Transcript Slide 1

Streamlined Sales Tax
Implications for Alaska
Patty Ware
Alaska Municipal League
Workshop Goals
 Provide broad overview of streamlined sales
tax project
 Discuss critical areas of the national
Agreement as they pertain to Alaska
 Get your input and recommendations about
issues and questions important to local
governments
History of the Streamlined Sales Tax
(SST) Project
 Response to U.S. Supreme Court ruling
limiting states from requiring remote sellers
without nexus to collect use tax
 Emphasis on simplification and uniformity of
sales and use tax systems
 Trade-off for local governments is ability to
collect sales tax on remote purchases
History of the SST (continued)
 Involvement by 42 states
 Supported by NACO, NCSL, NGA, NLC
 Governing Board established October ’05
 Model Agreement adopted by 20 states
Primary Elements of the SSUTA
 State level administration & collection
 Uniform definitions
 Uniform tax base (exemptions)
 Uniform sourcing rules (destination-based) with some
exceptions
 Uniform tax return for SST taxes
 Single sales and use tax rate for each jurisdiction
 Prohibition on tax caps
What does the SSUTA cover?
 Taxes outside the sales tax code are
excluded from the SSUTA
 Doesn’t apply to vending machine sales
 Uniform sales/use tax rate requirement
doesn’t apply to certain items
 States can specify their own tax base
 Changes BOTH intrastate and interstate
(“outside”/electronic) sales tax processes
What About Use Tax?
 Use tax not levied in Alaska
 SSUTA applies to both sales and use taxes
 Required in order to apply to the SST Board
 SSUTA applies to both local and remote
businesses and would require collection of
sales and use taxes (including by AK
businesses not currently collecting).
Potential Benefits for State/Local
Governments
 Increased revenue from e-commerce retailers
 Improved climate for local businesses by
“leveling the playing field” with on-line
retailers
 Benefits of simplification include improved
sales tax administration, although not as
clean as for business community
SSUTA Impact on Governments: What
are other states saying?
 Taxing at point of delivery vs point of sale a
problem for some states (TX, KS) or local
governments (WA)
 Centralized administration means loss of
some local authority (AK, CO, AL)
 Costs to local governments not yet sufficiently
detailed
 Problems with existing member states and
achievement of “full” compliance
Local Government Concerns
(as voiced by other States)
 Loss of revenue for local governments
 Extensive business lobbying to benefit
particular industries at expense of
government sector
 Winners and losers, based on going from
point of sale to point of use (delivery) system
 Loss of local government authority for
collection and auditing
Benefits of SSUTA: Business Perspective
Voluntary Compliance Retailers
 Simplification- Uniformity of: definitions,
sourcing rules, tax base, auditing
requirements, etc.
 Use of technology to ensure accurate
collection and reporting, paid for by states
 Amnesty for uncollected back taxes
 Vendor compensation from participating
states for collecting sales tax
National Revenue estimates from
electronic commerce
 Loss of national sales tax revenue from e-
commerce estimated between $21.5-33.7
billion
 Online commerce growing at 25% a year
 Losses dependent upon population, tax base,
tax rate
Cost-Benefit Analysis
 No information yet from any participating
state
 Costs for state participation include SST dues
(population-based/total sales tax) + travel
 Much more significant costs for streamlining
work, on-line filing requirements,
administration uniformity (depends on state)
Alaska’s interest in the SST… or,
are we interested?
 One of the early “alliance states”- focusing on
local government issues
 Given geographic isolation, significant
internet use and on-line purchasing
 Potential for increased revenues if sales tax
collected on e-purchases
How Much Revenue for Alaska?
 SW Alaska Municipal League Economic
Geography Study ?
 University of TN 2004 Study - Revenue loss
Comparisons with small population, rural
states and Alaska specific estimates ?
Southwest Alaska- An estimate
 Southwest: Aleutians East Borough, Aleutians
West Census Area; Bristol Bay Borough;
Dillingham; Kodiak Borough; Lake &
Peninsula Borough
 Data sources: Surveys of households and
businesses, origin-destination freight
movement analysis, and input-output analysis
 “Outside” purchases include internet- not
100% internet sales data
What % of SW Alaska sales
were made “outside” ?
 Total Household purchases
33.6%
 Total Business purchases
46.8%
 Combined Total
44.5% OR 347 million
Caveats & Cautions
 Figures are for very remote region of AK
 Internet purchases included in total outside
sales, but not solely e-commerce
 Must be very careful about applying these
percentages to other regions or communities
Small Population States with State Sales
Tax- Useful Comparisons?
Vermont
Population
623,050
State Local
6%
1%
North Dakota
636,677
5%
2.5%
South Dakota
775,933
4%
2%
Projected Local Revenue Losses from ECommerce (University TN 2004 Study)
2008
Low
High
Vermont
0
0
North Dakota
4.6 M
7.2 M
South Dakota
13.3 M
20.8 M
Show Me the Money…Alaska
 E-commerce losses estimated at 6.2% of total
local general sales taxes
 Alaska’s local governments local sales tax
revenue of $148.5 million (2003-2004)
 Rough estimate of Alaska’s local government
revenue loss = $9.2 million
Some Alaska Examples….
City
Sales Tax Revenue
Juneau
30,539,500
Kenai Pen 14,910,977
Ktn Bor
4,071,818
Bethel
4,880,743
Wasilla
7,135,574
Unalaska 6,350,610
Kodiak
7,130,691
Loss Estimate
1,893,449.
924,480.
252,452.
302,606.
442,405.
393,737.
442,102.
More Caveats and Caution
 Relies on high growth assumption for
electronic sales
 Assumes most electronic retailers DON’T
have physical nexus in Alaska
 Assumes low collection and remittance of
taxes in Alaska from e-commerce purchases
 Likely fairly good estimate IF Alaskans shop
online more frequently than residents of lower
48 states
Recap- What SSUTA would mean
 Form a statewide administrative entity to
perform required SSUTA tasks
 Adopt common tax base and uniform
definitions for all local governments
 Agree on deletion of all tax caps
More Requirements…..
 Pass a use tax in order to be able to apply to
the Governing Board for acceptance
 Adopt other, more detailed uniformity
requirements of the SSUTA (sales tax
holidays, reporting forms, etc.)
Possible Next Steps
 Obtain more detailed information on revenue
loss estimates for Alaska
 Compile information on local government
sales tax exemptions and definitions
 Convene workgroup of Alaskan communities
interested in working on SST/tax
simplification
Other Suggestions …… ?
 Develop list of questions and issues
impacting local communities to guide a
process
 Review information from other states with
active local government voices in the process
 Discuss issues with State Department of
Revenue
Additional SST Information
 http://wwwstreamlinedsalestax.org/ (General)
 http://www.awcnet.org (WA League of Cities)
 http://www.mrsc.org/focus/finadvisor/fina0706
.aspx (Article in SST impacts to states)
 http://www.sstregister.org (Business info)