Some remote sellers need to register to collect sales tax in Alaska. Now.
Although there’s no state sales tax in Alaska, more than 100 local governments in The Last Frontier levy local sales taxes. Some of these local governments now require certain out-of-state sellers to register to collect and remit sales tax.
- $100,000 or more in statewide gross sales from the sale(s) of property, products, or services delivered into the state; or
- 200 or more separate transactions of property, products, or services delivered into the state.
Remote sellers and marketplace facilitators should include all sales made into Alaska when calculating the threshold, not merely sales shipped to a particular jurisdiction. Those with less than $100,000 in sales or fewer than 200 transactions aren’t required to register but should monitor their sales into the state so they’ll know if they cross the threshold.
As of this writing, the following cities and boroughs in Alaska have adopted a remote sales tax collection obligation (listed with the date they adopted the Remote Sales Tax Code):
- City and Borough of Juneau (February 3, 2020)
- City and Borough of Wrangell (March 1, 2020)
- City of Adak (March 17, 2020)
- City of Cordova (April 1, 2020)
- City of Homer (February 24, 2020)
- City of Kenai (February 24, 2020)
- City of Nome (March 9, 2020)
- City of Palmer (March 24, 2020)
- City of Seldovia (February 24, 2020)
- City of Seward (February 24, 2020)
- City of Soldotna (February 24, 2020)
- City of Wasilla (February 24, 2020)
- Haines Borough (March 10, 2020)
- Kenai Peninsula Borough (February 24, 2020)
Out-of-state businesses that have already met the $100,000 sales/200 transactions threshold in Alaska must start collecting sales tax on their sales into these cities and boroughs within 30 days of the dates listed above.
That means qualifying remote sellers should register and be prepared to start collecting sales tax in the City and Borough of Juneau by March 4, 2020, and in the remaining cities and boroughs by March 25, 2020. More details on how to do file and remit in Alaska are provided below.
Requirements for marketplace facilitators
Marketplace facilitators are considered the remote seller for all sales facilitated through the marketplace. As such, they’re responsible for collecting, remitting, and reporting sales tax to the Alaska Remote Sellers Sales Tax Commission in most instances. Certain exceptions apply when a marketplace is involved in the sale or rental of lodging facilities.
A central point of registration
Remote sellers don’t need to register with the tax authorities in each of the above jurisdictions. Instead, they register and remit through a single, statewide administrative system: the Alaska Remote Sellers Sales Tax Commission Portal. Each seller should register with the commission once, even if they sell (and plan to collect sales tax) in multiple cities or boroughs.
The commission will notify registered sellers as additional cities or boroughs adopt the Remote Sellers Sales Tax Code. It expects more to do so by June 30, 2020.
The Alaska cities believe having this single point of registration and remittance allows Alaska to be more in line with South Dakota v. Wayfair, Inc., the United States Supreme Court decision that authorized states to tax remote sales.Wayfair and the birth of economic nexus
Until the Wayfair decision (June 21, 2018), states could require a business to collect and remit sales tax only if the business had a physical presence in the state. Wayfair overruled the physical presence rule, authorizing states to base a remote sales tax collection obligation solely on economic activity in the state, or economic nexus.*
This was groundbreaking.
In previous decisions, the Supreme Court had upheld the physical presence rule on the grounds that taxing remote sales could discriminate against or place undue burdens upon interstate commerce. In Wayfair, however, the court determined South Dakota had taken steps to prevent such discrimination or burdens by:
- Providing safe harbor to companies with limited business in the state (the small-seller exception)
- Forbidding retroactive enforcement of economic nexus
- Participating in the Streamlined Sales and Use Tax Agreement (SST)
Lacking any other guidelines, these three points have become the North Star for the 43 states (plus the District of Columbia) that have adopted and enforce economic nexus.
Like South Dakota, most states provide a small-seller exception and enforce economic nexus prospectively. And while not all are members of the SST, all SST members have adopted economic nexus. See more details in this state-by-state guide to economic nexus laws.
Economic nexus in Alaska
What’s happening in Alaska is a bit different than the situation in the lower 48 because there’s no statewide sales tax or sales tax governing body in Alaska. Any and all cities and boroughs could simply require remote sellers to collect sales tax and remit it to the local tax authorities. And in fact, at least one is doing just that: Nome, as of September 1, 2019. (Update: Nome adopted the Remote Sales Tax Code on March 9, 2020.)
Of course, if every jurisdiction with a sales tax did that, companies could end up registering and filing sales tax returns with more than 100 local tax authorities in Alaska alone. That would likely be burdensome for businesses — and lead to a legal challenge.
Understanding this, representatives from the Alaska Municipal League created the Alaska Intergovernmental Remote Seller Sales Tax Agreement to simplify sales tax compliance for all business required to collect sales tax in Alaska, including in-state businesses selling into jurisdictions where they have no physical presence.
The Agreement implements a single-level, statewide administration of remote sales tax collection, remittance, and exemption certificate management. It’s governed by the Alaska Remote Sellers Sales Tax Commission, a new intergovernmental agency comprised of representatives from member cities and boroughs.
Participation is voluntary — local governments aren’t required to tax remote sales or sign the Agreement. Those that choose to do so and retain their taxing authority: The Commission doesn’t interfere with local rates or sales tax exemptions. However, it may develop and recommend proposals to promote uniformity of local tax law and administration throughout the state.
For additional information regarding your potential sales tax obligations in Alaska, see the Alaska Remote Sellers Sales Tax Commission. Alternatively, contact the professional services team at Avalara.
*The Wayfair ruling didn’t eliminate physical nexus: Having a physical presence in a state still creates an obligation to collect sales tax.
The 2021 sales tax changes report: midyear update
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