Legislature(2003 - 2004)
05/17/2003 10:38 AM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 102(L&C) am(efd fld)
"An Act increasing the amount of revenue received by
the state from charitable gaming activities, and
relating to taxes on pull-tabs."
LARRY PERSILY, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE
provided information on the legislation. He explained that
the Senate version would increase the state tax on the sale
of pull-tabs through a change in their calculation. The
current state tax on pull-tabs is 3 percent of the net,
which is actual gross minus prices. The legislation would
increase the state tax on pull-tabs (not bingo or raffle) to
15 percent of idea net, which is the assumption that all of
the pull tabs in the game or box are sold. If a game had
1,000 pull-tabs at a dollar each, the ideal gross is $1,000.
If 80 percent were paid out in prices, the ideal net would
be $200. The legislation would change the state tax to 15
percent of this amount. He added that Section 5, page 2,
would prohibit a municipality that has a sales tax from
collecting sales tax on charitable gaming. There is no
effective date, which would reduce the FY 04 revenue amount
[since it would not go into effect by July 1. He estimated
that the tax change would take effect in the middle of the
year.
KENT HARTBERG, ANCHORAGE, testified via teleconference in
opposition to the bill. He noted that he was a licensed
operator and was formerly employed with the Department of
Gaming. He discussed the financial difficulties presented by
the bill. He emphasized that there will be games that do not
realize the ideal net. He also noted that licensed operators
are the only ones to have their licenses revoked for failing
to meet state minimums. He encouraged the legislature to
closely examine the bill for all of its impacts.
DAVID LAMPERT, FAIRBANKS, testified via teleconference in
opposition to the bill. He stated that he is a fundraiser
for 17 organizations, and maintained that the bill would put
them out of business if it were enacted. He would be forced
to layoff 22 employees. He explained that the organizations
could not meet the requirements of the legislation. The
effective date would be a problem, since many organizations
had already based their budgets on the current tax
structure. The tax would have to be prepaid. He maintained
that there had been no testimony in favor of the bill from
the Department of Revenue. He stressed the negative impact
of this bill on non-profits.
GREGORY PETERSON, ALLIED CHARITIES OF ALASKA testified via
teleconference in opposition to the bill. He stated that the
legislation would raise the level of taxes paid by charities
by 500 percent, impacting 800 - 1,000 jobs across the state
of Alaska, ending programs. He stressed that although the
new version of the bill was better than the original, it
would still have negative impacts on the needy. He urged
the legislators to stop the bill.
TAWNY WRIGHT, PULL-TAB CLERK, NORTH POLE, testified via
teleconference in opposition to the bill. She maintained
that the bill would have a negative impact on charities, and
stressed that the increase from three to fifteen percent in
tax was too steep. She noted that her family of four was
supported by her job in the pull-tab industry, because it
provided flexibility. She maintained that the bill would
negatively impact many of the lower income individuals.
DAVID SANDON, MVP, JUNEAU testified in support of the
Committee Substitute. He noted that he works for two
Montessori programs that provide early childhood education
and Juneau Dance Unlimited. He spoke in favor of the
exemption from municipal taxation. He maintained that the
Senate Labor and Commerce interim subcommittee should be
allowed to review the issue during the interim and suggested
the following be reviewed:
1. Use an adequate percentage of the additional revenue
the state will be receiving to step up enforcement of
gaming regulation.
2. License all management (not just operators) involved
in gaming and revoke those licenses if the permits
they manage do not return the state mandated minimums.
3. Prevent "ghost charities" those charities that only
exist on paper from being allowed gaming permits by
strengthening the requirements for qualification.
4. Increase the state mandated returns to the nonprofits.
5. Consider a revenue sharing scheme with the local
municipalities based on where. the finds are
generated.
Mr. Sandon maintained that there is room for increased
taxation in the industry as a whole if it is viewed from
a statewide perspective. He continued to read from
prepared remarks:
"We are currently paying 28% of our ideal net in taxes,
25% to our municipality and 3% to the state. Without
the local sales tax prohibition in this legislation we
would be under a 40% tax burden. You do the math under
a 40% tax burden we will simply be literally taxed into
bankruptcy. We would like to note here that in our
original testimony through both the Senate and House
Labor and Commerce Committees we brought forth a
revenue sharing strategy between the state and ~ii
local municipalities based on where the proceeds were
raised.
This is your opportunity to set some precedence
statewide concerning the taxation of gaming as we move
towards our future. We urge you to support this
legislation in its current form.
I am certain you are hearing many voices of concern
regarding this legislation. We would like to address
some questions you might have of us as follows:
Q: Why don't you pass the sales tax along to the customer?
A: This was tried with disastrous results, as the pace and
process of pull-tab gaming was frustrated and as a
result gross revenues dropped 60%. We had no choice but
to absorb the tax.
Imagine if you will every time someone exchanges a
playback the oil that runs all gaming (the small
winning tickets $ 1, $2, $5, $10 winners) they had to
reach for small change in their pocket or receive small
change. These transactions currently take place in
seconds. This logistical scenario of passing along a
tax to the consumer is frankly impossible.
Believe me if we could pass the sales tax along we
would have been doing so since its inception. The City
and Borough of Juneau has long since realized this as
well; however, they have also been stubbornly aware of
the room for taxation in this industry. We can pay a
justifiable tax but we cannot pay a combined local and
state tax burden of 40%. There can only be one hand in
the taxation of this revenue stream. That hand in this
case should be the state. The state can then decide
whether and on what proportion these tax proceeds
should be spent between local and state interests.
Please note, that the City and Borough of Juneau does
not seem willing to back down on its rhetoric either.
Please do not put us at their mercy for they might by
default simply choose to tax local gaming out of
existence with out a vote of the local electorate.
Q: Are your expenses higher than other types of business?
A: No in fact I challenge you to find another business in
the State that that returns 30.5% profit while
absorbing our current 28% tax burden. (25% sales tax 3%
state ideal net tax)
Q: How can we create an equitable tax structure on gaming
statewide, while making sure we have proper regulation
and no profiteering? Thus insuring the permit holders
receive the maximum possible return.
GEORGE WRIGHT, OPERATOR 84, JUNEAU ANB, testified in
opposition to the bill. He stated that they have 100
employees, working with 52 non-profits. He stressed that the
tax is heavy, especially in combination with local sales
tax, but that they could live with the current version. He
emphasized concern with the effective date and noted more
time was needed for implementation. Charities' years go from
January 1, to December 31. He asserted that SB 102 would
negatively impact charities. He suggested that any work
group should include individuals from the industry. He
stated that charities in Juneau would be finished without a
local prohibition [on municipal taxation] or an effective
date. He suggested a later effective date.
ROGER SHANNON, KENAI, testified via teleconference. He
discussed the potential negative impacts of the gaming
industry.
SB 102 was HELD in Committee for further consideration.
CS FOR SENATE BILL NO. 102(L&C) am(efd fld)
"An Act increasing the amount of revenue received by
the state from charitable gaming activities, and
relating to taxes on pull-tabs."
Vice-Chair Meyer noted that the Senate added an amendment to
prohibit municipal taxation: A city that levies and collects
sales and use taxes under (a) of this section may not levy
and collect a sales or use tax on pull-tabs used in
charitable gaming. He questioned if it would be possible to
allow communities that currently collect the tax (Juneau,
Nome and Bethel) to continue to do so, while prohibiting new
communities (Anchorage) from collections.
LARRY PERSILY, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
provided information on the legislation. In response to the
question by Vice-Chair Meyer, he observed that similar
exemptions have been allowed under the taxation of alcohol.
Vice-Chair Meyer speculated that the amendment was not
intended to negatively impact municipalities. Mr. Persily
indicated that legislative legal could be consulted about
how the provision could be change.
Vice-Chair Meyer speculated that the maker of the senate
amendment had intended to exclude Anchorage, but did not
intend to adversely affect the communities collecting the
tax.
Mr. Persily discussed the fiscal notes accompanying SB 102.
He assumed that the bill would be signed in June and take
affect in the fall, which would reduce the state's revenue.
The Governor's legislation would have also limited the prize
payback. He stressed that all of the fiscal notes are based
on the assumption that there would be no change in gaming
activity in Alaska.
CSSB 102 HELD in Committee for further consideration.
| Document Name | Date/Time | Subjects |
|---|