By Larry Persily
While the borough assembly considers an ordinance to clarify the taxable status of online sales delivered to Skagway shoppers, it remains “on a wait-and-see approach,” the mayor said, whether to join a statewide cooperative effort to administer local sales taxes on the growing e-commerce industry.
“When we run the numbers … it just doesn’t look like it’s real practical,” Mayor Andrew Cremata said of joining the Alaska Municipal League (AML) effort to more aggressively enforce and administer collections on online sales.
The municipality would lose a sizable percentage of collections to cover the program’s cost, and the mayor wants to see the numbers from participating communities — new revenues versus expenses — before making up his own mind whether he would support Skagway joining up.
The ordinance up for first reading at the Jan. 2 assembly meeting would clarify that a “remote sale” is fully subject to Skagway’s sales tax if the seller’s place of business is outside the municipality and the goods are delivered to a consumer inside the borough.
The ordinance, which will get a public hearing at the Jan. 16 assembly meeting, would amend borough code to read: “Retail and remote sales, services and rentals made for use or consumption within the municipality are subject to municipal sales tax.”
“We have online businesses that are collecting … and hopefully remitting” taxes to the borough, Assemblymember Steve Burnham said at the Jan. 2 meeting. “But our code is inconsistent with that practice. We are trying to get up to speed with the times,” said Burnham, chair of the assembly Finance Committee.
The ordinance would update borough code to take advantage of a 2018 U.S. Supreme Court decision that gave states the go-ahead to require out-of-state sellers to collect and remit sales taxes on orders delivered into the local jurisdiction.
“The growth and ease of tax-exempt remote (online) sales affects (the) local economy,” says the explanation portion of the proposed ordinance.
The Alaska Municipal League signed up 15 founding members in November for the Alaska Intergovernmental Remote Sellers Sales Tax Commission, which has contracted with a tax administration software company to set up a system for online merchants to determine the correct tax rate and rules for sales in Alaska, then remit the payments for distribution to participating cities and boroughs.
Additional members have joined since then, putting the number at 23 out of 106 cities and boroughs with a local sales tax, Nils Andreassen, AML executive director said Dec. 30. The municipal group looks to continue expanding the number of participants.
The collections and administration effort is expected to start up early this year.
Even without participating in the AML effort, Skagway is receiving some sales tax revenues from online merchants. Just over 50 remote sellers remitted about $15,000 in tax proceeds in the quarter July through September 2019, Heather Rodig, borough treasurer, reported Dec. 31. Individual business returns are confidential.
Skagway is budgeted this year to collect an estimated $8 million in sales tax receipts.
The mayor noted that more aggressive collection of taxes on online sales delivered to Skagway consumers would add to the cost of goods — consumers pay the tax, not the seller.
Residents shop in town when they can find what they need, he said, and greatly expanding the reach of the local tax and joining the Alaska Municipal League effort would add to the cost of living, he said.
Supporters of the AML effort contend that consistently requiring remote merchants to collect tax the same as local stores would generate additional revenue to help the community and remove an unfair advantage enjoyed by online merchants.
Amazon started collecting sales tax on many of its deliveries into Alaska cities and boroughs last year, but not on everything ordered from its website. It generally excluded collecting tax on goods sold by third-party vendors, even if the items are advertised and sold through the Amazon site. The AML effort wants to ensure that such so-called “marketplace vendors” do not avoid tax collection.