Alaska considers first-ever state sales tax in 2026

Alaska needs more revenue, and Governor Mike Dunleavy has proposed a statewide sales tax to help secure it. This isn’t the first time a state sales tax has been suggested in the Last Frontier, and if this proposal fails, it probably won’t be the last.

Key takeaways

• Governor Dunleavy is urging the Alaska Legislature to enact a statewide sales tax with seasonal rates: 2% October through March and 4% April through September. The state sales tax would take effect January 1, 2027, and expire in 2034.

• More than 100 local governments in Alaska currently have a local sales tax, which they administer themselves. The Alaska Department of Revenue would take over administration of local sales taxes if Senate Bill 227 is enacted.

• SB 227 establishes a uniform sales tax base for state and local sales taxes. If signed into law, many local jurisdictions would have to change what they tax and exempt.
   

The state sales tax proposal

Introduced at Governor Dunleavy’s request, Senate Bill 227 would establish a state sales and use tax at a rate that ebbs and flows with the seasons — or at least with tourism.

• Between April 1 and September 30, when millions of people visit Alaska, the rate would be 4%.

• From October 1 through March 31, when tourism dips, and many locals decamp to warmer climes, the rate would drop to 2%.

This will be a familiar concept to many Alaskans. At least nine local jurisdictions in Alaska have seasonal sales tax rate changes today.

The state sales tax base would be broad, as both personal property and services would be subject to the state sales tax.

• Personal property includes electricity, internet services, gas, steam, and water; electronic or digital goods, and prewritten computer software. Personal property means “property that can be seen, weighed, measured, felt, or touched, or that is in any other manner perceptible to the senses.”

• Personal property does not include real property; or intangible property such as stocks, bonds, goodwill, trademarks, patents, franchises, or copyrights.

• Services include activities performed by a person for its member or shareholders; construction activities (and personal property that becomes an ingredient or component part of a construction project); labor; professional services; transportation; telephone or other communications services; entertainment, including cable, pay television, or other telecommunications services; the supplying of food, lodging, or other accommodations; admissions to exhibitions and places of entertainment; the use of a computer, computer time, a computer system, a computer program, a computer network, or any part of a computer system or network; and the supplying of equipment for use.

Food, internet access, isolated or occasional sales, and sales of personal property for resale are exempt from sales tax under SB 227.

Alaska’s state tax would be temporary, taking effect January 1, 2027, and reverting to 0% on January 1, 2034. The state’s revenue from oil and gas is expected to get a boost starting in fiscal year 2034 due to the opening of new oil fields and new revenue distribution models established by the One Big Beautiful Bill Act of 2025.
 

Administration of the state sales tax

The Alaska Department of Revenue would administer the state sales and use tax and take over the administration of local sales and use taxes. The latter point will likely be contentious for Alaskan cities and boroughs, for although Alaska doesn’t have a state sales tax today, it does allow local sales and use taxes. More than 100 municipalities in Alaska levy and administer a general local sales tax today.

Many local governments in Alaska have adopted economic nexus and tax remote transactions — those by businesses with no physical presence in the jurisdiction. Many of these jurisdictions are members of the Alaska Remote Seller Sales Tax Commission (ARSSTC), which administers remote sales taxes on their behalf.

ARSSTC was established in 2019 through an intergovernmental agreement to coordinate remote sales tax collection in Alaska. Under the ARSSTC’s Remote Seller Sales Tax Code, remote sellers and marketplaces that establish economic nexus with the state are required to collect and remit local sales taxes. More than 5,000 sellers have registered with the ARSSTC.

SB 227 doesn’t mention the ARSSTC. Would the ARSSTC be forced to cease operations if the state takes over the administration of local sales taxes? “The legislation is in early stages and requires a lot more work between the Department and local governments,” Nils Andreassen, Executive Director of the Alaska Municipal League, explained in an email to Avalara. “There’s no clarity at this point for how ARSSTC features within this proposal.”

The legislation also doesn’t clearly state how local taxes would be administered after the state sales and use tax sunsets in 2034. Andreassen notes that after the state’s sales tax expires, there’s nothing that repeals its collection. “From what we can tell,” he wrote, “local collection remains with the state.”

“This is an opening for the locals to argue the state should only administer its own tax and not the locals’ taxes,” says Scott Peterson, VP of Government Relations at Avalara. “Also, what would happen in jurisdictions like Anchorage that don’t currently have a sales tax? If the state were to take over local sales tax administration, there must be authority for locals to have taxes. If Anchorage took advantage of that authority starting in 2027, what would they do in 2034?”
 

Streamlined Sales and Use Tax Agreement

SB 227 authorizes (but doesn’t require) the Alaska Department of Revenue to join the Streamlined Sales and Use Tax Agreement, or a “substantially similar agreement,” to “establish standards for certification of a certified service provider and certified automated system and to establish performance standards for multistate sellers.”

The Streamlined Sales Tax (SST) project was created by the National Governor’s Association (NGA) and the National Conference of State Legislatures (NCSL) in 1999 to simplify sales tax collection for businesses, and the administration of sales tax for states. There are 23 full member states and one associate member; as of December 31, 2025, 34,131 businesses were active SST registrants.

A certified service provider (CSP) is an agent certified by the SST (or a similar agreement) to perform sales and use tax functions for sellers. SST member states compensate the CSP for providing sales tax administration responsibilities for qualifying sellers. As of the end of 2025, 29.3% of businesses registered through the Streamlined Sales Tax Registration System have contracted with a CSP. Avalara is a CSP for the SST. Avalara also powers the ARSSTC sales tax lookup.

If Alaska does enact a state sales tax and subsequently joins the SST, the number of compliant businesses could increase. “Dealing with a unified sales tax base and a centralized point of administration would remove some compliance hurdles for retailers,” says Brian Smith, Senior Government Relations Director at Avalara. “For Alaskans and taxpayers, the juice could be worth the squeeze.”
 

Impact on local jurisdictions

The fact that SB 227 would establish a single sales tax base for state and local taxes will affect jurisdictions that already have a local sales tax today. “As currently written,” Andreassen explained in his email, “local governments would retain the ability to levy a sales tax but be preempted from separate definitions and exemptions. Every sales tax code in Alaska would have to be rewritten as part of an implementation pathway.”

A statewide sales tax could have other unintended consequences as well. For instance, some communities may feel obligated to lower their local sales tax rates to reduce the overall sales tax burden on residents.

There aren’t many role models for Alaska. “There are very few examples of a state imposing a statewide tax that was already in place at the local level,” says Peterson. “It would be simplest and less expensive for the state to let the cities administer the state tax. However, Anchorage, the most populous city in the state, doesn’t have a local tax, and the cities don’t have identical tax bases.”

The Alaska Municipal League will almost certainly discuss the proposed state sales tax during its winter legislative conference, February 17–19, 2026.
 

Impact on taxpayers

If Alaska does establish a state-level sales tax, businesses that are registered to collect and remit local sales tax(es) in Alaska would need to update their point-of-sale (POS) and ecommerce systems to comply with new requirements.

Taxpayers that currently remit local taxes to their home jurisdictions and/or the ARSSTC would need to register with and submit payments and returns to the Alaska Department of Revenue. In the long run, dealing with one administrative body could be a bit less burdensome for businesses, but it won’t eliminate all compliance challenges.

“A statewide sales tax doesn’t automatically make compliance easier or harder,” says Amanda Denniston, Government Relations Manager at Avalara. “It just changes where the complexity lives. Businesses might benefit from a single point of administration, but they’d still need to correctly calculate tax, manage exemptions, file returns on time, and maintain records. In a state where local jurisdictions have historically maintained autonomy over sales tax rules and administration, the adjustment period will be especially important (and likely more demanding than many expect) as businesses adapt to a statewide layer.”

Avalara AI-powered tax compliance software helps businesses manage sales and use tax compliance across the United States, including Alaska (with or without a state sales tax).
 

Alaska sales tax FAQ

Will Avalara support compliance with Alaska’s proposed state sales tax?

Yes. Powered by AI, Avalara AvaTax will apply the appropriate rate and taxability rules based on SB 227 requirements if enacted, including exemptions and seasonal rates. Avalara also supports filing and remittance.

Why is Alaska considering a state sales tax now?

Oil revenues have declined steadily since 2015. A statewide sales and use tax could generate an estimated $735 million annually and be a stable source of revenue for the state.

How would the seasonal sales tax rates work under SB 227?

SB 227 proposes a 4% rate from April through September and a 2% rate from October through March. This aligns with seasonal tourism patterns.

What’s the proposed start date for Alaska’s state sales tax?

If SB 227 is enacted, the sales tax would take effect on January 1, 2027, and sunset on January 1, 2034.

Will this affect businesses that already collect local sales tax in Alaska?

Yes. The state would take over local sales tax administration. Businesses would likely need to register with the Alaska Department of Revenue and update their tax management systems to account for the new sales tax base.

Has Alaska ever had a state sales tax?

No. However, different lawmakers proposed a state sales tax in 2003, 2016, 2022, and 2023.