Kenai City Hall on Feb. 20, 2020, in Kenai, Alaska. (Photo by Victoria Petersen/Peninsula Clarion)

Kenai City Hall on Feb. 20, 2020, in Kenai, Alaska. (Photo by Victoria Petersen/Peninsula Clarion)

Kenai sees returns from remote sales tax

The city has received almost $96,000 in net revenue

The City of Kenai has received almost $96,000 in net revenue generated from remote sales tax since it began collecting those taxes in March.

The city first joined the Alaska Remote Sellers Sales Tax Commission (ARSSTC) in early 2020 so that it could collect local sales tax from remote sellers like Amazon. According to a memo from City Attorney Scott Bloom to the council, doing so expanded the city’s ability to collect local sales tax from certain vendors located outside of Kenai who are selling goods and services into the city.

ARSSTC was created by municipalities around Alaska with help from the Alaska Municipal League. The commission contracted software vendors to develop products needed and entered into an agreement with AML for administrative support.

Fees incurred from software development and management are not paid upfront, but rather as a percentage of the collected taxes, per ARSSTC’s design. In total, 19.10% in various fees are collected from the total sales tax collected. Since the program went live, the city has received $116,728.13 in gross sales tax and $95,785.27 in net revenue, according to the memo.

“The contracts are structured to allow for percentage fees to decrease if certain revenue milestones are accomplished,” Bloom wrote. “There is also opportunity to renegotiate after a number of years.”

The amount of revenue generated is less than the city was expecting. Bloom said it should grow as the program becomes larger, meaning more jurisdictions participate, more sellers are registered to collect taxes and there is less economic pressure from the COVID-19 pandemic. Bloom said that some members of the commission believe that the fees are too high, but that it was the “lesser of two evils” in order to get the program started.

“One thing that’s unique about Alaska, compared to other states that are doing this, is we’re the only state that’s doing this that doesn’t have a state sales tax,” Bloom said at the Kenai City Council’s Dec. 16 meeting. “So it was pretty challenging to figure out how to do this under the parameters of the Supreme Court decision that allowed this that requires a uniform platform to collect it.”

According to the memo, 711 sellers have been registered by the ARSSTC to collect and remit sales tax. Additionally, almost 40 municipalities have joined the ARSSTC including the Kenai Peninsula Borough, the City of Kenai, the City of Soldotna, the City of Homer and the City of Seward.

Reach reporter Ashlyn O’Hara at ashlyn.ohara@peninsulaclarion.com.

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