A bill that would change several tax laws — including requiring out-of-state online sellers to collect sales and use taxes from in-state purchasers and changing the state's corporate income-tax code — cleared the Arkansas Senate on Monday.
The Senate voted 27-3 to send Senate Bill 576 by Sen. Bart Hester, R-Cave Springs, to the House for further consideration.
SB576 also would phase in a reduction in the top corporate income-tax rate from 6.5 percent to 5.9 percent, phase in an extension of the five-year carry-forward period for businesses' net operating losses to 10 years, and provide for a single-sales factor for the apportionment formula used by corporations for income-tax filings.
Gov. Asa Hutchinson said that "in reference to SB 576, I do support the tax reform bill because it creates more fairness in our tax system, and it makes our corporate tax structure more competitive."
"I will be watching the progress of this bill to see whether there are any changes as it goes through the General Assembly," the Republican governor said in a written statement.
The legislation also would provide a carwash-related sales-tax exemption, levy a new annual fee on some carwash operators and add a monthly water-use fee on operators of carwash tunnels.
The Senate's approval of the legislation came after Hester answered three senators' questions about the bill's taxation of carwashes. Hester said the taxes on carwashes "will be levelized" under an amendment in the House.
Hester agreed to the amendment after Zips Car Wash Chief Financial Officer Sam Neely testified last week that the bill would raise the firm's state taxes by about $440,000 a year.
Zips Car Wash CEO Brett Overman took out full-page ads in the Arkansas Democrat-Gazette to drive that point home.
In an interview, Hester said, "I felt like we could have stayed the course and probably eked it out. But it was better off, I felt, to find some common ground and end up eliminating an exemption.
"I think Zips is happy with this, unfortunately," he said.
Overman said in a text message to this newspaper that the "amendment language we have seen is a fair compromise under the circumstances, so we will support it."
"We will monitor the numbers closely and inform the Legislature during their fiscal session in 2020 if any changes are warranted," Overman said.
Afterward, House Revenue and Taxation Committee Chairman Joe Jett, R-Success, said the committee will consider the legislation Thursday.