Stricken language would be deleted from and underlined language would be added to present law.
1 State of Arkansas
2 94th General Assembly A Bill
3 Regular Session, 2023 HOUSE BILL 1661
4
5 By: Representative Underwood
6
7 For An Act To Be Entitled
8 AN ACT TO REPEAL THE SALES AND USE TAX ON FOOD AND
9 FOOD INGREDIENTS; TO EXEMPT FOOD AND FOOD INGREDIENTS
10 FROM SALES AND USE TAX; TO MAKE CONFORMING CHANGES;
11 AND FOR OTHER PURPOSES.
12
13
14 Subtitle
15 TO REPEAL THE SALES AND USE TAX ON FOOD
16 AND FOOD INGREDIENTS; AND TO EXEMPT FOOD
17 AND FOOD INGREDIENTS FROM SALES AND USE
18 TAX.
19
20
21 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:
22
23 SECTION 1. Arkansas Code § 19-5-1103(b), concerning the Property Tax
24 Relief Trust Fund, is amended to read as follows:
25 (b) The fund shall consist of such revenues as generated by §§ 26-52-
26 302(c), 26-52-317(c)(1)(B), 26-52-319(a)(2)(B), 26-53-107(c), 26-53-
27 145(c)(1)(B), 26-53-148(a)(2)(B), and 26-56-224(c)(2) and shall be used for
28 such purposes as set out in § 26-26-310.
29
30 SECTION 2. Arkansas Code § 19-5-1227(b)(3), concerning the Educational
31 Adequacy Fund, is amended to read as follows:
32 (3) The revenues generated by § 26-52-302(d), § 26-52-316,
33 § 26-52-317(c)(1)(C), § 26-52-319(a)(2)(C), § 26-53-107(d), § 26-53-
34 145(c)(1)(C), § 26-53-148(a)(2)(C), § 26-56-224(c)(3), and § 26-57-
35 1002(d)(1)(A)(ii); and
36
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1 SECTION 3. Arkansas Code § 19-6-201(58), concerning the enumeration of
2 general revenues, is repealed.
3 (58) Seventy-six and six-tenths percent (76.6%) of all taxes,
4 interest, penalties, and costs on taxes levied on the gross receipts or gross
5 proceeds derived from the sale of food and food ingredients, § 26-52-
6 317(c)(1)(A);
7
8 SECTION 4. Arkansas Code § 19-6-201(60), concerning the enumeration of
9 general revenues, is repealed.
10 (60) Seventy-six and six-tenths percent (76.6%) of the taxes,
11 interest, penalties, and costs received on taxes levied on the privilege of
12 storing, using, distributing, or using food and food ingredients, § 26-53-
13 145(c)(1)(A);
14
15 SECTION 5. The introductory language of Arkansas Code § 26-52-301,
16 concerning the sales tax levied on the sale of certain products and services,
17 is amended to read as follows:
18 Except for food and food ingredients that are taxed under § 26-52-317
19 and except for used motor vehicles, trailers, and semitrailers that are taxed
20 under § 26-52-324, there is levied an excise tax of three percent (3%) upon
21 the gross proceeds or gross receipts derived from all sales to any person of
22 the following:
23
24 SECTION 6. Arkansas Code § 26-52-302 is amended to read as follows:
25 26-52-302. Additional taxes levied.
26 (a)(1) In addition to the excise tax levied upon the gross proceeds or
27 gross receipts derived from all sales by this chapter, except for food and
28 food ingredients that are taxed under § 26-52-317 and except for used motor
29 vehicles, trailers, and semitrailers that are taxed under § 26-52-324, there
30 is levied an excise tax of one percent (1%) upon all taxable sales of
31 property, specified digital products, digital codes, and services subject to
32 the tax levied in this chapter.
33 (2) This tax shall be collected, reported, and paid in the same
34 manner and at the same time as is prescribed by law for the collection,
35 reporting, and payment of all other Arkansas gross receipts taxes.
36 (3) In computing gross receipts or gross proceeds as defined in
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1 § 26-52-103, a deduction shall be allowed for bad debts resulting from the
2 sale of tangible personal property.
3 (b)(1) In addition to the excise tax levied upon the gross proceeds or
4 gross receipts derived from all sales by this chapter, except for food and
5 food ingredients that are taxed under § 26-52-317 and except for used motor
6 vehicles, trailers, and semitrailers that are taxed under § 26-52-324, there
7 is hereby levied an excise tax of one-half of one percent (0.5%) upon all
8 taxable sales of property, specified digital products, digital codes, and
9 services subject to the tax levied in this chapter.
10 (2) This tax shall be collected, reported, and paid in the same
11 manner and at the same time as is prescribed by law for the collection,
12 reporting, and payment of all other Arkansas gross receipts taxes.
13 (3) However, in computing gross receipts or gross proceeds as
14 defined in § 26-52-103, a deduction shall be allowed for bad debts resulting
15 from the sale of tangible personal property.
16 (c)(1) Except for food and food ingredients that are taxed under § 26-
17 52-317 and except for used motor vehicles, trailers, and semitrailers that
18 are taxed under § 26-52-324, there is levied an additional excise tax of one-
19 half of one percent (0.5%) upon all taxable sales of property, specified
20 digital products, digital codes, and services subject to the tax levied by
21 this chapter.
22 (2) The tax shall be collected, reported, and paid in the same
23 manner and at the same time as is prescribed by this chapter, for the
24 collection, reporting, and payment of Arkansas gross receipts taxes.
25 (d)(1) Except for food and food ingredients that are taxed under § 26-
26 52-317 and except for used motor vehicles, trailers, and semitrailers that
27 are taxed under § 26-52-324, there is levied an additional excise tax of
28 seven-eighths of one percent (0.875%) upon all taxable sales of property,
29 specified digital products, digital codes, and services subject to the tax
30 levied by this chapter.
31 (2) The tax shall be collected, reported, and paid in the same
32 manner and at the same time as prescribed by this chapter, for the
33 collection, reporting, and payment of Arkansas gross receipts taxes.
34
35 SECTION 7. Arkansas Code § 26-52-317 is repealed.
36 26-52-317. Food and food ingredients.
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1 (a)(1) The Secretary of the Department of Finance and Administration
2 shall determine the following conditions:
3 (A) That federal law authorizes the state to collect sales
4 and use tax from some or all of the sellers that have no physical presence in
5 the State of Arkansas and that make sales of taxable goods and services to
6 Arkansas purchasers;
7 (B) That initiating the collection of sales and use tax
8 from these sellers would increase the net available general revenues needed
9 to fund state agencies, services, and programs; and
10 (C)(i) That during a six-month consecutive period, the
11 amount of net available general revenues attributable to the collection of
12 sales and use tax from sellers that have no physical presence in the State of
13 Arkansas is equal to or greater than one hundred fifty percent (150%) of
14 sales and use tax collected under subsection (c) of this section and § 26-53-
15 145 on food and food ingredients.
16 (ii) The secretary shall make the determination
17 under subdivision (a)(1)(C)(i) of this section on a monthly basis following
18 the determination that the conditions under subdivision (a)(1)(A) of this
19 section have been met.
20 (2)(A) The secretary shall make a monthly determination as to
21 whether the aggregate amount of deductions from net general revenues
22 attributable to the following during the most recently ended six-month
23 consecutive period, as compared with the same six-month period in the prior
24 year, has declined by thirty-five million dollars ($35,000,000) or more:
25 (i) The Educational Adequacy Fund;
26 (ii) Bonds issued under the Arkansas College Savings
27 Bond Act of 1989, § 6-62-701 et seq.;
28 (iii) Bonds issued under the Arkansas Higher
29 Education Technology and Facility Improvement Act of 2005, § 6-62-1101 et
30 seq.;
31 (iv) The City-County Tourist Facilities Aid Fund;
32 and
33 (v) Bonds issued under the Arkansas Water, Waste
34 Disposal and Pollution Abatement Facilities Financing Act of 1997 and the
35 Arkansas Water, Waste Disposal, and Pollution Abatement Facilities Financing
36 Act of 2007, § 15-20-1301 et seq.
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1 (B)(i) In making the determination in this subdivision
2 (a)(2), the secretary shall consider all economic factors existing at the
3 time of the determination that could potentially affect the decline in the
4 aggregate amount of deductions, including without limitation pending
5 litigation.
6 (ii) If the consideration of additional economic
7 factors under subdivision (a)(2)(B)(i) of this section results in a
8 determination that the decline in the aggregate amount of deductions is not
9 likely to remain at that reduced level, the secretary shall conclude that the
10 conditions in this subdivision (a)(2) have not been met.
11 (3) When the secretary finds that all of the conditions in
12 either subdivision (a)(1) or subdivision (a)(2) of this section have been
13 met, then the gross receipts or gross proceeds taxes levied under subsection
14 (c) of this section shall be levied at the rate of zero percent (0%) on the
15 sale of food and food ingredients beginning on the first day of the calendar
16 quarter that is at least thirty (30) days following the determination of the
17 secretary.
18 (b) As used in this section:
19 (1) “Food” and “food ingredients” mean the same as defined in §
20 26-52-103 except that “food” and “food ingredients” do not include prepared
21 food; and
22 (2) “Prepared food” means the same as defined in § 26-52-103
23 except that “prepared food” does not include:
24 (A) Food that is only cut, repackaged, or pasteurized by
25 the seller; or
26 (B) Eggs, fish, meat, and poultry, and foods containing
27 these raw animal foods requiring cooking by the consumer to prevent food-
28 borne illnesses as recommended by the United States Food and Drug
29 Administration in its 2005 Food Code, § 3-401.11, as it existed on January 1,
30 2007.
31 (c)(1) Beginning July 1, 2011, in lieu of the gross receipts or gross
32 proceeds taxes levied on food and food ingredients under §§ 26-52-301 and 26-
33 52-302, there is levied a tax on the gross receipts or gross proceeds derived
34 from the sale of food and food ingredients at the rate of one and three-
35 eighths percent (1.375%), to be distributed as follows:
36 (A) Seventy-six and six-tenths percent (76.6%) of the
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1 taxes, interest, penalties, and costs received by the secretary under this
2 subdivision (c)(1) shall be deposited as general revenues;
3 (B) Eight and five-tenths percent (8.5%) of the taxes,
4 interest, penalties, and costs received by the secretary under this
5 subdivision (c)(1) shall be deposited into the Property Tax Relief Trust
6 Fund; and
7 (C) Fourteen and nine-tenths percent (14.9%) of the taxes,
8 interest, penalties, and costs received by the secretary under this
9 subdivision (c)(1) shall be deposited into the Educational Adequacy Fund.
10 (2) The gross receipts or gross proceeds taxes levied under
11 subdivision (c)(1) of this section shall be collected, reported, and paid in
12 the same manner and at the same time as is prescribed by law for the
13 collection, reporting, and payment of all other Arkansas gross receipts
14 taxes.
15 (d) The gross receipts or gross proceeds derived from the sale of food
16 and food ingredients shall continue to be subject to the:
17 (1) Excise tax levied under Arkansas Constitution, Amendment 75,
18 § 2; and
19 (2) All municipal and county gross receipts taxes.
20 (e) The Department of Finance and Administration shall promulgate
21 rules to implement the provisions of this section.
22
23 SECTION 8. Arkansas Code § 26-52-323 is amended to read as follows:
24 26-52-323. Application of tax to candy and soft drinks.
25 The Secretary of the Department of Finance and Administration shall
26 either:
27 (1)(A) Publish a list of the Universal Product Codes for items
28 that meet the definition of:
29 (i) A candy under § 26-52-103 or § 26-53-102; or
30 (ii) A soft drink under § 26-52-103 or § 26-53-102.
31 (B) The list published by the secretary under subdivision
32 (1)(A) of this section shall provide guidance to retailers, sellers, and
33 vendors regarding which items are defined as a candy or a soft drink but not
34 defined as food and food ingredients under the Arkansas Gross Receipts Act of
35 1941, § 26-52-101 et seq., or the Arkansas Compensating Tax Act of 1949, §
36 26-53-101 et seq.
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1 (C) The list published by the secretary under subdivision
2 (1)(A) of this section is exempt from the Arkansas Administrative Procedure
3 Act, § 25-15-201 et seq.; or
4 (2) Not subject a retailer, seller, or vendor to the penalties
5 under § 26-18-201, § 26-18-202, § 26-18-208, § 26-18-209, § 26-52-512, or §
6 26-53-125 if the retailer, seller, or vendor:
7 (A) Collects and remits Does not collect or remit tax
8 payments to the Department of Finance and Administration on the gross
9 receipts and gross proceeds derived from the sale of items that meet the
10 definition of:
11 (i) A candy under § 26-52-103 or § 26-53-102 at the
12 taxable rate for food and food ingredients under § 26-52-317 or § 26-53-145;
13 or
14 (ii) A soft drink under § 26-52-103 or § 26-53-102 at
15 the taxable rate for food and food ingredients under § 26-52-317 or § 26-53-
16 145; and
17 (B) Demonstrates a good faith effort to collect and remit
18 tax payments to the department on the gross receipts and gross proceeds
19 derived from the sale of items that meet the definition of:
20 (i) A candy under § 26-52-103 or § 26-53-102 at the
21 taxable rate under § 26-52-301, § 26-52-302, § 26-53-106, or § 26-53-107; or
22 (ii) A soft drink under § 26-52-103 or § 26-53-102 at
23 the taxable rate under § 26-52-301, § 26-52-302, § 26-53-106, or § 26-53-107.
24
25 SECTION 9. Arkansas Code Title 26, Chapter 52, Subchapter 4, is
26 amended to add an additional section to read as follows:
27 26-52-455. Food and food ingredients.
28 (a) As used in this section:
29 (1) "Food" and "food ingredients" mean the same as defined in §
30 26-52-103 except that “food” and “food ingredients” do not include prepared
31 food; and
32 (2) “Prepared food” means the same as defined in § 26-52-103
33 except that “prepared food” does not include:
34 (A) Food that is only cut, repackaged, or pasteurized by
35 the seller; or
36 (B) Eggs, fish, meat, and poultry, and foods containing
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1 these raw animal foods requiring cooking by the consumer to prevent food-
2 borne illnesses as recommended by the United States Food and Drug
3 Administration in its 2005 Food Code, § 3-401.11, as it existed on January 1,
4 2007.
5 (b) The gross receipts or gross proceeds derived from the sale of food
6 and food ingredients are exempt from the gross receipts tax levied by this
7 chapter and the compensating use tax levied by the Arkansas Compensating Tax
8 Act of 1949, § 26-53-101