Arkansas committee hears bill to repeal $50 sales-tax permit fee; no vote taken

Representative Underwood introduced House Bill 1203 to eliminate the one-time $50 fee charged when a business applies for a state sales-tax permit, saying the fee discourages small entrepreneurs from registering and remitting taxes.

Underwood, state representative for District 16, said the measure would remove a practical barrier for small vendors and help encourage voluntary compliance. "Essentially, what this bill does is it eliminates the $50 fee, for the tax registration fee that you for applying for your sales tax permit," Underwood said. She described a small family-run linen-rental side business as an example of the kind of operation she said would benefit from removing the charge.

Paul Goring of the Arkansas Department of Finance and Administration (DFA) told the committee the department reviewed permit activity for fiscal years 2022–2024 and found the $50 nonrefundable permit fee produces about $432,000 in revenue annually. "On average, over fiscal year 22 through fiscal year 2024, our average was $432,000 that we collect per fiscal year," Goring said. DFA officials said the proceeds are credited to State Central Services for the benefit of the revenue division and that permit processing is one of several administrative tasks handled by excise-tax staff.

Committee members questioned operational and budgetary implications. DFA said the fee is a one-time application charge for each permit issued and that the department issues roughly 8,600 new permits per year on average. Goring told the committee that much noncompliance comes from taxpayers who do not know they are required to collect sales tax rather than from those deterred only by the fee: "...it's a lack of knowledge that they were the individual was supposed to be collecting sales tax," he said.

Members also discussed the department's prompt-payment discount for sellers who remit tax timely. DFA said a 2% prompt-payment discount applies to timely remittances; an official said he would confirm whether a $5,000 cap applies. Committee members asked whether removing the fee would require replacing roughly $432,000 in central funding to maintain current staffing; DFA said the workload would remain and that the department would need another funding source to cover those costs if the fee were repealed.

Representative Underwood closed by reiterating the bill's purpose. "432,000 doesn't seem like a whole lot of money, to benefit these small businesses," she said, while acknowledging the committee's fiscal questions. The committee considered the measure in discussion-only status and did not take a vote. The chair asked staff to prepare a weekly report showing running bills and their physical impacts; the committee then adjourned.