The cities of Kenai and Soldotna are joining municipalities and boroughs across the state in an effort to collect sales taxes from online retailers. At their city council meetings on Nov. 6 and Nov. 13 the city of Kenai and Soldotna voted to sign onto the statewide initiative, which could result in greater sales tax revenues for the cities.
The plan, which is being administered by the Alaska Municipal League, will create a sales tax commission for the state. The Alaska Remote Seller Sales Tax Commission — an intergovernmental entity — will contract MuniRevs, a Colorado-based software company, to collect taxes from online vendors.
Both cities approved resolutions authorizing them to become a member municipality of the commission. The resolutions also designate a city representative to the commission.
Kenai City Council member Henry Knackstedt said he thinks the initiative will help “level the playing field.”
“There are businesses here that are paying taxes within our city,” Knackstedt said at the Nov. 6 Kenai City Council meeting. “If you want to go buy a shirt or buy a good of some sort, you do pay taxes here. (The initiative) brings the online a little more in line with that kind of competition, so I appreciate that aspect.”
Newly appointed Soldotna City Council member Pam Parker also said the initiative will help balance local and online retailers.
“The collection of online sales taxes will level the playing field for some of our brick and mortar businesses in town,” she said at the Nov. 13 Soldotna City Council meeting.
Sales tax revenues help support government services in both Kenai and Soldotna. Soldotna City Council member Lisa Parker reminded residents that those revenues support services for them and residents of the central peninsula outside of city limits.
“The reason we collect sales tax here, part of the reason — besides supporting our general operations, keeping the library open, helping with events, parks, the police department — it also keeps our property taxes very low, 0.5 mills for Soldotna residents is very low and we pay less inside city limits than if you were in the borough just across the street,” Lisa Parker said at the Nov. 13 Soldotna City Council meeting. “The city provides a multitude of services through the sales taxes that we collect. These services are not only for you as city residents, but for the approximately 40,000 that live in the central peninsula that also benefit from services here in the city.”
Online vendors who make least $100,000 in annual sales or 100 annual transactions in Alaska during the current or previous calendar year will collect sales taxes from the buyer based on the shipping address. For example, residents who are shipping products to their home in Soldotna will be subject to the city’s 3% sales tax and the borough’s 3% sales tax, totaling 6% in sales tax, when they order online. In areas with no sales tax, like Fairbanks and Anchorage, no sales tax will apply to online orders. Throughout the borough, there is a 3% sales tax, and some cities levy a higher sales tax.
The sales taxes will transfer to the commission on a monthly or quarterly basis. The commission and MuniRevs will take a cut of the revenue, and the rest will be distributed to the applicable municipalities and boroughs who have signed on to the agreement.
The Kenai Peninsula Borough Assembly also voted to support the initiative at the Nov. 5 assembly meeting.
In 2018, the Kenai Peninsula Borough collected the second most revenue from sales tax in the state, at $31.5 million. That sales tax revenue directly funds the Kenai Peninsula Borough School District.
The Seldovia City Council adopted their own resolution Oct. 28, which will authorize their city manager to obtain membership to the commission and designated Seldovia’s city manager, Cassidi Cameron, to represent the city as a member of the commission. In 2018, Seldovia earned $134,881 in sales tax revenue.
In 2018, the city of Soldotna raised $7.7 million in sales tax revenue. Homer received $7.85 million. Seward received $5.1 million and Kenai brought in $6.8 million in tax revenue.