Cities and boroughs in Alaska that levy sales taxes have unveiled a plan to collect from online purchases that would be the first of its kind in the United States.
If successful, the arrangement would result in millions of dollars in extra tax revenue for local governments and eliminate an incentive for Alaskans to buy online instead of at local shops.
While Anchorage and Fairbanks — the state’s two largest cities — don’t have sales taxes, many other communities do: There are 106 sales tax jurisdictions in Alaska, in places as varied as Ketchikan, Kotzebue and Kenai. All could be affected by the arrangement, depending on actions taken by their local government.
Under the plan, cities and boroughs are being asked to join a cooperative agreement that creates a statewide sales tax commission administered by the Alaska Municipal League. That commission will be in charge of keeping track of the various local sales taxes and will contract with Colorado-based software company MuniRevs to collect them from online retailers.
When someone buys something online, the retailer will send the appropriate tax — based on shipping address — to the commission, which will distribute it back to communities. MuniRevs and the commission would each take a cut to pay for the cost of their work. Only companies with at least 100 sales or sales worth $100,000 in Alaska would be required to pay online sales taxes.
The plan is expected take effect in 2020 in communities where the local government has signed on.
“We think it levels the playing field for everybody,” said Jeff Rogers, finance director for the City and Borough of Juneau, one of the communities leading the effort.
If local businesses pay local sales taxes but online stores don’t, “local businesses are being systematically disadvantaged,” Rogers said. “That’s not a good thing for anybody.”
There’s a significant financial incentive, too. According to state figures, Juneau collected more than $48 million in sales tax revenue in 2018, the most in the state, and Rogers said he expects online collections to add at least $1 million to that figure.
The Kenai Peninsula Borough collected $31.5 million in sales tax revenue in 2018, second-most in the state, and finance director Brandi Harbaugh is even more bullish than Rogers: She said she estimates online collections could be worth 10% of the 2018 figure.
She, like Rogers, said the equity factor is more important than the potential revenue.
“I think it definitely helps even the playing field and helps the local vendors," she said.
For its part, Amazon — the nation’s largest online retailer — has generally favored a centralized tax collection system. It lobbied for federal legislation but has also supported so-called “marketplace” legislation in individual states.
“Amazon supports marketplace legislation in the states because it simplifies sales tax collection for the millions of small businesses that sell on Amazon," wrote Jill Kerr, Amazon’s state policy communications manager, by email. She said the company didn’t have a comment about Alaska specifically.
According to the National Conference of State Legislatures, 42 states across the country have begun collecting online sales taxes since the U.S. Supreme Court ruled in June 2018 that online retailers can be required to pay sales taxes, even if they don’t physically exist in a particular state.
But all of those states have statewide sales taxes and have used their state governments as a central clearinghouse. Alaska doesn’t have a statewide sales tax, and barring action by the Alaska Legislature, it’s up to cities and boroughs to collect online taxes.
Jackson Brainard, senior policy specialist with the National Conference of State Legislatures, wrote by email that “Alaska is a unique case on this front.”
The other four states without statewide sales taxes do not have local sales taxes. States with local sales taxes and a statewide sales tax have allowed their state governments to take the lead, collecting online taxes on behalf of municipalities and sending them onward.
In Alaska’s case, nothing will happen unless local governments sign on.
The Kenai Peninsula Borough, City and Borough of Juneau and other local governments are preparing draft resolutions to be considered by their elected assemblies in early November. A signing ceremony officially opening the commission’s work has been tentatively scheduled for the Alaska Municipal League’s statewide conference in November.
If all goes as planned, the first collections would take place in 2020.
Largest sales tax communities
According to the latest Alaska Taxable report published by the state assessor’s office, these are the top 10 largest municipalities in Alaska with sales taxes:
• Kenai Peninsula Borough: population 58,024, 3% sales tax
• City and Borough of Juneau: population 32,269, 5%
• Ketchikan Gateway Borough: population 13,754, 2.5%
• City of Wasilla: population 8,797, 3% (will drop to 2.5% starting Dec. 1)
• City and Borough of Sitka: population 8,748, 5% in winter, 6% in summer
• City of Ketchikan: population 8,125, 4%
• City of Kenai: population 7,038, 3%
• City of Palmer: population 6,296, 3%
• City of Bethel: population 6,151, 6%
• City of Kodiak: population 5,952, 7%