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Alaska online sales tax offers a ‘tiny bright spot’ of revenue for some local communities

A shopper browses at the Juneau Artists Gallery.
A shopper browses at the Juneau Artists Gallery.(KTUU)
Published: Nov. 27, 2020 at 5:59 PM AKST
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JUNEAU, Alaska (KTUU) - Thirty-three Alaska communities are collecting remote sales tax and are projected to share in between $8 and $10 million in new revenue this year.

In November of 2019, the Alaska Remote Sellers Sales Tax Commission was created by the Alaska Municipal League. It was formed to help local governments across Alaska collect sales tax from purchases made from out of state.

Jeff Rogers, the president of the commission, said that was about leveling the playing field for brick and mortar stores where customers pay sales tax. “If you are not collecting remote sales tax, you are effectively subsidizing those sales,” Rogers added.

During the COVID-19 pandemic, more Alaskans are shopping online. The Small Business Development Center reports that online shopping has gone up by 100% across every age demographic in Alaska.

The Alaska Remote Sellers Sales Tax Commission is working to register more businesses to remit more sales tax to Alaska. Rogers said Walmart and Target had recently registered.

The commission reports that a total of 665 vendors have signed up. The bulk of the taxes are collected for online sales, but they can also be for purchases made over the phone.

There are potentially thousands of other vendors that could be eligible to pay remote sales tax.

Rogers said the $10 million projected to be collected statewide in 2020 is not the high watermark. As more communities and vendors sign up, Alaska “could easily double that,” he added.

The commission requires any company operating remotely that makes over $100,000 in sales per year or has more than 200 annual sales across Alaska to remit tax revenue. Some of the participating sellers are big name companies like Amazon, Lowes and Home Depot.

The amount each company pays to Alaska communities is confidential.

Alaska was a late adopter to start collecting remote sales tax. In 2018, the U.S. Supreme Court gave broad authority to states to start collecting that revenue.

Since that decision, over 40 states have signed up to collect remote sales tax. Without a statewide sales tax, it’s up to local governments in Alaska to decide if they want to join the commission and pass a uniform code.

There are currently 33 communities listed as having adopted the code, another six are in the process of adopting it.

Nils Andreassen, the executive director of the Alaska Municipal League, said that there are 106 communities across Alaska that can join the commission because they have a sales tax mechanism in place.

Some large cities like Anchorage and Fairbanks don’t collect sales tax, meaning they are not participating. Anchorage could start collecting sales tax on alcohol purchases made from out of state when that tax is implemented in February.

Andreassen said the remote sales tax has provided “more stability” for participating communities through the pandemic. This is not a new tax but the extension of an existing tax to online sales, he explained.

The City and Borough of Juneau was the first community to join the commission in February. Rogers, who is also Juneau’s finance director, said that the remote sales tax is projected to bring in $1.2 million for the city in 2020.

“What we tend to say is, ‘It’s a million dollars in services that CBJ can provide that it couldn’t provide otherwise,’” Rogers said, describing it as a “tiny bright spot.”

The addition of remote sales tax revenue comes during a tough fiscal time for Juneau. Before the COVID-19 pandemic, Rogers said the city would have expected to collect around $50 million in sales tax revenue this year. In 2020, that could drop to between $35 and $40 million due largely to cruise ships not coming in the summer.

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