Cities and boroughs across the state are joining together in an effort to collect sales taxes from online retailers. At Tuesday’s Kenai Peninsula Borough Assembly meeting, members will decide if the borough should sign onto the plan, which could result in greater sales tax revenues.
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.
The assembly will likely vote on a resolution authorizing the borough to become a member municipality of the commission, according to a Oct. 24 memo to the assembly from borough finance director Brandi Harbaugh and borough deputy attorney Sean Kelley. The resolution also designates a borough representative to the commission.
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.
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 inability to effectively collect sales tax on online sales “is eroding the sales tax base of Alaska’s communities,” the Oct. 24 memo said.
“The resulting revenue losses are causing imminent harm to residents through the loss of critical funding for local education,” the memo said.
The City of Seldovia has already adopted a similar resolution to join the group. The Seldovia City Council adopted the 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.