The Alaska Municipal League is examining how to create a system for localities around the state to collect and remit sales taxes for online purchases.
The system would enable municipalities or boroughs that already have a sales tax in place for brick-and-mortar retailers to apply the tax to e-commerce sales.
The league’s effort follows a U.S. Supreme Court ruling last year that paved the way for states to implement sales taxes for online purchases.
That ruling in that case, South Dakota v. Wayfair, meant a company could be subject to sales tax in a state where it does business, even if the company has no physical presence in that state.
That’s significant for remote Alaska, where online shopping and services like Amazon Prime are hugely popular. Alaska doesn’t have a statewide sales tax, but about 100 municipalities around the state do. Anchorage, the largest city, doesn’t.
“This is sales tax that cities and boroughs already have, and really what it does is level the playing field for local economies and retailers here in the state,” said Nils Andreassen, executive director of the Alaska Municipal League. “This evens it out for them. In a lot of ways it supports local economic development.”
The system would not mean a statewide sales tax, he said. What it would do is create one centralized point for retailers to deal with to collect sales taxes, he said, instead of a business having to coordinate with all those individual local governments that want to participate. The Wayfair ruling meant states that want online sales taxes need to develop that kind of streamlined approach so there’s not an undue burden on retailers.
On Jan. 1, Amazon started collecting online sales tax in many Alaska communities on sales of Amazon products, Andreassen said. Amazon did not provide answers to specific emailed questions about its sales taxes in Alaska.
Andreassen expects an agreement between municipalities for what that system will look like to come together in May or June, and then it will take six months to a year to develop software and implement it.
Alaska state assessor Marty McGee said he’s noticed “a lot of interest” about taxing online purchases.
“I’ve gotten calls from a lot of places that would like to start taxing internet commerce," McGee said. He’s heard from every major city in Alaska that has a sales tax, he said.
The Kenai Peninsula Borough has a 3 percent borough-wide sales tax and is participating in the league’s effort. That includes the borough appropriating $10,000 toward the effort, said borough finance director Brandi Harbaugh.
Some of the main points in the Wayfair case that Alaska is now trying to follow, Harbaugh said, include creating a centralized reporting system with the state that all localities can use, and also not placing an undue burden on vendors.
“That’s the main requirement we’re trying to accommodate,” she said. It’s “difficult to say” what an online sales tax would mean for the borough’s economy, she said, because it’s not clear how much money it could generate.
There’s an estimated budget of “maybe $100,000” for the research the municipal league is doing, Andreassen said, with municipalities contributing that money.
The process “doesn’t commit any single municipality to implement an online sales tax,” Andreassen said. “So that conversation will take place at a local level.”
Bob Bartholomew, finance director at the City and Borough of Juneau, said there will be a public process with hearings about the proposed system for collecting the taxes. Juneau has a 5 percent sales tax.
“We’d have to figure out the overall effect. Then we could start the public policy discussion of, does the public and our Assembly want to change the existing sales tax code?” he said. “The sales tax code is a critical part of communities. It’s the pulse.”