Rye
Unverified
33:07
appreciate you giving those figures because I remember back when that passed
in 1994 it was only about 25 million so now it's just about doubled hasn't it that sounds right sir thank you Representative
David thank you Mr chairman. any other questions members any other questions members
Representative David Ray
Unverified
33:32
madam chairir, Iu I have a couple of questions for DF andA if they would be willing to come to the table that'd be very brief
And Paul if you'll introduce yourself again for
Representative David Ray
Unverified
33:57
the record. thank you. PaulehringdFfa representative ray that feels a little weird asking the question from down
here Paul if you could I Id just explain for the benefit of everybody in the audience who makes the de when when money comes out of the medicaid trust fund who makes that determination is that the
secretary of DHS that authorizes that or is it the secretary of DFNA or is it some combination thereof? how does that process work? So I I would certainly need to go back and discuss
Speaker 50
34:26
that with DHS on the mechanism for how the the the match to the the revenue's work but we certainly would be
Speaker 51
34:32
able to provide that information to the committee OK I think that would be good information to have and then my my brief follow up
Representative David Ray
Unverified
34:40
to that and Paula if you'll just get that to staff we'll give it out to the
committee and my brief follow up to that would be when money is requested to come out of the medicaid trust fund does the legislature have any oversight of that request or decision we'll provide that information as well thank
you thank you that's all I have and if there's no further questions I'll just move to
adopt the interim study proposal. no other questions seeing none motion made by RepresentativeRay for Dupas all in favor sayy aye
Pa say nay congratulations it has passed. members with that we are adjourned
Agenda
A. Call to Order
B. Consideration of a Motion to Approve Special Expenses Incurred by the Committee
C. Consideration for Adoption of Interim Study Proposals (ISPs) [Exhibits C1-C2]
D. Other Business
E. Adjournment
Documents
No documents posted.
Speakers
Representative Robin Lundstrum Chair
Unverified
Representative Frances Cavenaugh
Unverified
Representative James Eaton
Unverified
Representative Jim Wooten Chair
Unverified
Representative Johnny Rye
Unverified
Representative Les D. Eaves
Unverified
Speaker 50
Speaker 51
Speaker 53
Representative David Ray
Unverified
Speaker 76
Representative Roger D. Lynch Chair
Unverified
Representative Richard McGrew
Unverified
Representative Rick McClure
Unverified
Speaker 62
Speaker 71