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Here's why there's a city tax on your utility bill in Arkansas

A Van Buren viewer reached out to the 5NEWS Verify Team asking what a seemingly random 4.25% tax fee was. We break down what a "franchise fee" is.

VAN BUREN, Ark. — The 5NEWS Verify Team received a question from a Van Buren resident who wanted to know why there is a city tax on his AOG utility bill.

After reaching out the city, AOG, and other officials, we figured out what that seemingly random, 4.25% tax fee is on Van Buren utility bills— and we found out this goes beyond the River Valley and is a practice across the state.


Why is there a city tax on my utility bill?


Our sources are Arkansas-Oklahoma Gas (AOG) and the City of Van Buren. 

After getting to the bottom of what the fee could be, the 5NEWS Verify Team figured out that these taxes you see are actually called “franchise fees.” 

Under Arkansas law, any city in the state is allowed to charge companies in the residential, commercial, and industrial sectors this tax if they operate in that area.

Those companies like AOG, OG&E, Cox, AT&T, and many more can then turn around and charge you, the consumer, with that tax you see on your bill.

The companies do this to recoup the money they're being taxed by your city. 

The city clerk and treasurer of Van Buren says Arkansas Code 14-54-302 allows this, and she adds that the city uses the taxes to boost its general fund. 

According to the Arkansas Municipal League, this code has certain procedures if the city wishes to sell or lease property. “If the city wishes to enter into a sale or lease contract for the purchase of real or personal property, see A.C.A. 14-54-302(b), which contains the procedures.”

The procedures, which is what was cited by the City of Van Buren, include approval of the contract by a written resolution of the city council.

Here's a statement from AOG:

Arkansas Oklahoma Gas (AOG) proudly serves western Arkansas customers and has for nearly 75 years. In Arkansas, municipalities can pass an ordinance that requires utilities to place a franchise fee on their bill for the use of public right of ways. The fee is a passthrough amount from the customer to the municipality that can be used to support the local government's budget.


So yes, we can verify that the tax you see on your utility bills is legitimate as franchise fees and are allowed in any city in the state of Arkansas.

If you're in 5COUNTRY and want to see something in your community verified, just text “VERIFY” with your question to (479) 785-5000.

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