Residents in Alaska are starting to see sales tax on their Amazon.com purchases, something commonplace in the rest of the United States, but newly implemented here. Reports through Skagway confirmed that Amazon has started charging a three percent sales tax on certain items sold through the online retailer.
It isn’t just Skagway though. On Jan. 1, Amazon began charging local sales tax on certain items throughout Alaska, according to an article from the Anchorage Daily News. While sales tax from Amazon isn’t anything new for anyone residing in the lower 48, the lack of a statewide sales tax has meant that online sales were typically taxfree in Alaska.
“We are reviewing our current sales tax code and working to resolve this issue. From my understanding, only Amazon has been reported as collecting a tax,” Heather Rodig, borough treasurer, said.
The municipality taxes from each region are being added to the bills from Amazon. For example, Juneau residents buying from Amazon can expect an additional five percent on certain items, according ADN. Amazon didn’t respond in time for publication on direct confirmation of where the taxed income was going.
The taxing is currently on items sold from Amazon.com directly, and doesn’t include the third-party retailers that Amazon works with. The move from Amazon is new, although it isn’t entirely unexpected. The Alaska Municipal League (AML) have been pushing for an online sales tax to be implemented since last November.
The decision partially stems from the Supreme Court decision in Wayfair v. South Dakota, in which the Supreme Court found that South Dakota could collect the state sales tax from a retailer with no physical presence in the state. With that in mind, AML put forth options for an implementation of an online sales tax in order to decrease the likelihood of a statewide sales tax being put into place. In order to directly remit sales tax to Skagway, Amazon would have to have a business license with Skagway. This is the issue that AML is trying to eliminate.
As a representative body of the municipalities across Alaska, AML is hoping to establish a center that online taxes will go through. With the model that AML is proposing, they will act as the mediator between online retailers and municipalities. They would negotiate the different tax definitions and exemptions for each municipality. This would allow retailers to work with a single point of contact, rather than 100 separate municipalities, and the municipalities would be able to work directly with AML.
“The goal is to establish a municipal- driven, independent arm of the AML, that would conduct all online sales tax administration on behalf of the municipalities,” said Nils Andreassen, AML executive director in a memo when the project was announced.
AML is still setting this up. They’ve had the financial support of larger communities like Juneau. Skagway will be considering a donation to the working group after the upcoming winter conference later this month. AML is looking for an estimated $100 thousand to complete the majority of the initial set up tasks.
Based on reports coming from other locations across Alaska, it’s clear that Amazon is gathering the correct taxes from different municipalities, with Skagway’s three percent, compared to Kodiak residents being charged seven percent, according to the Kodiak Daily Mirror.
While Amazon may be the first to implement the online sales tax, Skagway residents can expect that it may become more commonplace across online retailers.
“The reality is that online retailers are voluntarily complying with Wayfair for their own internal corporate reasons, and that local governments to a large degree are not compelling online sales tax collection until such time as it can be done carefully and successfully,” Andreassen said in a release from the AML.
In the case of Skagway, where there’s a different sales tax during part of the year, Andreassen said that residents can expect Amazon and other corporate retailers to follow that, along with other rates, caps and exemptions specific to Skagway. Considering this is just the start of the process, Andreassen urged patience as Alaska, online retailers and municipalities figure out how the system will best work.
“The trend nationally will be to comply with Wayfair, and online retailers have begun. Local governments are trying to catch up and ensure that residents’ concerns are addressed along the way,” Andreassen said.