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HB 1636

Appropriation; Dept. of Willife, Fisheries and Parks to increase conservation officers' salaries.

2025 Regular Session Introduced by Bill Kinkade

Arkansas would steadily reduce and then repeal the soft drink tax based on estimated tax receipts, ending the per-gallon rate and eliminating the tax when thresholds are met.

Died In Committee
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Bill Summary · HB 1636

Summary — HB 1636 (Arkansas) — Phase‑out of the Arkansas Soft Drink Tax

Status: Died in committee (filed Dec. 16, 2024; committee action in early 2025; author later withdrew/committee recommended interim study)

Main purpose

HB 1636 would phase down and ultimately repeal Arkansas’s dedicated "soft drink tax" (Ark. Code § 26‑57‑904) conditional on the state’s estimated sales and use tax receipts attributable to soft drink sales. The intent is to eliminate the per‑gallon excise currently levied on soft drink syrups, bottled soft drinks, powders and bases as specified thresholds of sales tax revenue are met.

Key provisions

  • Requires the Department of Finance and Administration (DFA) to estimate, within 90 calendar days after each fiscal year end, the amount of sales and use tax revenue derived from soft drink sales (added codified section § 26‑52‑112).
  • Establishes a five‑step, threshold‑based reduction of the soft drink tax rates. Reductions occur beginning July 1 following the fiscal year in which DFA’s estimate meets each threshold, subject to the rule that the soft drink tax may be reduced at most once per fiscal year and earlier phases must have been implemented.
    • Current rates (before reductions): syrup $1.26/gal; bottled/powders 20.6¢/gal.
    • Phase 1 (if estimated sales tax ≥ $16,000,000): syrup → $0.96/gal; bottled/powders → $0.16/gal.
    • Phase 2 (≥ $25,000,000): syrup → $0.72; bottled/powders → $0.12.
    • Phase 3 (≥ $34,000,000): syrup → $0.48; bottled/powders → $0.08.
    • Phase 4 (≥ $43,000,000): syrup → $0.24; bottled/powders → $0.04.
    • Phase 5 (≥ $52,000,000): all rates → $0.00 (tax eliminated).
  • Once the per‑gallon rate reaches 0¢, the bill would repeal the Arkansas Soft Drink Tax Act and requires DFA to notify legislative/code authorities to remove the law from the code.
  • Amendment H1 changed wording to require DFA to "estimate" rather than "certify" the sales tax amount; H2 added cosponsors.

Fiscal impact

  • DFA’s fiscal statement cites FY2024 soft drink tax receipts totaling approximately $42,551,945. Under the bill’s staged reductions, annual state excise revenue would decline progressively and, when fully phased out, would reduce soft drink tax revenue by roughly $42.6 million annually (based on FY2024 levels).
  • DFA’s table shows incremental annual losses by phase (first reduction loss ≈ $9.63M; cumulative losses grow through each phase to the full amount). State agencies that relied on this revenue would see commensurate reductions; other analyses (DHS) flagged effects on state/federal matching and program funding over multiple years.

Who is affected

  • Distributors, manufacturers, and wholesale dealers (currently required to collect the soft drink tax) — their excise collection obligations would decline as rates fall and end once repealed.
  • State general/restricted funds and programs that currently receive soft drink tax revenues — will experience reduced revenue up to the full ~$42.6M annual loss if the tax is eliminated.
  • DFA (administration and annual estimation duty) and legislative code bodies (statute removal when tax reaches 0¢).

Implementation and procedural notes

  • DFA must estimate sales‑tax‑from‑soft‑drink receipts within 90 days after fiscal year end (practical deadline appears by Dec. 1 under statutory language).
  • Each phase’s rate change becomes effective July 1 following the first fiscal year meeting the applicable threshold; only one phase may occur per fiscal year.
  • The bill was amended during the 2025 session (H1/H2) but did not become law; legislative actions in March–April 2025 included readings and amendments. Final status in the provided record: died in committee / withdrawn by author and recommended for interim study.

Compiled from official sources — confirm details with the bill’s official record.

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