Summary of House Bill 1636
Bill Overview
- Bill Number: HB 1636
- Title: To Amend the Arkansas Soft Drink Tax Act, as Affirmed by Referred Act 1 of 1994; and to Phase Out the Soft Drink Tax Based on Sales Tax Collections from Sales of Soft Drinks.
- Status: Recommended for study in the Interim by the Committee on Revenue & Taxation - House
- Introduced: March 03, 2025
Purpose and Intent
House Bill 1636 aims to gradually phase out the existing soft drink tax in Arkansas. The bill proposes a structured reduction of the tax rates based on the sales tax collections from soft drink sales, ultimately leading to the complete elimination of the tax.
Key Provisions
The bill outlines a phased approach to reducing the soft drink tax, which is currently levied at the following rates:
- Soft Drink Syrup or Simple Syrup: $1.26 per gallon
- Bottled Soft Drinks: 20.6¢ per gallon
- Powders and Base Products: 20.6¢ per gallon
Phased Reductions
The reductions are contingent upon the estimated sales tax collections for soft drinks in a fiscal year, as determined by the Department of Finance and Administration (DFA). The phases are as follows:
Phase 1 Reduction:
- Condition: Estimated sales tax collections of at least $16 million.
- New Rates (effective July 1 of the following year):
- Soft Drink Syrup: 96¢ per gallon
- Bottled Soft Drinks: 16¢ per gallon
- Powders and Base Products: 16¢ per gallon
Phase 2 Reduction:
- Condition: Estimated collections of at least $25 million and completion of Phase 1.
- New Rates:
- Soft Drink Syrup: 72¢ per gallon
- Bottled Soft Drinks: 12¢ per gallon
- Powders and Base Products: 12¢ per gallon
Phase 3 Reduction:
- Condition: Estimated collections of at least $34 million and completion of Phase 2.
- New Rates:
- Soft Drink Syrup: 48¢ per gallon
- Bottled Soft Drinks: 8¢ per gallon
- Powders and Base Products: 8¢ per gallon
Phase 4 Reduction:
- Condition: Estimated collections of at least $43 million and completion of Phase 3.
- New Rates:
- Soft Drink Syrup: 24¢ per gallon
- Bottled Soft Drinks: 4¢ per gallon
- Powders and Base Products: 4¢ per gallon
Phase 5 Reduction:
- Condition: Estimated collections of at least $52 million and completion of Phase 4.
- New Rates:
- Soft Drink Syrup: 0¢ per gallon
- Bottled Soft Drinks: 0¢ per gallon
- Powders and Base Products: 0¢ per gallon
Once the tax rates reach 0¢, the Arkansas Soft Drink Tax Act will be repealed, and the DFA will notify relevant legislative bodies for the removal of the Act from the code.
Impact
The bill is expected to significantly reduce tax revenue from soft drink sales over time, with an estimated cumulative loss of approximately $42.5 million by the time the tax is fully phased out. The phased reductions will impact distributors, manufacturers, and wholesalers of soft drinks in Arkansas.
Procedural Timeline
- March 03, 2025: Bill filed and read for the first time.
- March 11, 2025: Amendments adopted and bill engrossed.
- April 09, 2025: Bill withdrawn by the author and recommended for interim study.
This summary provides a clear overview of HB 1636, detailing its purpose, key provisions, potential impacts, and procedural history, making it accessible for both experts and general readers interested in Arkansas legislation.
