New sales tax proposed on e-books, digital movies/music, and other digital code downloads
Part of the Governor’s 2017 tax plan has been to exempt military retirement and survivors benefits from Arkansas income taxes while paying for it with new tax increases elsewhere. The original senate bill (SB120) outlining these proposals was filed by Sen. Jane English (R-SD34). A true tax decrease would reduce the total number of dollars available for the government to spend. Like most taxpayers, Conduit for Action does not want any tax increases.
A proposed manufactured housing tax rate increase originally part of SB120 has now been replaced by a new tax on digital products outlined in an amendment introduced Tuesday. To their credit, the manufactured housing industry resisted the tax increase on their industry. They took a stand and won.
The bill as amended collects a sales tax on “digital products” downloaded from the internet and perhaps paves the way for additional internet sales taxes and internet regulation from Arkansas legislators with a separate bill (SB140) filed by Sen. Jake Files last week.
The new replacement digital products tax hits the everyday consumer who does not have a lobbyist. Specifically, the new Arkansas sales tax will be placed on the following: “digital audio works,” “digital audio-visual works,” “digital books,” and “digital code.” “Digital code” is expanded to include “a code that provides a purchase with a right to obtain one (1) or more specified digital products …. regardless of its designation as a song code, video code, or book code” which arguably expands the interpretation to include any software products.
In Summary, SB120 does the following:
- Exempts income taxes on military retirement and survivor benefits;
- Imposes new taxes on digital products, unemployment compensation, unemployment insurance benefits, soft drinks, and candy purchases;
- Reduces the current tax on companies producing soda syrup and powder;
- To see a breakdown of these taxes and the impact on the budget see the Arkansas Department of Finance and Administration’s impact statement found HERE.
Conduit for Action has consistently favored reducing taxes. CFA is against a revenue neutral tax “cut” as it does not actually cut the total amount of taxes received as taxes are increased elsewhere. Again, a true honest tax decrease or tax cut means there is an overall reduction in funds available to be spent by state government.
A message of encouragement to our legislators:
Messaging from the Governor’s office seems to paint those who oppose an increase in taxes in this bill as being “against veterans” since the increase is lumped together with the tax cut in the same bill. However, a legislator COULD file his or her own separate bill to pass an income tax exemption for the veterans without increasing taxes, and in fact SB13 appears to do just that. It may require the legislature to cut spending to cover the difference. Fortunately for legislators, cutting spending appears to be wildly popular now as this message was championed by many elected as Republicans all over the state (and nation) this past fall.
This bill as amended will effectively be a tax increase on people all over the state who purchase music, movies, books, or other items online, as well as those who purchase soft drinks and candy—mostly those without a lobbyist voice in Little Rock. A movie night at home or buying that new bestselling e-book would become more expensive for the consumer.
The bill and amendment will be running through the House and Senate revenue and tax committees. The legislators on those committees and their contact information are listed in the links below if you would like to contact them to voice your views on this new tax increase.