Alaska is a Good Place to Grow Old – Wacky Tax Wednesday

Creaky knees aside, there are advantages to aging. For example, seniors pay reduced admissions at cinemas, museums, and other cultural activities, as well as reduced fares for many forms of transportation. Seniors may audit college classes for little or no tuition at more than half of the nation’s colleges and universities. Post-retirement, seniors have more time to travel, volunteer, pursue hobbies, and spend time with friends and family.

But my favorite perk, by far, is the fact that seniors are granted sales tax exemptions in certain tax jurisdictions, just because they’ve lived so long. Now that’s worth sticking around for, sore joints and all.

Alaska

Alaska likes to reward its residents for living there, presumably because it is not easy to do so and there are plenty of easier options. Although Alaska has no statewide sales tax, the state does permit local sales tax and many cities and boroughs levy them. Of those that do, a good number offer some sort of senior exemption for residents with a valid senior exemption card.

As with all things sales tax, the fine print for senior exemptions is different in each and every location. Some jurisdictions require seniors to have been a resident for at least one year, while others will grant the exemption to seniors who have lived in the area for just thirty days. Senior is defined as persons older than 60 years of age in some areas, 65 in others, and in one, 66. Some jurisdictions allow seniors to purchase alcohol and tobacco products tax free, while others limit the exemption to “essentials” such as food and utilities. Retailers need to understand local senior exemptions in order to properly apply them, for as always, the onus falls on businesses to properly collect and remit sales tax.

I invite retailers and current and future seniors to read on. Knowing the fine print will help us all make informed decisions.

Senior citizens in Bethel may purchase food for themselves, their spouses, and any unemancipated minor children, so long as spouse and children live in the same household as the senior. Rent, telephone, electricity, water and sewer utility services for the senior’s primary residence and permanent place of abode may also be purchased tax-free by a senior citizen. Additional information.

Craig provides an exemption for elderly residents of Alaska who are 60 years or older. As a general rule, spouses under the age of 60 are “not eligible for the exemption and cannot purchase anything without the presence of the exempt spouse.” See Craig Municipal Code 3.08.030. Senior citizen exemption cards expire every three years.

Currently, residents of the City and Borough of Juneau (CBJ) who are 65 years and older may purchase a senior sales tax exemption card, which enables them to purchase most taxable goods exempt from sales tax. Spouses of qualifying seniors are also eligible for the exemption, no matter their age. The CBJ senior exemption does not extend to the following purchases: alcoholic beverages; hotel/motel tax; purchases related to a business; and purchases for others, such as gifts, restaurant meals, and utilities for property not occupied by the qualifying senior.

Ketchikan Gateway Borough provides senior tax exemptions “for purchases of items for use by themselves and their spouses.” To be eligible for a sales tax exemption card, a person must be “a bona fide resident of the Borough for not less than 180 days” and be 65 years of age or older. Ketchikan seniors may purchase numerous goods and services tax free, including but not limited to boat harbors, cigarettes and tobacco products, pet kenneling, and alcohol (although sales tax applies to alcohol purchased for parties, weddings and receptions). Additional information.

A senior sales tax exemption is available for residents of Kodiak. Eligible seniors are 65 years of age or older and have resided in Kodiak Island Borough for a continuous period of 30 days or more.” The exemption does not extend to purchases made for business or to generate income of any sort. For additional information, please see the City of Kodiak Sales Tax Review, KCC 3.08.055.

In Petersburg, “Any qualifying senior citizen who has obtained a Borough issued exemption card may be exempt from paying sales tax.” Qualifying seniors are 65 years of age or older, have their permanent place of abode within Petersburg Borough, and have resided in Petersburg “for at least one year immediately prior to applying” for the exemption. The senior should intend to live in Petersburg indefinitely. Read more.

In the City and Borough of Sitka, there is an exemption “for persons who have reached the age of sixty-five… who is a resident of the state of Alaska.” The exemption extends to spouses and qualified domestic partners. Alcoholic beverages, cigarettes and other tobacco products are not eligible for the exemption. Additional information.

Residents of Unalaska who are 65 years old or older by March 31 of each year may apply for and receive a senior citizen sales tax annual refund of $200. Qualifying seniors must have been a resident of Unalaska “for at least 30 days prior to” submitting an application. Additional information.

Sorry, Santa

It should be noted that senior sales tax exemptions/refunds don’t necessarily last forever. The senior/disabled sales tax refund was repealed in the North Pole, where there is a local sales tax rate of 4% and a maximum tax per purchase of $8. Sorry, Santa. More information.

A recent decline in sales tax revenue caused by an increase in eligible seniors has prompted the CBJ Finance Committee to consider eliminating some of the existing senior sales tax exemptions. In late July, a proposal limiting the exemption to “essential purchases” such food, electricity, heating fuel, water and wastewater utilities was sent by the committee to the Assembly for approval (a need-based provision would extend the current exemptions to low-income seniors). Finance Director Bob Bartholomew says that unless a change is made, the city’s tax revenue will continue to decrease by approximately $400,000 to $500,000 each year (Juneau Empire). During meetings on the subject earlier this year, “Many seniors warned the Assembly that axing their tax exemption might make them leave Juneau.”

The senior sales tax exemption in Petersburg came under fire last fall. After much debate, the senior exemption was retained but tightened to exclude non-borough residents.

Other

In the spirit of fairness, I should mention that a few other states incentivize aging with sales tax refunds and similar programs. These include the following:

• South Carolina: Seniors aged 85 and older with a valid exemption card are eligible for a reduced state sales tax rate on most purchases. However, they must still pay the 3% tax on unprepared food. Additional information. 
• South Dakota: Senior residents at least 66 years of age meeting certain income requirements may choose between a once-a-year refund of sales tax and a once-a-year refund of property tax. Annual income requirements fluctuate; the current limit for single-member households is $11,670 and for multiple-member households it is $15,730. More information.
• Wyoming individuals aged 65 or older with an income of less than $17,500 (single persons) or $28,500 (married persons) in the preceding year are eligible for a sales tax refund. Eliminating the program has been proposed. Additional information.

See? Growing old isn't all bad.