The Supreme Court Just Handed States a New Power to Tax. Should Arkansas Use it?

By Caleb Taylor

Will a recent Supreme Court decision on state taxation of remote online sales (like through Amazon or Etsy) help or harm Arkansas’s recent tax reform efforts?

ACRE Scholar and UCA Assistant Professor of Economics Jeremy Horpedahl was quoted in two statewide outlets on Thursday, June 21st about the effect of the South Dakota v. Wayfair Inc. Supreme Court decision on Arkansas taxes.

Horpedahl said in a KARK article entitled Online Sales Tax: SCOTUS Rules States Can Force Retailers to Collect:

With the Wayfair decision, the Supreme Court has provided an important clarification for states on taxing remote sales. The exemption of remote sales from the sales tax base has always been a legal distinction, not one of good tax principles. Good tax policy is to treat all transactions equally, regardless of where the seller is physically located. Arkansas must now decide how to implement a law that will comply with Wayfair, and what to do with any new revenues.

Arkansas already has a provision in law that any revenue from remote sales in excess of $70 million will go to cutting income taxes, which is a good principle to follow. The Wayfair decision gives Arkansas a good opportunity to broaden its sales tax base while also lowering income tax rates.

You can also read Horpedahl’s comments on the decision in a story by Talk Business & Politics’ Wesley Brown here.

Horpedahl is the co-author of  Arkansas: The Road Map To Tax Reform with Tax Foundation experts about how to make the state’s tax code fairer and more competitive. He is also a co-author with Nicole Kaeding, Director of Special Projects at the Tax Foundation, on a research paper Learning from Other States’ Successes and Failures in Tax Reform released on May 15th.

More of ACRE’s research on taxation can be found here.