Seasonal sales taxes – Wacky Tax Wednesday

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.

Since seasonal tax hikes tend to target tourists, they're typically found 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 local seasonal sales tax in Oregon, too. 

Interestingly, Alaska, Montana, and Oregon are three of just five states with no general statewide sales tax* (there are local sales taxes in many parts of Alaska and local resort taxes in Montana). Is there a method behind the madness? Could seasonal sales taxes be a gateway tax?

Perhaps. All three states have looked at introducing a general 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, Oregon managed to levy a tax on bicycles.

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.

Haines Borough, and the city and borough of Juneau (see meeting agenda from August 1, 2022) have considered levying a seasonal sales tax but don’t have one as of this writing.

The seasonal taxes in Montana are called resort taxes rather than sales taxes and they’re only permitted in resort areas of a certain size.

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
• Whitefish

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.

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.

Update: Josephine County voters soundly rejected the seasonal sales tax. 

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:

• Campgrounds
• Lodging establishments
• Motor vehicle rentals
• Recreational equipment rentals and services
• Spectator events
• Visitor attractions
• Visitor-intensive businesses

The short answer is that it depends. If you’re an out-of-state seller 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. But that may not always be the case.

While many jurisdictions in Alaska tax remote sales, not all jurisdictions with a seasonal sales tax require remote sellers to register for sales tax. As of this writing, Ketchikan, 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 for the most up-to-date information.

The resort sales taxes in Montana tend to be tied to the physical location of the resort. No local governments in Montana 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 point is moot in Oregon, since voters rejected the proposed Josephine County seasonal sales tax. The language of the seasonal sales tax ordinance suggests remote sales would have been taxed had it been approved. It says, “conversions … delivered to a Consumer or a location in Josephine County” would be subject to the tax, “regardless of the shipping source.”

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 sales tax collection and remittance can help reduce the burden of compliance.

*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.