Soaring prices also means Arkansans have to pay more in sales tax as the price of the item increases. Sales tax relief has been largely forgotten by the governor and legislature during the last several years, but sales tax relief has not been forgotten by Representative John Payton (R- Wilburn).
Last year Representative Payton focused on cutting the sales taxes on used vehicles. The increasing cost of used cars is a burden on Arkansans, especially on those needing a vehicle to get to and from work. Arkansas law exempted used vehicles, trailers, and semitrailers from sales tax if the cost is less than $4,000 but prices are increasing. If it costs more, it is fully taxable under state and local taxes.
Sales taxes in Arkansas are a significant burden. The Arkansas sales tax rate is 6.50% and while city and county sales tax rates vary from place to place, the average combined state and local rate is 9.136% and the highest rate is 12.625%.[i]
The first bill Representative Payton filed in 2021 was HB1160 to immediately raise the exemption to $7,500 and then increase the exemption to $10,000 in two years. The bill sailed through the House of Representatives without a single vote against it but the Senate Revenue and Tax Committee wouldn’t pass the bill and it died. The bill needed 5 votes out of 8 committee votes to go to the Senate floor.
Who would oppose such tax relief? Based on what happened, the opposition came from the Arkansas Municipal League (representing cities) and the Association of Arkansas Counties (representing counties). Both are powerful organizations and they have a history of opposing sales tax relief that would in any way reduce local sales tax revenues. In other words, they didn’t care that the cost of used cars had gone up; they wanted all the tax money they could get.
With the bill dead in the Senate, many legislators would have given up and said “I tried” but Representative Payton didn’t give up. He came up with another approach to provide sales tax relief on used vehicles. The new approach avoided having to fight cities and counties.
In HB1912 Payton kept the current exemption for used vehicles, trailers, and semitrailers under $4,000 and he cut the state rate from 6.5% to 3.5% if it cost at least $4,000 and less than $10,000. The bill passed both the House of Representatives and Senate without a single vote against the bill. It is now Act 1013 of 2021. Representative John Payton’s legislation will save taxpayers over $13 million a year while not changing local tax revenues.[ii]
THANK YOU, REPRESENTATIVE PAYTON, FOR NOT GIVING UP ON SALES TAX RELIEF!
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Representative John Payton is running for the Republican nomination as Senator from Senate District 22. Rep. Payton is in a runoff election against Senator James Sturch. The runoff election is Tuesday June 21st. Early voting begins Tuesday June 14th.
[ii] Department of Finance and Administration Revenue Impact Estimate: https://www.arkleg.state.ar.us/Bills/FTPDocument?path=%2FFiscalImpact%2F2021R%2FPublic%2FHB1912-DFA2.pdf