Seasonal sales taxes – Wacky Tax Wednesday
Sales tax rates in some parts of this country ebb and flow with the seasons, swelling with the influx of tourists each spring and dropping back down in the fall. But seasonal tax hikes don’t affect visitors alone: Businesses collect and remit them; residents pay them.
What is a seasonal sales tax?
A seasonal sales tax is just what it sounds like: a sales tax that changes with the seasons.
Most seasonal taxes are levied at the local level rather than the state level, meaning the state tax rate stays constant but the local tax goes up or down on certain dates. However, there's at least one state with a statewide seasonal tax.
Who has a seasonal sales tax?
Seasonal tax hikes tend to target tourists so are typically imposed in areas with a clearly defined tourist season. They’re fairly common in Alaska since more than half of Alaska’s tourists arrive by cruise ship some time between late April and late September. They can also be found in Montana, another state where weather impacts tourism.
Most of Oregon is more temperate, but if a renegade county in the south of the state gets its way, there could soon be a seasonal sales tax in Oregon, too.
Interestingly, Alaska, Montana, and Oregon are three of just five states with no sales tax.* Is there a method behind the madness? Could seasonal sales taxes be a gateway tax?
Perhaps. All three states have looked at introducing sales tax at one time or another. Former Alaska Governor Bill Walker urged the legislature to consider a state sales tax in 2016, and there’ve been several proposals to expand local option sales taxes in Montana. Oregon has seen a number of sales tax plans come and go, including a suggested tax on luxury items; though most proposals die, it managed to levy a tax on bicycles.
Local seasonal sales taxes in Alaska
Alaska boroughs and cities with a seasonal sales tax include:
- Seldovia: 9.5% April 1–September 30; 5% October 1–March 31 (see Sales Tax Quick Facts)
- Sitka: 6% April 1–September 30; 5% October 1–March 31
- Skagway: 5% April 1–September 30; 3% October 1–March 31; Skagway may increase the seasonal sales tax rate to 6.5% starting in 2023
- Whittier: 5% April 1–September 30; no sales tax the rest of the year
The City of Ketchikan plans to institute a seasonal sales tax in 2023. The municipal rates will be 5.5% April 1–September 30 and 3% October 1–March 31; with borough sales tax the combined rates will be 8% and 5.5%. See meeting minutes from August 18, 2022, for additional details.
Nome eliminated its seasonal sales tax effective May 1, 2022, though it could reinstitute the tax starting May 1, 2023. While in effect, the combined sales tax rate in Nome was 7% May 1–August 31 and 5% September 1–April 30. Galena also appears to have eliminated its seasonal sales tax.
Local seasonal sales taxes in Montana
Communities in the Big Sky State with a seasonal resort tax include:
- Craig (April 1–November 15)
- Gardiner (June 1–September 30)
- Virginia City (April 1–October 1)
- Wolf Creek (April 1–November 15)
Montana communities with a year-round resort tax include:
- Big Sky
- Cooke City
- Red Lodge
- St. Regis
- West Yellowstone
For the most part, resort taxes apply to luxury items as well as goods and services sold by lodging businesses, restaurants and similar food or beverage establishments, and recreational facilities. However, specific requirements vary from location to location.
For example, the Red Lodge resort tax applies to “any gift item … or other item normally sold to the public or to transient visitors or tourists,” including clothing marked with Red Lodge or Beartooth Mountains emblems or images.
The Big Sky resort tax applies to “any item of clothing,” but “necessities of life” are exempt. I generally consider clothing to be a necessity, but maybe that’s not how things roll in Montana.
Proposed seasonal sales tax in Oregon
Registered voters in Josephine County, Oregon, will determine the fate of a proposed seasonal sales tax on November 8, 2022. Should they approve it, Josephine County would impose a seasonal tax on certain retail activities occurring within the county between April 15 and October 15 each year.
South Dakota imposes a statewide tourism tax on certain lodging and amusement services during the months of June, July, August, and September. It applies to 1.5% of the gross receipts of the following:
- Lodging establishments
- Motor vehicle rentals
- Recreational equipment rentals and services
- Spectator events
- Visitor attractions
- Visitor-intensive businesses
Do out-of-state sellers have to collect seasonal sales taxes?
The short answer is that it depends, because each seasonal sales tax is unique. But if you’re an out-of-state seller that’s required to collect and remit sales tax in a jurisdiction with a seasonal sales tax, you’ll likely have to collect and remit the rate that’s due.
Many jurisdictions in Alaska tax remote sales, and some of those have a seasonal sales tax.
Yet not all jurisdictions with a seasonal sales tax in Alaska require remote sellers to register for sales tax. As of this writing, Seldovia and Sitka do, Skagway and Whittier don’t. Check out the Alaska Remote Seller Sales Tax Commission’s lists of jurisdictions that tax remote sales and jurisdictions with seasonal rates (download the pdf) for the most up-to-date information.
As their name suggests, the resort sales taxes in Montana tend to be tied to the physical location of the resort. Unlike in Alaska, local governments in Montana don’t require remote sellers to register for the resort tax. So while online sales could be subject to the resort tax in Red Lodge, that would only be the case if the product was shipped from a location in Red Lodge. Online sales originating outside of Red Lodge aren’t subject to the resort tax.
The situation in Oregon is less clear. Local governments in Oregon haven’t worked to streamline remote sales tax collection, and it’s unclear whether local governments in Oregon even have the authority to tax remote sales. Yet the language of the seasonal sales tax ordinance in Josephine County, Oregon, suggests remote sales would be taxed. It says, “conversions … delivered to a Consumer or a location in Josephine County” would be subject to the tax, “regardless of the shipping source.”
The pros and cons of a seasonal sales tax
Ask 10 people whether a seasonal sales tax is good policy or bad and you’ll get 10 different answers.
Some residents are in favor of them because visitors end up paying more tax than locals, at least in theory. Ketchikan City Council Member Lallette Kistler likes the idea of “extracting more revenue from tourists.” Council Member Judy Zenge said that she expected negative feedback from the taxes, but had more people contact her with positive input (see August 18 meeting minutes).
I’ve always looked at seasonal taxes in Alaska the other way round, as a reward for the hardy souls willing to endure the long, dark winter.
Either way, seasonal sales taxes do create more work for businesses, especially businesses that are required to collect and remit seasonal sales taxes in multiple jurisdictions. Every time a sales tax rate changes, point-of-sale systems must be updated to charge the right rate, and imposing a seasonal sales tax on some transactions but not others compounds the complexity. Fortunately, automating tax compliance can help reduce it.
*The five states with no sales tax are sometimes referred to as the NOMAD states after their initials: New Hampshire, Oregon, Montana, Alaska, and Delaware.
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