Legislature(2007 - 2008)CAPITOL 17
03/10/2008 03:00 PM House LABOR & COMMERCE
| 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 | TELECONFERENCED | |
| += | HB 391 | TELECONFERENCED | |
HB 350-VEHICLE RENTAL TAX COLLECTION
3:27:05 PM
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."
3:27:24 PM
PETE FELLMAN, Staff to Representative John Harris, Alaska State
Legislature, explained on behalf of the prime sponsor of HB 350,
the proposed committee substitutes (CS) for HB 350, labeled 25-
LS1362\L, Bullock, 3/5/08, referred to as Version L; and 25-
LS1362\M, Bullock, 3/5/08, referred to as Version M. He
explained that Version L of HB 350 would allow businesses to
retain 2 percent [of the vehicle rental tax collected] with a
$4,000 cap, and Version M of HB 350 would allow businesses to
retain 2 percent [of the vehicle rental tax collected] without a
cap. He offered that the prime sponsor prefers to limit the
bill to timely filing credits to only the vehicle rental tax due
to time constraints.
3:28:28 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 350.
3:29:21 PM
MR. FELLMAN, in response to Representative Gardner, confirmed
that the rebate on the vehicle rental tax is only available to
those businesses who submit timely filings to the state.
3:30:19 PM
CHAIR OLSON, in response to Representative Gardner, surmised
that the reason that companies are given a rebate that is not
limited to the specific amount charged by a credit card company
is because credit card agreements vary.
MR. FELLMAN opined that the reason for the timely filing credit
has more to do with the labor intensive process that the
Department of Revenue (DOR) would need in order to maintain
separate rates for all businesses. The two percent timely
filing credit represents a figure somewhere in the median range.
3:31:30 PM
REPRESENTATIVE GARDNER inquired as to the specific credit card
rates.
CHAIR OLSON answered that testimony at a prior hearing on HB 350
highlighted that the rates varied widely.
3:31:58 PM
REPRESENTATIVE GATTO posed a scenario in which a credit card
company charges a business a rate of 4 percent, but may also
offer the business a discount for heavy usage. In those
instances, the state would not be privy to any rebates the
vehicle rental business received from the credit card company,
he surmised.
3:33:14 PM
CHAIR OLSON, in response to Representative Gatto, noted that the
committee packet contains two versions of proposed committee
substitutes for the committee to review that include different
timely filing credit percentages. The purpose of HB 350 is to
compensate the business for the administrative functions for
collecting the vehicle rental tax on behalf of the state.
3:33:35 PM
REPRESENTATIVE LEDOUX pointed out that companies have the
benefit of interest accrual on the vehicle rental tax collected
for the period from the collection of the tax to the quarterly
submittal date.
3:34:45 PM
JOHANNA BALES, Deputy Director , Anchorage Office, Tax Division,
Department of Revenue (DOR), said that Representative LeDoux is
absolutely right in that businesses who collect the vehicle
rental tax submit the tax collected quarterly and companies can
retain the state's money for up to 3 months. She opined that
the lag time represents one of the downsides to third party
collections. While the fractional interest and timely filing
credit may offset credit card charges assessed to businesses
offering credit cards, the purpose of the timely filing is
simply to assist companies to recover a portion of their costs
for the administrative functions of collecting the tax.
Additionally, if businesses fail to timely file, the company
would incur interest assessed by the state which is currently
set at 11 percent, compounded quarterly, she noted.
3:36:42 PM
REPRESENTATIVE NEUMAN opined that Version L seems to incorporate
the comments and testimony on HB 350. Version L offers a 2
percent timely filing credit capped at $4,000, he noted He
related his understanding that the timely filing credit is
similar to a fee charged for the service provided to the state.
He surmised that if a business collects $20,000 to $30,000 in
vehicle rental tax and is able to earn interest on the taxes
collected, that those companies are entitled to the interest
earned, since it probably takes more effort to account for the
tax. He offered his support for Version L of HB 350.
3:38:40 PM
REPRESENTATIVE NEUMAN made a motion to adopt the proposed
committee substitute (CS) for HB 350, Version 25-LS1362\L,
Bullock, 3/5/08, as the working document.
There being no objection, Version L was before the committee.
3:39:12 PM
MS. BALES, in response to Representative Gatto, offered that in
addition to the 11 percent interest, the state charges a penalty
of 5 percent per month up to a 25 percent maximum for businesses
that fails to file on time.
3:39:29 PM
REPRESENTATIVE GATTO opined that the amount being paid for the
vehicle rental tax is probably already calculated into the
amount received in revenue. He inquired as to whether the state
would then increase the tax to attempt to recoup the shortfall
in revenue.
CHAIR OLSON surmised he did not think that would be the case and
is the reason for the cap on the timely filing credit.
REPRESENTATIVE BUCH related his understanding that HB 350 would
allow businesses that collect vehicle rental tax on behalf of
the state to retain a portion of the tax to offset the
administrative costs to the business.
MR. FELLMAN, in response to Representative Gatto, answered that
HB 350 has a further referral to the House Finance Committee. In
further response to Representative Buch, Mr. Fellman assured him
that the chart provided to the committee that correctly assesses
the amounts of the timely filing credits.
3:41:34 PM
REPRESENTATIVE NEUMAN referred to the chart provided to the
committee and related that the total cost to the state would be
approximately $65,000. He expressed his preference for
expanding HB 350 to incorporate other taxes collected on behalf
of the state, but he also acknowledged the time constraints due
to the 90 day legislative session. He maintained his support
for Version L of HB 350.
MR. FELLMAN, in response to Representative Gardner, explained
that the fiscal note of $8.5 million refers to the HB 350 prior
before the cap.
MS. BALES further explained that the fiscal note reflects that
the DOR collects $8.5 million in vehicle rental tax. Thus, 3
percent timely filing credit with no cap would equate to
$255,000 in lost revenue. She maintained that the total tax
collected remains projected at $8.5 million. Therefore, a 2
percent timely filing credit with no cap would equate to $65,000
lost revenue to the state versus the $255,000 loss when the
timely filing credit is set at 3 percent with no cap.
REPRESENTATIVE GATTO related that HB 350 would simply return
$65,000 to companies.
3:44:17 PM
REPRESENTATIVE NEUMAN moved to report proposed CS for HB 350,
labeled 25-LS1362\L, Bullock, 3/5/08, out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, CSHB 350(L&C) was reported from the
House Labor and Commerce Standing Committee.
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