Legislature(2007 - 2008)
03/05/2008 08:11 AM House L&C
| Audio | Topic |
|---|---|
| Start | |
| HB391 | |
| HB350 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 350-VEHICLE RENTAL TAX COLLECTION 8:39:48 AM CHAIR OLSON announced that the final order of business would be HOUSE BILL NO. 350, "An Act providing for an amount to be deducted and retained for collecting and submitting the vehicle rental tax." [Before the committee was proposed committee substitute (CS) labeled 25-LS1362\C, Bullock, 2/22/08.] PETE FELLMAN, Staff, to Representative John Harris, Alaska State Legislature, outlined issues the committee raised on HB 350. He explained that HB 350 only applies to the vehicle rental tax and does not suggest a rebate for all taxes collected by third parties. He referred to a chart labeled, "FY 2007 timely filing credits 2% not to exceed $4,000" and explained that the original bill established a 3 percent rebate of the 10 percent state vehicle rental tax collected by businesses on behalf of the state. He pointed out that the chart identifies all state taxes collected by third parties. He stated that the [column labeled, "current credit"] shows the amount that is rebated to businesses that collect certain state taxes. He noted the fees that credit card companies charge businesses. And lastly, he pointed out that if the rebate had a cap placed on it by quarter, it would adversely affect businesses in tourism due to fluctuation between earnings for quarters. 8:42:36 AM REPRESENTATIVE NEUMAN asked for an explanation of the chart column titled, "2% not to exceed $4,000" and asked if that caps the rebate amount to $4,000 for each company. MR. FELLMAN answered that the chart does not reflect what is currently in HB 350. The chart attempts to provide information based on questions by members at the last hearing on HB 350. He explained that Version C would allow a 3 percent rebate of the state vehicle rental tax collected by businesses which is capped at $1,000 per quarter. In further response to Representative Neuman, Mr. Fellman explained that some businesses earn most of their income in two quarters, so the effect of the $1,000 cap per quarter is to limit the rebate to $2,000 annually. 8:44:44 AM MR. FELLMAN, in response to Representative LeDoux, pointed out that the chart is to provide information for members to assess the effect on businesses and the state, as well as the numbers of businesses that would be affected by the reducing the rebate to 2 percent with a $4,000 cap. 8:45:58 AM REPRESENTATIVE RAMRAS inquired as to whether Mr. Fellman could explain the 2 and 3 percent rebate. MR. FELLMAN explained that the 3 percent represents the amount of money the businesses would be allowed to retain for collecting the vehicle rental tax for the state. Version C sets the rebate at 3 percent with a $1,000 cap. The chart provides figures to reflect a 2 percent rebate with a $4,000 cap as a result of questions that members had at the last hearing. REPRESENTATIVE RAMRAS asked if the 2 percent rebate is derived from the 3 percent tax rebate reflected in Version C. MR. FELLMAN reiterated that the 3 percent is the percent tax [rebate] to the business owner for collecting the tax. The 2 percent represents a [rebate] for comparison. 8:48:24 AM REPRESENTATIVE LEDOUX inquired as to the reason that the vehicle rental tax was singled out for a rebate instead of offering a rebate to third parties who collect any tax on behalf of the state as a policy decision. MR. FELLMAN explained that the vehicle rental industry brought to the sponsor's attention that collecting the vehicle rental tax is a financial burden. CHAIR OLSON suggested that examining all of the excise taxes may take considerable time. The vehicle rental tax is the only tax being considered by the committee. REPRESENTATIVE LEDOUX asked for clarification on a line item in the chart for other tobacco products tax. MR. FELLMAN, in response to Representative Ramras, related that currently, some industries do not offer a timely filing credit. He explained the chart. In further response to Representative Ramras, Mr. Fellman offered that HB 350 proposes a 3 percent rebate to companies. At the last hearing, some committee members thought the rebate was too high, so the chart reflects 2 percent. 8:56:01 AM JOHANNA BALES, Deputy Director, Anchorage Office, Tax Division, Department of Revenue (DOR), explained that Version C represents the vehicle rental tax only with a three percent timely filing credit with a cap at $1,000 per quarter. During the last hearing, Representative Gatto expressed concern about timely filing credits for all state tax types. He requested that the division prepare a chart to demonstrate the effects of a timely filing credit to all taxpayers who collect a tax from a third party on behalf of the state. Thus, all tax types were identified ranging from alcohol taxes and salmon enhancement taxes to tire fees. However, since an income tax is paid on behalf of the person remitting the tax and not from a third party, income taxes are not listed in the chart. However, excise taxes are collected from another person and remitted to the state. Currently, three tax types are provided a timely filing credit: [the tobacco products tax, the motor fuel tax, and the tire fee.] At the last hearing Representative Gatto also expressed concern that not all taxpayers are entitled to the timely filing credit. The chart reflects a 2 percent rebate since at the 3 percent threshold the rebate appeared to significantly impact the state. She related her understanding that the prime sponsor is interested in offering the timely filing credit to the companies that collect the vehicle rental tax, but would allow the committee to determine whether to expand the bill to consider other taxpayers. MR. FELLMAN, in response to the Representative Ramras, responded that if the committee elected to adopt a CS that reflected 2 percent for timely filing credit, the three percent would be nonexistent. 8:59:15 AM REPRESENTATIVE NEUMAN referred to the chart and inquired as to whether the cost for the vehicle rental tax would be $65,000 per quarter or year. MR. FELLMAN answered that the total cost would be a $65,000 reduction in tax collected annually to the state. Of the 117 taxpayers, only 7 would be affected by the cap, which would result in a total of $65,000 for the timely filing credit. REPRESENTATIVE NEUMAN referred to the fiscal note of $265,000. MR. FELLMAN answered that the fiscal note refers to the original bill without a cap on the timely filing fee. In further response to Representative Neuman, Mr. Fellman agreed that $65,000 would be the amount not retained by the state. 9:01:33 AM REPRESENTATIVE RAMRAS inquired as to the source of funding. MR. FELLMAN reiterated the tax represents 2 percent of the tax collected by the business. In further response to Representative Ramras, Mr. Fellman answered that a 2.5 percent rebate could be a compromise rate. 9:04:04 AM CHAIR OLSON offered to have two committee substitutes prepared for the committee, along with spreadsheets that reflect the timely filing credit for the committee's consideration. 9:05:33 AM MS. BALES, in response to Representative LeDoux, explained that the current timely filing credit for other tobacco products tax is .4 percent and not 4 percent, which is less than one percent without a cap. If the timely filing credit for other tobacco products tax was increased to 2 percent but was capped at 4,000 a year, the cost to the state would be $4,181. The cost to the state is relatively small for the projected 2 percent timely filing credit since it is capped at $4,000. Currently, some "other tobacco products tax" taxpayers accrue a timely filing credit of $11,000, even at the lower rate of .4 percent. MS. BALES, in response to Representative LeDoux answered that larger dealers would be allowed a smaller timely filing credit under the proposed cap. 9:07:00 AM REPRESENTATIVE NEUMAN inquired as to the discussion during the time the legislature set the vehicle rental tax at 10 percent. He further inquired if the legislature considered a timely filing credit at the time the vehicle rental tax was set. MR. FELLMAN answered that he did not know. MS. BALES, in response to Representative Neuman, explained that in 2003 when the vehicle rental was established, the legislature reviewed other states' taxes and set the passenger vehicle rental tax at 10 percent. Additionally, the legislature set the recreational vehicle tax at 3 percent. In further response to Representative Neuman, Ms. Bales agreed that the vehicle rental tax is listed as a line item cost so the consumer pays the tax and the dealer remits the tax to the state. REPRESENTATIVE NEUMAN inquired as to whether the administrative costs are passed on to the consumer by the dealer. Representative Neuman further inquired as to whether the tax, which could vary between 2 to 3 percent could be tacked on to the business license fees for simplicity and to reduce paperwork for businesses. MS. BALES stated that she thought that businesses probably do pass on their overhead costs to consumers. She pointed out that since the individual taxpayer is the ultimate taxpayer, to require the dealer collect the tax saves the state collection costs. If the state were to collect directly from the individual, it would need to contact each person who rented vehicles. When the state collects the tax from dealers, it reduces its base for collections. Thus, offering a timely filing credit to businesses helps offset the administrative costs businesses incur when collecting the vehicle rental tax. She noted currently the state allows 3 types of businesses to qualify for a timely filing credit. MR. FELLMAN, in response to Representative Ramras, opined that businesses who receive a timely filing credit ranging from 2 to 3 percent may choose to pass on their administrative costs to the consumer. However, since the business collects a 10 percent tax, HB 350 would authorize the business to withhold from 2 to 3 percent. The committee will decide the timely filing credit amount which will be deducted from the 10 percent total tax collected. REPRESENTATIVE RAMRAS inquired as to whether the 2 to 3 percent tax represents the timely filing credit. MR. FELLMAN agreed that the timely filing credit is applied towards the 10 percent total tax collected. 9:14:59 AM REPRESENTATIVE LEDOUX inquired as to whether the businesses are required to place the vehicle rental tax collected in an interest bearing account on behalf of the state to accrue interest from the collection date to the quarterly remittance date. MR. FELLMAN said he was not sure. REPRESENTATIVE RAMRAS related his experience since his company collects a 3 percent bed tax and derives benefit for the 30 day period of time the funds are held prior to remittance. He opined that interest represents a fractional amount. Thus, the Fairbanks North Star Borough does not require hotels to account for the fractional amount of income derived. 9:18:10 AM MR. FELLMAN, in response to Representative Ramras, answered that the proposed 2 percent could be taken from the 3 percent tax if the perspective is that the 3 percent is derived from the 10 percent total vehicle rental tax collected. [HB 350, Version C, was held over.]
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