House Revenue and Taxation Committee
Video
Transcript
Machine transcript
May contain errors. Verify important quotations against the official video.
About transcript accuracy
- Source
- Whisper
- Model
- ggml-large-v3-turbo.bin
- Processing date
- October 4, 2026
members we're just about ready to start if you want to take your seats please
Representative Frances Cavenaugh
Unverified
2:00
members it's nine I'm going to 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 of the committee do we have any questions about that or discussion seeing none I have a motion motion all in favor say aye opposed 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 by representative 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
3:20
good morning james eaton district 26 thank you madam chair you're recognized to present thank you members of the committee uh 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 have 60 days on some
what that's doing is just moving 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
Representative Frances Cavenaugh
Unverified
4:14
just for clarification sure there is opposition to this study okay 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 uh moving of the way that the sales tax is collected there is opposition to that yes ma'am
Representative James Eaton
Unverified
4:34
and if i if i alluded to no opposition i just totally meant from those two sections sorry yeah i didn't mean to the intern study
there's no one no for it can be studied but yes awesome members
Representative Frances Cavenaugh
Unverified
4:53
we have any questions we're only taking committee questions
Representative Wooten, you're recognized Thank you, Madam Chairman On this, so we're putting the burden on the dealers To collect the tax or individuals Whoever sells it has to collect the tax at the point of
sale We're asking for this to go for an interim study so this is just to send it to that but yes sir eventually okay
thank you madam chairman representative lunchroom you're recognized i was going to ask what the controversy was i realize representative hall may not know um could you you alluded to that so just a question of the chair what was the
Representative Frances Cavenaugh
Unverified
5:51
controversy uh the auto dealers in the state of arkansas are not in favor of this um it has been tried in other states and there has been a mixed bag of results when that happens
um so there's all there's opposition against it from the actual auto dealers in the state okay um 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 okay thank you for that point of clarification I'm for putting this in
an ISP if 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 I'll come back to
Representative Frances Cavenaugh
Unverified
6:27
you thank you representative Rye you're recognized thank you madam chairman just have a
Representative Johnny Rye
Unverified
6:35
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 in that right I'm not
Representative James Eaton
Unverified
6:49
sure the exact time frame I don't think it's 90 days though I think it's 60 60 okay well let
Representative Johnny Rye
Unverified
6:55
me ask you this if that did change to what we have here would that be immediately upon the sale thank you representative Johnny
Representative James Eaton
Unverified
7:03
yes it would be immediately okay thank you sir thank you madam chair
Representative Les D. Eaves
Unverified
7:10
representing these you're recognized thank you is and maybe mr. Garrett can answer this or any 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 non-member
Speaker 50
7:39
Paul Goering DFA. You're recognized. Thank you, Madam Chair. Representative Eves, we would certainly have a
fiscal impact in the regard that we would
Speaker 51
7:46
require programming changes to our system, but, and there would also be, with the different timing of the collection of the tax, with the consumers currently having a 60-day period to remit the tax to DFA 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 not change okay i appreciate
Representative Les D. Eaves
Unverified
8:14
it and and madam chair i don't know if anyone here on the committee is in the uh new car business but if they are it'd be nice
Representative Frances Cavenaugh
Unverified
8:31
to hear what their take on this would be well that would be me but and I and I do on that have a question for Mr. Gehring 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 from dfna if um 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 madam chair and that's a very good
Speaker 50
9:21
point. So certainly our fiscal impact would not, uh, have any data as to the implementation costs for private industry, for the dealers to, to make this change. Um, many of our dealers are already registered to collect sales and use tax due to the fact that the, they sell tangible personal property, um, you know, accessories to vehicles. They also have a, a service department where taxable repairs, um, sales of tires, oil changes, things of that nature are already occurring. But there would
Speaker 51
9:53
also be changes in processes at the dealerships
that they would definitely have to make their own programming changes, and there would also be, of course, the issue
Speaker 50
10:05
of that could come up that if a dealer had the requirement to collect the tax and then when the person registered their car, we would have to verify that the sales tax 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 remittance from a dealer, that would have to be verified.
Speaker 53
10:35
The only way to verify that would be an
Representative Frances Cavenaugh
Unverified
10:40
actual audit of the dealer. But the other problem that I see from the dealers, and this 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 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, and those two things are usually tied together when they actually pay that sales tax. So that's a process that
DF&A, as the government official, would have to work out, plus the business would have to work out how they're going to
Speaker 50
11:23
get that reported to DF&A. I agree. And 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 have a review process to make sure that the documents are in order and that if no taxes actually do that's that would be the correct result so um 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
Representative Frances Cavenaugh
Unverified
11:54
transaction was actually remitted to the state okay thank
you um representative wooten you're recognized Mr. Gehring, why would you all support this? Representative Wooten,
Speaker 50
12:08
we haven't provided a, with all due respect to Representative Eden,
we haven't announced a position on this interim study proposal or the bill when it was introduced in the House last legislative session. So we don't have a for-against position where we're neutral on the bill. Well, would it not put
the burden, and then like Representative Kavanaugh pointed out, how are you going to know when the revenue office that sales tax has been paid on?
We can't even collect it all today by putting the temporary tags on the cars. It's still, you know, at the desire of the individual to whether or not they pay the sales tax. So what's to guarantee us that we're not going to lose
Speaker 50
13:06
more money than we're losing today? Well, certainly, Representative Wooten, the existing process does require the purchaser to come into DFA, register their vehicle.
and before we register that vehicle, we have to collect the sales tax from the individual, we do recognize that there are individuals that fail to do so ever or within the required 60 days. We do have a process where we go and collect and assess that tax from the individual on the purchase because tax is owed regardless of whether the person comes in and registers their car.
So, yeah, we do recognize that there are circumstances 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 problem for law enforcement if a vehicle is outside of their 60 days, has not got a registration tag for the vehicle, and then
Speaker 51
14:15
it becomes a greater problem beyond DFA as well.
So in other words, what we're creating, we're just adding to a bigger mass. We're making more of a problem if we change this. And I understand the standpoint of moving it, but I don't think
it's the right thing to do. It is a minority
Speaker 50
14:41
position in the United States for tax to be collected at the point of sale. For example, Florida collects
Speaker 51
14:48
at the point of sale, I believe also Indiana.
Speaker 50
14:52
So most states have the process that Arkansas has, which is the purchaser pays at the time
of registration. Are we not more certain to collect the tax in the proper manner the way we're doing it today versus what this proposal would require? We would have to
Speaker 50
15:13
do a greater in-depth study. We would have to look at those other states to see what the scope of their collections versus using their process.
So we wouldn't have any data at this point in order to form an opinion either way if one system is more effective or not. But we certainly can recognize right now there are individuals that buy vehicles that do not register and do not pay the sales tax within the
Speaker 51
15:38
60 days or possibly ever, or for the life of them owning the vehicle. Thank you. Thank you, Madam Chairman. I did
Representative James Eaton
Unverified
15:46
want to, Representative Wooten, I was told by a member of the department that they were in favor of this.
Speaker 51
15:54
With all due respect, I'm sorry, I'll just make sure that we have a conversation and we can talk about this.
Representative James Eaton
Unverified
16:01
Sure, sure. Be happy to. Just wanted to clarify that
Speaker 50
16:03
I was told that yesterday. Yeah, I wasn't, Madam Chair and Representative Eden, I was not aware that DFA had taken a position either way on this bill or this ISP. My apologies. Representative Ray, you're
Representative David Ray
Unverified
16:20
recognized for your question. Thank you, Madam Chair. Um, Mr. Gehring. So in the title, it says it uses the, in the title of the bill, it uses the phrase as, as affirmed by Referred Act 19 of 1958. I'm,
Speaker 76
16:32
I'm just unaware of what that reference is to, do you know?
Speaker 50
16:36
So, Representative Ray, when the start of the 2025 legislative session, DFA also noticed that a number of the sales tax bills had that reference within those
Speaker 51
16:50
bills. BLR began including that language in the bill draft. We
Speaker 50
16:56
had a conversation with the drafters. I had a much greater understanding 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, but I
Speaker 51
17:10
don't recall the specific reasoning. But I know that there was a very good reason that the Bureau was including that language in sales tax bills. Okay. Well, I'm
Representative David Ray
Unverified
17:17
sure someone from the Bureau is watching, so maybe they can find that answer and contact me. We spoke with Ms. Leonard, and she
Speaker 51
17:22
gave an explanation. All right. Thank you. Representative Lundstrom, you're recognized. Just
a motion at the proper time when the chair calls to me. Are you ready for that?
No, I've got more in the queue. Thank you. I haven't forgot you. Representative Lynch
are recognized for question. Thank
you, Madam Chair. Paul, just for everybody's information, what is the current sales tax rate for new
Speaker 50
17:53
cars and for used cars? So the General Assembly enacted a, generally speaking, a sales tax on a new car
Speaker 51
18:01
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 may be some motor vehicles that we have a graduated rate system. So most new cars are going to be sold at
Speaker 50
18:23
the 6.5% state sales tax rate. Now, there's also a middle sales tax rate, 4.5% on certain vehicles at a certain price point, and then when the total consideration paid for a car is $4,000 or less, there's no sales tax collected. So
there's no local sales tax on a new car?
Speaker 51
18:45
There's also the locals, and they are capped at $2,500 of the purchase price. So it can
go as high as, like, some parts of Long Oak County is 11% on sales tax. Shouldn't
Speaker 51
18:56
because of the cap on the sales, on the $2,500 of the purchase price. I
know that we lowered the tax rate on the used cars. Mr. Payton, Senator Payton, has run that bill several times. I think that's down like 3% or 4%, right, on used cars? I think it's 4.5%, but I'll have to check.
4.5%. okay so the new cars where you get the the
Speaker 51
19:22
big lick then that's correct because they don't um most news cars are sold greater than that reduced rate all right thank
Representative Johnny Rye
Unverified
19:35
you representative rye you're recognized thank you madam chairman paul let me ask you this at this point the bookkeeping first of all you got 60 days but on top of that you got bookkeeping that's done through dfna that's correct yes okay now if this did occur and this took place in the
dealership of the car dealership would that would they not have to hire extra
Speaker 51
20:03
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 responsibility. But I can certainly understand, 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
Representative Johnny Rye
Unverified
20:37
have to make. Follow-up, please. Paul, could that lead to the price of a vehicle being more expensive since that work would be done locally at the dealership? We could certainly
Speaker 51
20:48
understand that whatever drives costs in a business can drive also the ultimate price sold to a consumer. Thank you, Paul.
Representative Richard McGrew
Unverified
20:57
Thank you, Madam Chairman. 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
Speaker 50
21:25
is that handled? Okay, so for the first question, so what DFNA's processes are is that 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 I know
Representative Richard McGrew
Unverified
21:56
some dealerships and and the chairman may know this more than you offer to pay the sales tax at the time of purchase
as an incentive to get them to buy how is
Speaker 50
22:08
that handled do you know i certainly i understand so certainly there are there are quite
Speaker 51
22:15
often times where a purchaser when they are going to finance a vehicle at a dealership will ask the dealership about the possibility of financing
Speaker 50
22:27
their sales tax as a part of the financing of 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 of course the
chair probably knows this process a lot better and if so if i'm making any mistakes but there's going to be a check cut either from the financing bank or the dealership or some entity to the the department of finance and administration 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
Representative Frances Cavenaugh
Unverified
23:11
dealership has 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 sir 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 represent McCleary recognized thank
Representative Rick McClure
Unverified
23:35
you madam chair 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 50,000 plus so when I figured that out that's about
$3,250 sales tax that I got to pay within 60 days, plus my first payment is going to be due within 60 days, and I haven't registered it, I haven't got it assessed, who actually owns the car? Because I have a sales contract, but I don't have registration, I haven't paid my taxes. Yeah, I certainly
Speaker 50
24:12
understand. So there's certainly, you would be the owner, the purchaser would be the owner of the car. And then if there's financing in place for that vehicle,
they would have a, um, 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 the state, but you would
Speaker 51
24:36
even be in possession potentially of the manufacturer's certificate of origin, um, and the bill of sale and all of the documentation that you received at a dealership to demonstrate that you were the rightful owner but you
Speaker 50
24:48
just haven't registered the vehicle with the state follow up so what happens if i have
Representative Rick McClure
Unverified
24:56
buyer's remorse and decide i can't afford that thirty two hundred dollars sales tax right up front 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
Speaker 62
25:14
see what i'm saying Yeah, I mean, there's certainly some times
Speaker 51
25:20
that the dealer will rescind the sale, rescind or cancel the sale, and take the vehicle back, and they'll just consider the deal to be a nullity that was entered into by the parties.
Speaker 50
25:33
But most often 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 sales
Speaker 51
25:43
tax. They still owe the sales tax on the transaction. The tax was owed at the time of purchase. So barring that
Speaker 50
25:51
the sale was rescinded or canceled, the debt is still owed to the state for the sales tax. Representative McClure, kind of to touch on that also.
Representative James Eaton
Unverified
26:03
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 do have buyer's remorse, 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 sign it. He just said you own it. So hopefully that will clarify that some.
Representative Frances Cavenaugh
Unverified
26:35
I think that's a good part of this. And for 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 shows who ownership is. So even if you might not have registered yet, even in the 60 days or you decide you don't do it for some reason, you're still the owner because the instrument that shows ownership has been transferred to you,
so the new owner is then the one that is held liable. Most dealers, by policy, will fill it out, put the lien holders' information on the back of the MSO 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 lien 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 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 none representative lunchtime if you'll get in the queue you're recognizing
Representative James Eaton
Unverified
27:51
representative lunchtime madam chair yes could I clarify one thing dfna possibly didn't say they were in favor of this i should state my my question to them better i asked if they opposed this they said that they did not so that i just want to be
clear on to the committee that i wasn't trying to misleading when saying or put words in their mouth first i just said they didn't they didn't oppose this so representative eaton do you want to close for your yes ma'am i am closed i appreciate the
committee for your time and questions thank you representative lundstrom you're recognized i move we do pass the isp of 2025 069 on
to research i have a motion do pass by representative lundstrom any discussion on the motion seeing none all in favor say aye aye poll say nay congratulations your study is passed
Representative Frances Cavenaugh
Unverified
28:42
thank you representative ray i think you're up next and it's going to be isp2025071 if you'll introduce yourself for the record
Representative David Ray
Unverified
29:08
please thank you madam chair representative david ray house district 69
colleagues this interim study proposal is from house bill 1636 from the 2025 session many of you were co-sponsors 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, uh, excise tax on soda. Um, I really don't think any of the underlying factors have changed, uh, since 2025 when this bill was presented. And, um, uh, and so,
uh, we debated it quite a bit then, so I won't go into a lot of detail, but I'd be happy to answer any questions that anybody has about the proposal and just
appreciate the opportunity to keep that conversation going. Thank you. Representative Rutten, you're recognized. Thank you. Representative Ray, are you a consultant? Yes, sir. Or other, you are? Yes. Do you represent the
Arkansas Beverage Company? No, sir. The second question is, didn't this get defeated in this very
committee in the last session? No,
Representative David Ray
Unverified
30:27
sir. It was passed by the committee and it
failed on the floor. Okay. Failed
Representative David Ray
Unverified
30:32
on the floor. Yes. And I mentioned that in my,
in my presentation just now. All right. Thank you. Um, what
Representative David Ray
Unverified
30:41
is this dedicated to, uh, the funds from the excise tax
on soda go into the Medicaid trust fund,
Representative David Ray
Unverified
30:50
Medicaid trust fund. Is it going to be replaced? This proposal, House Bill 1636 from 2025, did not replace the revenue. Instead, it
allowed for a gradual five-year phase-out of the soda excise tax contingent on revenue triggers in the trust fund. Is that the only money that's
given to the trust fund? No, sir. There's
Representative David Ray
Unverified
31:12
several other um revenue sources that go into the trust fund i believe there are eight or nine 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 uh 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
Representative David Ray
Unverified
31:43
no probably had their own reasons for doing so. Okay, thank you. Thank you,
Speaker 71
31:48
Madam Chairman. Representative Rye, you're recognized.
Representative Johnny Rye
Unverified
32:04
Okay, thank you, Mr. Chairman. Representative Draver, let me ask you this. on the tax itself that's changed a tremendous amount since 1994 how much does that generate each year
Representative David Ray
Unverified
32:20
do you know uh that's a good question because um in 2017 when uh sorry the the excise tower sorry the excise tax itself um 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 the $40 million to $50 million range annually. And I apologize, I don't have that number in front of me. I may have it and just can't put my finger on it. But I believe it's
Representative Johnny Rye
Unverified
33:02
somewhere in that range. Representative David, I 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 in it that sounds right yes sir thank you representative david thank you mr
Representative David Ray
Unverified
33:27
chairman any other questions members any other questions members madam chair i would i have a couple of questions for dfna if they would be willing to come to the table that'd be very brief and Paul if you'll introduce yourself again for the
record thank you Paul Gehring DFA representative right feels a little weird asking
the question from down here Paul if you could just explain for the benefit of everybody in the audience. 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 would certainly
Speaker 50
34:21
need to go back and discuss that with DHS on the mechanism for uh how the the match to the
Speaker 51
34:27
revenues work but we certainly would be able to provide that information to the committee okay i think that would be good
Representative David Ray
Unverified
34:35
information to have and then my my brief follow-up to that and paul if you'll
Representative Frances Cavenaugh
Unverified
34:39
just get that to staff we'll give it out to
Representative David Ray
Unverified
34:43
the committee will do um 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 okay 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 day representative ray for do pass all in favor say aye poll say nay congratulations it is 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