Kenai Peninsula contemplates sales tax changes
- Sales Tax News
- Jun 6, 2016 | Gail Cole
Local sales tax revenue is down in the Kenai Peninsula Borough (Alaska has no state sales tax but many localities impose local sales tax). To increase revenue streams, Borough Mayor Mike Navarre and the Assembly are considering numerous sales tax changes.
The exact cause for the drop in sales tax revenue is unknown, but Larry Persily, special assistant to Mr. Navarre, suggests to two possible factors: the shift from a retail economy to a service economy and the rise of online shopping. Sales made from out-of-state sellers such as Amazon are not subject to the borough’s sales tax. Unless policy changes are made, sales tax revenue is expected to continue its decline.
Increase maximum sales tax cap
Navarre has proposed increasing the maximum sales tax on single transactions. The Kenai Peninsula Borough’s maximum sales tax of $500 was established in 1965 and the rate has remained unchanged since then. Had it been adjusted for inflation, the cap would now be more than $3,000. Navarre proposed the ordinance during a May 17 assembly meeting and it will be discussed during public hearings on June 7 and 21. It seeks to:
- Increase maximum amount of a sale subject to borough sales tax from $500 to $1000
- Adjust the sales tax cap for inflation every five years
The measure would also exempt residential rentals from sales tax. Before taking effect, the proposed ordinance must be approved by a majority of borough voters.
Many Alaska localities have a maximum sales tax cap, and the caps vary considerably. In the City/Borough of Juneau, for example, the cap on single items is currently $12,000 (the same cap exists for services). At the other end of the spectrum, the North Pole collects a maximum sales tax of $8.00 per sale (except sales of alcohol, hotel-motel rooms, marijuana, and tobacco products).
If approved, the new sales tax cap would generate an additional $3.6 million in annual sales tax revenue. It would take effect January 1, 2017.
Other proposed sales tax changes
The Kenai Peninsula Borough Assembly is also considering a number of other sales tax changes:
- Exempt businesses with under $2,500 a year in sales from collecting sales tax
- Tax food sold by non-SNAP (food stamp) eligible businesses year round (currently there is a seasonal sales tax exemption from September 1 through May 31)
- Tax many currently-exempt sales by nonprofit organizations
- Tax certain alcohol sales at nonprofit events
- Tax sales of certain flightseeing excursions
- Limit items eligible for the construction materials exemption
- Tax freight services
- Clarify the taxation of services
For additional details, please see the Kenai Peninsula Borough proposed sales and property tax code revisions.
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