Baxter County Friends of the Taxpayers

An A&P Tax is a city ordinance calling for a special tax on restaurants and hotels, which is used to advertise and promote "the area." Thirty-six other towns in Arkansas, and hundreds more communities around the country, have these taxes (often called hospitality, bed, meal, or tourist taxes).

How did the A&P Tax go into effect?

The Mountain Home City Council voted it into existence on January 6, 2005, by approving it unanimously in three consecutive readings in one night.

The AR State Constitution reads as follows:

Title 26; Subtitle 6; Chapter 75; Subchapter 6 (26-75-602. Gross receipts taxes authorized.)

(a) Any city of the first class, city of the second class, or incorporated town MAY, by ordinance of the governing body thereof, levy a tax not to exceed three percent (3%) upon the gross receipts or gross proceeds identified in subsection (c) of this section. (EMPHASIS added)

(copied verbatim from the AR Legislature’s official website http://www.arkleg.state.ar.us/  [click on “Arkansas Code”])

Nowhere does the Code say “shall,” or “must” or “will” – it says the city MAY levy a tax of this sort on its residents.  City Council members maintain that by passing the ordinance the way they did, they were simply following the law, and that if they could have taken the A&P Tax issue to the voters, they would have done so.

In our opinion, this issue could have been set before the voters from the beginning, simply by having it added to the ballot at the next general election.

How does an A&P Tax work?

The tax would add an additional 1% to a restaurant bill, and an additional 2% to a hotel stay. This would bring the total taxes to 9% on restaurants and 12% on hotels.

Will the tax apply to all of Baxter County?

No. Only restaurants and hotels inside the Mountain Home city limits would be taxed. These types of businesses outside the city limits would not have to collect or remit the tax (yet they would benefit from the increased advertising and promotion efforts made possible by the tax).

Will the tax only be on sit-down restaurants and hotels?

No. Included with restaurants are cafes, cafeterias, delis, drive-in restaurants, carry-out restaurants, concession stands, convenience stores, grocery-store restaurants, and similar businesses. (The tax would not apply to any such businesses operated by organizations qualified under section 501[c][3] of the federal Internal Revenue Code.)

The A&P Tax would apply to any food that is cooked and purchased ready-to-eat, whether eaten on the premises or taken out for consumption elsewhere. In other words, a bucket of fried chicken from Wal-Mart or a roasted chicken from the grocery store deli would have the extra tax added on -- as would a dozen donuts or a birthday cake from the bakery, burritos or nachos bought at the gas station, burgers and fries from McDonald's drive-thru, and the pizza and hot wings that get delivered to your door.

Besides hotels, the tax would be applied to stays at motels, resorts, bed-and-breakfasts, inns, and short-term condos, for periods less than 30 days in length. Also included would be meeting or party room facilities rented to the public for profit.

What's the big deal? It's only an extra 1 or 2 pennies per dollar.

The money isn't -- and never has been -- the issue for most of the people who are opposed to this tax. Mountain Home residents have shared many reasons why they object to this tax -- here are a few (the rest can be found on the A&P Tax page):

• Taxpayers should not be held responsible for the advertising costs of private businesses; advertising is a tax-deductible business expense and should be paid for by the business owner

• This tax amounts to taxation without representation (remember the Boston Tea Party?) for Mountain Home residents who live outside the city limits, and for tourists who come here to dine or stay in a hotel

• It's one more layer of bureaucracy and taxing authority placed over the residents of Mountain Home

How much money are we talking about?

The A&P Commission estimates that this tax will raise between $300,000 and $400,000 the first year.

Who gets to spend the money?

The 7-member A&P Commission. According to the AR State Constitution:

• Four members shall be owners or managers of businesses in the tourism industry, ... at least three of whom shall be owners or managers of hotels, motels or restaurants ....

• Two members of the commission shall be members of the governing body of the city (the City Council) and selected by the governing body; and

• One member shall be from the public at large, who shall reside within the levying city.

These people are NOT elected to their positions by the citizens of Mountain Home -- they are appointed by the City Council (two of whom also serve on the A&P Commission).

And, according the the AR State Constitution, vacancies on the Commission are to be filled "by appointment made by the remaining members of the commission, with the approval of the governing body of the city."

There are no checks and balances to this system -- taxpayers have no say whatsoever over who serves on the Commission, or what the money should be spent on.

But wouldn't that much money for community projects and advertising the Mountain Home area be a good thing?

There's no denying that it would be nice to have that much extra money to use for community projects and such things. But it has to come from another source! Taxes simply are not the answer to every new proposal that gets thought up.

This area was built with private money and volunteerism, and people working together to make the town a better place. In our opinion, that's still the way to go.

As far as advertising is concerned, we think the Mountain Home area gets plenty of exposure. Three long-established levels of advertising and promotion agencies already exist in Arkansas (two are already funded by taxpayer dollars):

• AR Department of Parks and Tourism (ADPT), which is funded by a 2% sales tax on tourist-related goods and services that went into effect in 1989 (Act 38). In 2003 19.9 million tourists spent $3.9 BILLION in Arkansas, leaving behind over $300 MILLION in local taxes.

• Ozark Mountain Region, one of the ADPT's 12 "regional tourism associations," all of which are funded, at least in part, by the ADPT.

• Mountain Home Area Chamber of Commerce, whose funding comes primarily from membership dues and private sources.

All of these organizations have excellent web sites and offer promotional packages free of charge -- just visit one of their web sites or make a toll-free telephone call.

Many local businesses also offer free information packets to out-of-state visitors.

There's also the new Hometown Merchants Association, formed in 2004 to offer merchants the opportunity to join forces to advertise themselves on the local level (the Chamber only advertises outside the immediate area).

Add to this the recent Wall Street Journal article, word-of-mouth and Internet advertising already in place, and the need to spend hundreds of thousands of additional dollars seems even more like a colossal waste of money.