State Lawmakers Name Which Sales-Tax Exemptions Could Go

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LITTLE ROCK, Ark. – Arkansans could soon pay more for everyday items like gas and groceries.

That is if lawmakers decide to change up parts of the state tax code.

The Arkansas legislature’s Tax Reform and Relief Task Force named Tuesday morning which sales-tax exemptions could go under further review.

“This is not written in stone,” co-chair Rep. Lane Jean, R-Magnolia, told his colleagues. 

Instead, the 16 members filled two and a half pieces of paper with exemptions to potentially consider at its next meeting April 25.

“We want recommendations that are serious,” Rep. Jean said. “Not potshots to get somebody’s attention that you have no intention to do anything about.”

Many high-dollar items made it on the list, including the grocery tax.

“It certainly sparked a lot of interest when you hear agreement from both sides of the spectrum that it’s something we need to consider,” said co-chair Sen. Jim Hendren, R-Gravette.

Sen. Hendren said advocacy groups from the left and right agree the state’s reduced tax rate on grocery items is an inefficient way to help low-income Arkansans. However, he also questions if eliminating it wouldn’t come with some hurt.

“If we do that, it would have to be coupled with some sort of income tax credit or tax cut for low-income folks,” Hendren said. 

Another big ticket item on the list is the gas tax.

“With all the changes in cars and trucks being more efficient, that has had a huge impact and we need to own up to that,” said Sen. Joyce Elliott, D-Little Rock. “Decide as a state, not just as legislators, if this is the way we have traditionally funded our highways and roads, how do we now catch up with the new technology.”

The third recommendation with a hefty price tag is prescriptions, which surprised some lawmakers. Arkansas would be the only state in the region to tax the sales and purchases of the drugs.

“It’s a huge dollar item, but it’s also one that would probably put us in a very uncompetitive situation,” Hendren said.

“Food and pharmacy in a lot of ways are things that we’ve held kind of sacrosanct when it comes to exemptions,” Elliott said. 

Even so, Sen. Elliott said she and her colleagues will continue looking at the list, asking which exemptions are still relevant. A process which she believes could pit the task force against each other by party, region and industry.

“We might see some differences and patterns of where people’s real allegiances lie,” Elliott said. 

Stakeholders can fight for their exemptions during the April meeting. 

Here is the full list of the suggestions as read by Rep. Jean during the meeting: 

Grocery tax 

Billboard tax 

Energy exemptions

Newspaper sales

Used car sales under $4,000

Anticipated amount of internet sales tax 

Manufactured housing

Radio and TV services 

Federal charter credit unions 

Coin-operated car washes 

Four wheelers or ATVs for farm use

Half a percent of exemptions by group type (Jean questioned what lawmaker meant by that)

Fuel tax

Earned income tax credit 

Tax holiday

Sales of machinery and equipment used directly in manufacturing or processing

Partial sales tax exemption on the use of natural gas and electricity by a power generator

Sale of twine

Sale of fuel

Packaging material 

Any exemption that has not been used in the last six years 

General sales tax

Repeal of any exemption used less than $10,000 in energy nonprofit (Jean clarified if criteria is not met at $10,000 threshold, the lawmaker wants an exemption)

Repeal exemptions on hospitals, nonprofits 

Use a tax base of 2 or 2.5 percent 

Repeal sales tax on used property as trade-in (Jean clarified use the trade-in value, don’t pay sales tax on the full amount)

Sunset on all nonprofit exemptions

Exemption on the dyed diesel and off-road diesel  

Sale of fuel to vessels and barges on watercraft and railroads 

Sale of ads to newspapers and publications 

Sale of raw products, Christmas trees etc., from the farm, orchard, gardens, farmers’ markets

Sale of baby chicks

Sale of packaging material used by cotton gins

Sale of cotton, cotton seed or baled cotton

Sale of seed to be used by commercial products 

Sale of feed stuff used for commercial products in livestock and poultry

Sale of gas products from biomass

Aircraft sales or resale

Sales of new aircraft purchased out of Arkansas 

Low-income tax credit for the first 500 kilowatts (hours of electricity per month) 

Medical exemptions

Prescription drugs

Medical services on blood tests 

Durable medical equipment

Sale of dental appliances

Sale of municipalities for tickets (to places of amusement or athletic, entertainment, or recreational events)

Sale of public school districts for tickets 

Sale of colleges for tickets

Parking spaces charged by government entity, mainly schools

Admission to county fairs

Magazine publications sold through prescriptions

Right now, the panel is protecting the confidentiality of its members’ submissions.

In the next several months, lawmakers will go through the same process for the state’s income and property taxes. 

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