Legislature(2013 - 2014)HOUSE FINANCE 519
04/07/2013 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB21 | |
| HB193 | |
| HB76 | |
| HB193 | |
| HB129 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 21 | TELECONFERENCED | |
| += | HB 129 | TELECONFERENCED | |
| + | HB 76 | TELECONFERENCED | |
| + | HB 193 | TELECONFERENCED | |
| += | SB 18 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 193
"An Act relating to the joint administration of
tobacco taxes by the state and a municipality."
4:09:50 PM
Representative Costello MOVED to ADOPT the proposed
committee substitute for HB 193, Work Draft 28-LS0714\U
(Bullock, 4/5/13).
Co-Chair Stoltze OBJECTED for discussion.
REPRESENTATIVE LANCE PRUITT, SPONSOR, shared that the bill
had come to him at the request of the municipality of
Anchorage. He clarified that the bill did not increase
taxes; it was about communication and potentially lowering
property taxes. He stated that the legislation would allow
communication between municipalities and the state
regarding tax returns, audits, etc. He detailed that
currently the state could share the information with the
federal government, other states, and the Canadian
government, but not with municipalities within the state.
He noted that the City of Anchorage treasurer [Daniel
Moore] was available via teleconference to discuss the
issue.
Representative Pruitt relayed that the second piece of the
legislation allowed the Department of Revenue (DOR) to
partner with cities to create a stamp tax on tobacco. He
explained that currently the state received tobacco tax
from wholesalers and cities received the tax from
retailers. The bill would enable the city to partner with
the state and the tax would be administered at the
wholesale level, which would eliminate the potential for
tax evasion at the retail level. The bill's language
assured that the money would be provided by a municipality
to cover the costs. He shared that if 5 percent of tax
evasion could be recovered it would equal approximately $1
million for the City of Anchorage.
4:13:37 PM
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, Work Draft 28-LS0714\U was ADOPTED.
Representative Wilson asked whether people could buy
cigarettes online to avoid the tax. Representative Pruitt
deferred the question to DOR.
JOHANNA BALES, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT OF
REVENUE, replied that the state currently had a cigarette
tax stamp that was purchased by distributors. She detailed
that individuals who purchased cigarettes online were
required to pay tax to the department; individuals had the
same tax liability as distributors.
Co-Chair Stoltze noted that DOR had provided testimony
related to the tracking of cigarette taxes in the past. He
asked how the department tracked the tax and about measures
it had used. Ms. Bales relayed that federal law required
internet sellers to provide the department with information
when individuals purchased cigarettes online. She stated
that over 2,000 Alaskans had purchased cigarettes online;
the department had sent the individuals tax bills that they
were required to pay.
Co-Chair Stoltze asked whether the process had been under
an amnesty program. Ms. Bales replied that the department
had waived all penalties and had generous payment plans.
DANIEL MOORE, CITY TREASURER, MUNICIPALITY OF ANCHORAGE,
spoke in support of the legislation. He relayed that the
city's tobacco tax was currently collected without a tax
stamp. He stated that in the future the city may want a
tobacco tax stamp. The city was aware the state already had
a tobacco stamp. The private tobacco distribution industry
had strongly recommended that if Anchorage had a tobacco
stamp that it should be a joint single combination stamp
that would require the city to work through the state to
distribute and sell the stamps to distributors.
4:18:43 PM
Representative Munoz asked for an explanation about the
meaning of stamp relating to cigarettes.
Co-Chair Stoltze asked Representative Thompson to provide
an example. Representative Thompson read a tax stamp on
pack of cigarettes to the committee.
Representative Thompson asked whether the bill would change
the City of Anchorage's retail tax system to a wholesale
level. Mr. Moore replied that currently the tax was done at
a wholesale level; it was an excise tax applied to any
volume of cigarette product that came into Anchorage for
sale. He stated that the retailers were at the other end of
the distribution chain; Anchorage did not directly tax
retailers. The tobacco stamp would create a more
identifiable trail showing that the tax had been paid; the
stamp would eliminate situations where an entity bought a
product in Anchorage, claimed it would be sold outside of
the city, and then brought the product back into the city
for sale to retailers. The goal was to discourage the
potential for tax evasion.
Representative Thompson had been concerned about the
possibility of sales outside of Anchorage. He appreciated
Mr. Moore's explanation.
4:21:15 PM
Representative Kawasaki wondered about examples of similar
tax collections that involved municipal and state tax
collections. Ms. Bales answered that the department did not
currently collect taxes for other localities. She explained
that taxes were collected through revenue sharing. She
pointed to fish tax as an example; a portion of the tax was
shared with the location where the fish was caught. She
stated that the form of taxation was utilized in other
states, specifically for sales tax.
Representative Kawasaki asked whether the bill would impact
revenue sharing or caps on local tax or revenue. Ms. Bales
replied that cigarette tax was not included in revenue
sharing. The Municipality of Anchorage and seven other
localities within the state had their own cigarette taxes.
She did not believe the cigarette tax would work into the
tax cap for Anchorage. She deferred the question to Mr.
Moore for additional detail.
Co-Chair Stoltze clarified that the bill related to the
broader category of tobacco taxes and was not limited to
cigarette taxes. He detailed that cigarette taxes provided
$31.4 million in unrestricted general fund (UGF) revenue;
whereas non-cigarette tobacco taxes provided $14.4 million.
He noted that the taxes brought in more UGF revenue than
the commercial fishing industry.
Mr. Moore relayed that tobacco tax fell under the tax cap
in Anchorage. He stated that any type of additional revenue
received as a result of tightening enforcement would be a
dollar for dollar tradeoff with property taxes; a dollar
more in tobacco tax would mean a dollar less in property
tax.
Representative Holmes asked for clarification on the fiscal
note from DOR. She pointed to the total cost of $135,100
coming from statutory designated funds. She observed that
because the state could be reimbursed by municipalities the
total cost to the state would be $0.00. She asked for
verification that the funds would be reimbursed to the
state.
Representative Pruitt replied that the CS would have a new
fiscal note showing program receipts.
Representative Holmes asked for confirmation that there
would be no fiscal impact to the state. Ms. Bales replied
that the forthcoming fiscal note would show that revenue
would come from program receipts. The fiscal note would
show an increase related to the creation of one new
position, but the total state expenditure would be zero;
the additional fees would be collected from participating
municipalities.
4:27:35 PM
Co-Chair Austerman asked whether the $135,000 would cover
all municipalities with a cigarette sales tax that wanted
to participate. Ms. Bales answered that the state would
continue to issue same number of cigarette tax stamps as it
did currently; there would be additional fees and new
designs if all municipalities chose to participate. She
furthered that most of the costs would be associated with a
position tasked with tracking all of the cigarette tax
stamps. The goal was to have a limit of one tax stamp per
pack of cigarettes to prevent additional costs incurred by
distributors. The department expected that the total cost
would not exceed $135,000.
Co-Chair Austerman asked for verification that there would
be one state/municipal stamp given to each of the
participating communities. Ms. Bales replied in the
affirmative.
Co-Chair Austerman asked for confirmation that DOR would
collect the fees and distribute them back to
municipalities. Ms. Bales answered in the affirmative. She
elaborated that revenue was collected when stamps were sold
to distributors; there would be different inventories of
stamps for sale and DOR would track which portion of the
sale was for either state or municipal revenue.
Co-Chair Austerman looked at page 2 of the CS and observed
that the bill indicated that the department "may" collect
funds from municipalities; there was nothing in the bill
that required the department to collect funds. He assumed
the intent was for DOR to collect the funds.
Representative Pruitt replied that he had worked with the
department on the bill language and it was the intent for
the state to have no financial burden.
Co-Chair Austerman asked whether the sponsor would object
if the word "may" was changed to "shall." Representative
Pruitt was agreeable to the change if no unintended
consequences were identified by DOR.
Co-Chair Stoltze did not see a problem with the current
language. He furthered that participation would be
initiated by municipalities and it would be in their best
interest to work with the state. He wondered if changing
the language to "shall" would create a burden. He was more
comfortable with the word "may."
4:31:58 PM
Representative Pruitt asked the department to weigh in on
the issue. Ms. Bales replied that the department would have
no problem with the change to shall and saw no unintended
consequences that would result from the change. The
department would ensure that costs to municipalities would
be predicated on the number of stamps sold in the area.
Co-Chair Stoltze asked whether the change would force a
municipality into a relationship with the state.
Co-Chair Austerman looked at line 4 on page 2 of the bill,
which included language related to the agreement between
DOR and a municipality. He was more concerned about line 12
related to reimbursement. He did not have a problem with
"may" in line 4.
Representative Pruitt confirmed that the intent was to
ensure that a municipality willingly and knowingly took on
the cost burden.
Co-Chair Stoltze communicated that the amendment would be
offered at a later portion of the meeting.
Representative Kawasaki referred to testimony from the city
and municipality [of Anchorage] about lost revenue due to
tax evasion. He asked about the department's record related
to tax collection. Ms. Bales answered that the state did
not have a tax stamp until 2004. She shared that there had
been a 24 percent increase in cigarette tax revenue in the
first full year after the stamp's enactment. She referred
to discussions with the Municipality of Anchorage related
to dealing with tax evasion; following the trail of
cigarette tax sales through invoices had been unsuccessful.
She relayed that the tax stamp had allowed for successful
enforcement.
4:35:01 PM
Representative Wilson asked what would happen if Anchorage
was the only municipality interested in participating. Ms.
Bales replied that the department would continue to issue a
state-only cigarette tax stamp for cigarettes sold outside
of the municipality and would have a joint stamp for
cigarettes sold within the municipality. She added that
there would be no problem if a municipality did or did not
want to have the tax stamp.
Representative Wilson wanted to make sure the state would
not need to hire a position if only one community decided
to participate.
Co-Chair Stoltze asked Mr. Moore about conversations with
other jurisdictions. He noted that Mat-Su had a
cigarette/tobacco tax. Mr. Moore replied that he had not
had recent conversations with other jurisdictions on the
subject; conversations had been primarily with private
sector wholesalers. He surmised that if Anchorage was the
only entity in the state pursuing a joint tobacco tax stamp
it would receive a disproportionate share of the costs. He
furthered that the municipality would work with the state
to determine whether a full-time or part-time person would
be needed. He continued that there would be a joint
agreement between the state and the municipality to
determine the terms. He elaborated that the state was in
the driver's seat and would tell the jurisdiction what the
cost would be; the municipality would then decide whether
it agreed to the terms. The municipality would look at the
cost and potential revenue that would be generated from the
stamps prior to a decision.
Co-Chair Stoltze commented that Anchorage should hope that
other cities would choose to participate because DOR would
hire a person if authorized by the legislature.
Representative Thompson discussed that Fairbanks had a
former similar tax; there had been no tax charged on
cigarettes shipped out of the city. He wondered if a
municipal stamp would be required on the packets sold in
stores such as Costco. He thought the issue could become
confusing.
Mr. Moore answered that the municipality had asked major
tobacco distributors including Sam's Club, Costco, Northern
Sales, and others about how the change would impact the
stores. The entities had responded that a joint stamp would
be necessary. He furthered that some of the member
wholesalers (e.g. Costco) would need to have two separately
managed secured inventories for the state-only stamp and
the joint state/city stamp.
4:39:20 PM
Representative Kawasaki stated that there were currently
six municipalities that taxed tobacco. He wondered if the
bill would encourage other municipalities to tax tobacco,
given that the state would take on the most expensive
aspect of administering the tax.
Representative Pruitt replied that some municipalities may
make the decision to begin taxing tobacco. He noted that in
Anchorage there was currently substantial revenue set in
place that was not obtained, which meant others throughout
the city had to pick up the costs through property tax or
other methods. He acknowledged that the bill may make it
easier for other municipalities to tax tobacco and
recognized that many people would benefit in communities
currently levying tobacco tax as well.
Representative Thompson could see where the change would
work for Anchorage, but he did not know if it would work in
Fairbanks. He explained that the Fairbanks North Star
Borough had a cigarette tax, within city limits there was a
separate sales tax, and there was also a state tax.
Ms. Bales commented on the concerns. She stated that there
was nothing currently that would preclude a municipality
from enacting a cigarette tax or from having a cigarette
tax stamp. She pointed to the concern that without a
cooperative agreement with the state every municipality
could enact its own stamp, which would put a requirement on
distributors. The bill would provide a mechanism to make it
easier (particularly for distributors) if more
municipalities decided to tax tobacco.
4:42:20 PM
Co-Chair Stoltze CLOSED the public testimony.
Co-Chair Austerman MOVED to ADOPT a conceptual amendment on
page 2, line 12 that would change the word "may" to
"shall." There being NO OBJECTION, it was so ordered.
Representative Costello requested to amend the replacement
fiscal note. She discussed that page 2 of the DOR fiscal
note specified that $50,000 would be used annually to
purchase cigarette stamps. She pointed to a services line
of $54,700 and believed that $50,000 of the amount should
be moved to the commodities section of the note.
Co-Chair Stoltze clarified that general fund program
receipts should be changed to statutory designated
receipts.
Representative Costello responded that the updated note did
reflect the change to statutory program receipts. She
discussed the zero note from the Department of Commerce,
Community and Economic Development and the Department of
Revenue replacement note [FN3], which showed $135,100 for
FY 14 through FY 19 in statutorily designated funds.
Representative Costello MOVED to REPORT CSHB 193(FIN) as
amended out of committee with individual recommendations
and the accompanying fiscal notes. There being NO
OBJECTION, it was so ordered.
CSHB 193(FIN) was REPORTED out of committee with a "do
pass" recommendation and with one new fiscal impact note
from Department of Revenue and one previously published
zero note: FN1 (CED).
4:46:25 PM
AT EASE
5:03:54 PM
RECONVENED
HOUSE BILL NO. 193
"An Act relating to the joint administration of
tobacco taxes by the state and a municipality."
5:43:10 PM
Co-Chair Stoltze brought previously reported out CSHB
193(FIN) back before the committee upon advice from legal
counsel related to an amendment.
Representative Costello MOVED that the committee RESCIND
its action to report CSHB 193(FIN) out of committee. There
being NO OBJECTION, it was so ordered.
Co-Chair Austerman MOVED to RECIND action on amending CSHB
193(FIN). There being NO OBJECTION, it was so ordered.
Co-Chair Austerman pointed to page 2, line 12, and MOVED
Amendment 2 that would replace the word "may" with "must."
Co-Chair Stoltze OBJECTED for discussion.
Co-Chair Austerman explained that Legislative Legal
Services had communicated that the proper replacement of
the word "may" was "must" (instead of "shall") in order to
accomplish the amendment's intent.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 2 was ADOPTED.
Representative Costello MOVED to REPORT CSHB 193(FIN) out
of committee with individual recommendations and the
accompanying fiscal notes.
CSHB 193(FIN) was REPORTED out of committee with a "do
pass" recommendation and with one new zero impact note from
Department of Commerce, Community and Economic Development
and one new fiscal impact note from Department of Revenue.
5:45:51 PM
AT EASE
5:46:30 PM
RECONVENED