The old mnemonic device for remembering states without a statewide sales tax, “NOMAD” (New Hampshire, Oregon, Montana, Alaska, and Delaware) might be dropping a letter. Specifically “A”, with the introduction of HB 3006 and HB 4005 in Alaska.
HB 3006 and HB 4005 each includes legislative language that would implement a statewide tax on sales of tangible personal property, rents or services at a rate of 2%. The bills would also enable Alaska to enter the Streamlined Sales Tax Agreement along with 24 other member states. The effective date of both bills would be July 1, 2022.
While it is commonly known there is no statewide sales tax in Alaska, under AS 29.45.650 and AS 29.45.700, local boroughs (i.e., counties) and certain cities have the authority to impose and collect sales tax on sales, rents and services. The rates and tax rules for these locally imposed taxes vary, but in application are reasonably uniform in nature due to substantial definitional commonality.
After the 2018 Wayfair decision, which enabled states to apply sales tax collection and remittance responsibility on remote sellers, the Alaskan Remote Sellers Sales Tax Commission (ARRSTC) was established via intergovernmental agreement to coordinate sales tax collection for remote sales into Alaskan boroughs and cities. Specifically, 51 boroughs and cites are currently participating with another five that are pending approval as of August 2021. The idea was to make Alaska local jurisdiction compliance less burdensome, in turn allowing localities to extend compliance obligations to remote sellers. As such, if a local city or borough chooses to participate in the agreement, it would adopt the Uniform Code established by the Commission and allow the Commission to administer compliance as it relates to remote sellers.
Alaska sales tax in the future
The two bills differ on one major aspect. HB 3006 would require localities that impose a sales tax to transfer their administration responsibility to the Alaska Department of Revenue (DOR) by July 1, 2022. In that way, the bill would effectively eliminate the relevance of the ARSSTC. However, this would likely not eliminate the obligation of remote sellers to collect and remit tax, as Alaska would simply join the rest of the United States in applying an “economic nexus” standard compelling remote sellers to collect and remit the new state and existing local taxes, all to the state DOR.
HB 4005 is silent concerning the fate of existing local sales taxes.
Amendments to hurdle
There are other legislative matters afoot that would make passing laws imposing a state tax even more of a challenge. SJR 7 and HJR 8 are current joint resolutions introduced in the Alaskan House and Senate that propose adding amendments to the Alaskan Constitution prohibiting the establishment of a state sales tax without the approval of the voters. An amendment of this kind would at least temporarily scuttle the immediate impact of these two bills by adding the step of voter approval once the legislation is passed and signed by the Governor. Whether Alaska voters would have the appetite to impose a new tax on themselves remains to be seen.
Although the storyline for HB3006 and HB 4005 is still in its early stages, their propositions would begin a new chapter for sales tax in Alaska. Developments bear close watching as the passage of either bill could lead to a net new compliance requirement.
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