Legislature(2009 - 2010)BARNES 124
02/26/2010 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB245 | |
| HB340 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 245 | TELECONFERENCED | |
| *+ | HB 340 | TELECONFERENCED | |
HB 340-MUNICIPAL SALES OR USE TAX ON MOTOR FUEL
3:46:56 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 340, "An Act relating to municipal sales or use
taxes on motor fuels; and providing for an effective date."
KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State
Legislature, paraphrased the sponsor's statement, which read
[original punctuation provided]:
House Bill 340 would limit the sales tax charged by
municipalities on gasoline and diesel, when used as
motor fuel on Alaska's highways, to $0.08 per gallon.
As the price of gasoline increases, consumers suffer
with an ever increasing sales tax liability. When the
price of gasoline in my community was at its highest,
nearly $4.70 per gallon, my constituents were paying
nearly $0.30 per gallon in sales tax.
This flat sales tax on a gallon of fuel will provide a
small savings at lower price points. If prices
increase in the future, consumers will see even
greater savings.
In cities within a borough, both the city and the
borough would be able to charge the flat tax. This
would mean a maximum sales tax of $0.16 per gallon.
While this cap will lower many municipalities' tax
revenue at high fuel prices, at low prices it will
mean higher revenue.
3:48:20 PM
CHAIR OLSON clarified that this bill refers to a flat tax.
MR. JACKSON explained that this bill would not cap the tax on
home heating fuel, but is specific to motor fuel, gasoline or
diesel fuel, which is used on the roadway. This would provide
relief to consumers at the pump when prices are high. When
prices are low, municipalities could collect additional sales
tax than collected under the current tax mechanism. He related
a scenario in which the current gas price in the Mendenhall
Valley cost approximately $3.00 per gallon, of which about $.14
per gallon represents the sales tax. With the passage of this
bill, the consumer would save $.06 per gallon on sales tax. The
current sales tax collected is in addition to the $.26 per
gallon in state and federal taxes.
3:50:39 PM
REPRESENTATIVE NEUMAN asked how HB 340 would affect home heating
oil and whether this proposal would be limited to transportation
fuel taxes.
MR. JACKSON explained that HB 340 is specific to motor fuel. He
referred to page 2, line 4, of HB 340 which read: "...gasoline
or diesel fuel of the type used in cars, trucks, and other motor
vehicles that are driven on roads ..." Thus, the targeted fuel
is the fuel from the pump at the local gas station, not the fuel
delivered to homes for heating purposes.
REPRESENTATIVE NEUMAN asked whether municipalities currently
have the ability to tax non-transportation fuels.
MR. JACKSON responded that the municipalities which collect a
sales tax collect the tax on all commodities sold. He noted
that some municipalities also specifically charge a transfer tax
on fuels. For example, Adak collects a $.02 per gallon fuel
transfer tax. He related that the fuel transfer taxes are
collected in three communities, although he acknowledged he may
have missed some.
REPRESENTATIVE NEUMAN asked whether a statewide list of
municipal taxes is available for motor fuel taxes.
MR. JACKSON explained he obtained information from the
Legislative Research Services titled, "Table 1: 2008 Municipal
Sales Tax, Special Tax and Revenues." He offered his belief
that the taxes listed include home heating fuel, groceries, and
gasoline.
REPRESENTATIVE NEUMAN asked whether the intent of the proposed
bill is not to place a tax on home heating or transportation
fuels.
MR. JACKSON answered no. He explained that the intent of HB 340
is to cap the taxes on motor fuel used on highways at $.08 per
gallon. The bill would not apply to home heating or fuel used
in boats, he stated.
REPRESENTATIVE NEUMAN asked whether some communities charge more
than $.08 per gallon tax for a combined sales tax and fuel tax.
MR. JACKSON answered yes.
3:54:14 PM
CHAIR OLSON offered to provide members with the chart being
referred to by Mr. Jackson. He recalled that under HB 340, in
the past five and a half of seven years that the municipalities
would have gained income. He explained that the past two years
would only have had a slight impact on municipalities. He
offered his belief that the windfall of high prices was not
built into the municipal budgets. He stated that his
constituents have complained their motor fuel costs are much
higher than in Anchorage, which is largely due to the sales tax.
Secondly, his constituents have also complained that Soldotna's
costs are higher than elsewhere.
3:55:06 PM
REPRESENTATIVE NEUMAN recalled many constituents commented on
when the state temporarily repealed the $.08 motor fuel tax.
CHAIR OLSON pointed out that should consumers fill up their boat
fuel tanks at the gas pump, that the taxes on recreational gas
would also be capped at $.08 per gallon.
REPRESENTATIVE NEUMAN commented that the bill would not affect
"colored" fuel sold.
CHAIR OLSON stated his intent is not to move HB 340 today to
allow for further testimony.
3:56:44 PM
REPRESENTATIVE T. WILSON remarked that the City of North Pole
currently charges a 4 percent sales tax. She asked for the
impact this bill would have on smaller communities. She
expressed concern that a cap could adversely affect the smaller
communities like North Pole, with a population of approximately
2,000 people.
MR. JACKSON stated that he received a letter from the City of
North Pole. He agreed that many communities have not yet
weighed in on the bill. He thought many communities currently
have a cap on sales tax, such as the Kenai Peninsula Borough.
He offered that this bill would lower the cap.
3:58:14 PM
REPRESENTATIVE T. WILSON asked for the highest tax on fuel in
the state.
MR. JACKSON answered that Wrangell has a 7 percent sales tax.
3:58:33 PM
CHAIR OLSON added that some taxes are assessed "in the Bush" by
non-governmental organizations, such as a tribal council or a
village council. He remarked that the fees assessed could be
significant, up to several dollars per gallon. However, this
bill would not affect those charges since they are not taxes.
REPRESENTATIVE T. WILSON related that the organizations do not
call the additional amount a sales tax.
CHAIR OLSON explained that the attorney general's office is
reviewing the additional costs assessed. He stated that he was
not able to find a way to incorporate those additional charges
into the bill. He remarked that the fuel distributors would
prefer to have the RCA regulate them since they have been blamed
for the higher price of fuel. The prices can vary from village
to village, he stated. He also anticipated a report would be
forthcoming from the attorney general's office.
4:00:11 PM
REPRESENTATIVE T. WILSON inquired as to whether the amount would
stay at $.08 per gallon until someone changed the bill, or if a
mechanism is built into the bill.
MR. JACKSON agreed that the tax cap would remain at $.08 per
gallon since the bill does not have a sunset clause.
4:00:38 PM
REPRESENTATIVE CHENAULT advised that the Kenai Peninsula Borough
currently charges a three percent sales tax on fuel. He
surmised that the majority of the cities charge about the same.
He related that under the current system, a person who purchases
fuel in the City of Kenai would pay about $.21 per gallon under
the proposed tax system. He asked whether the City of Kenai
would only be able to collect $.08 cents per gallon, and the KPB
would only collect $.08 per gallon for a total of $.16 per
gallon sales tax on motor fuel.
MR. JACKSON agreed.
4:01:49 PM
REPRESENTATIVE CHENAULT remarked that the bill would not drop
the tax back down to zero. He agreed that the KPB may estimate
the cost of the fuel when preparing its budget. He recalled
gasoline costs rose to $4.75 per gallon. He stated the fuel
taxes were never intended to provide a windfall for
municipalities, noting that this bill would also help consumers.
4:02:50 PM
REPRESENTATIVE LYNN asked whether municipalities would ask the
legislature for additional revenue sharing and if this bill
would just shift the cost to the state.
CHAIR OLSON surmised that since the fuel increases were not
anticipated, that the amount is not built into municipal
budgets. He recalled that fuel costs briefly were as high as
$4.99 per gallon. He related that communities lost the
potential of receiving extra sales tax, but since their budgets
were not based on the increased tax revenue, that they would
only lose the opportunity to collect the additional sales tax.
He recalled observing people drive the Seward Highway with up to
sixty gallons of fuel in five gallon cans which he presumed had
been filled in Anchorage to avoid paying extra fuel tax.
4:04:33 PM
REPRESENTATIVE NEUMAN recalled the legislature received requests
for reimbursement of up to the $150,000 in exemptions for senior
housing.
REPRESENTATIVE BUCH related that the consumer does not have an
adequate mechanism to control the pass through costs to
consumers. He recalled when the motor fuel tax was temporarily
repealed that when the tax was reduced to $.03 per gallon, the
costs quickly increased by $.04 per gallon. He restated that
the state does not have mechanism to control pass through costs
to consumers. He appreciates the bill sponsor's efforts, but
stated that he would like long-term solutions to fuel costs as
well as for "the intent of motor fuel tax reductions" to be
offered at the pump.
4:06:21 PM
DOUG ISSACSSON, Mayor, City of North Pole, Office of the Mayor,
stated that his office was just informed of this bill. He
applauded the sponsor for exploring ways to reduce the cost of
living for residents throughout Alaska. He paraphrased from his
written comments, as follows [original punctuation provided]:
3. However, I question the efficacy of this action
for at least two reasons:
a. First, if you, as the Legislature, are seeking to
lower cost at the pump for consumers, why not
start by lowering the fees charged by the State
to the refineries.
i. I understand this is a complex issue that,
owing to market factors and the laws of
supply and demand, ultimately may not
achieve the discount you are seeking.
b. Second, although you have the right to limit a
tax imposed by a local community, should you
exercise it and thus usurp the local voters'
ability to regulate commerce within their
community?
i. It is my belief that the sales tax is one of
the few taxes most municipalities have to
generate revenues and therefore should be
regulated at the local municipal level where
the voters have the ability to debate the
merits of the tax face to face with their
representatives.
ii. To set an arbitrary limit on municipalities
is, in my estimation, a slippery slope.
Factual data, the presence of repressive
taxation or abuse, or other compelling
factors should be used as the basis for the
State government's intervention or
overruling a municipality's control.
1. I have not received calls from
legislative staffers requesting
information on the impact of this bill,
except this morning by District 11
Representative Tammie Wilson;
2. I have not heard that the gas station
operators have complained to the
legislature;
3. I have not heard of numerous complaints
by residents--if gas prices are too
high in North Pole, they vote by going
to Fairbanks to fill up. If too many
people vote in this manner, the tree
gas stations in North Pole would
respond either by lowering their prices
or complaining to City Hall about a
repressive taxation regime that limits
their competitiveness.
5. So what is the effect to North Pole, or to consumers
in North Pole?
a. North Pole charges a 4% retail sales tax, four
cents on the dollar capped at $8.00 (eight
dollars) a transaction.
b. North Pole has a manual tax reporting that relies
on the veracity of the company reporting. We are
a minimally staffed municipality and do not
perform frequent audits.
4:11:04 PM
c. The three gas stations are owned by two entities:
Petro Star operates two facilities, one with a
convenience store attached; Tesoro operates the
third, also with a convenience store attached.
i. There is no distinction, at this time, in
reporting sales from gasoline or diesel, or
bubble gum and pop.
ii. There is a distinction, due to the separate
category, in taxing alcohol.
d. Because there is no reporting break-out, and
owning to the lack of time to adequately compile
the numbers, we do not know how significant the
impact will be to the City of North Pole.
e. However, a corollary may be that from September
2008 to September 2009 the City Council
authorized a sales tax suspension on heating oil.
i. Remember, retail sales tax is capped at $8
per transaction equal to a $200 purchase.
ii. A typical fill-up might be 100-200 gallons,
which due to price fluctuations could exceed
the $200/$8 cap, whereas most purchases for
fuel might be closer to the 10-20 gallon
range and be considerably lower than the
cap.
iii. We gauged that by suspending the tax on
heating oil deliveries, a monthly fuel
delivery with an $8 tax would save a
consumer $96 per year ($8 per month).
iv. Overall, the City lost approximately $25,000
in revenue during that period.
v. There was no public demand to keep the
suspension, even with two council meetings
where it was considered (a thirty day
period) and the tax was re-instated.
5. I would ask the sponsors, and this committee, to not
pass this out of committee until factual data from the
affected municipalities can be collected and the real
impact/savings can be determined.
4:16:03 PM
CHAIR OLSON clarified that the valley gas prices referred to
earlier are the Mendenhall Valley gas prices.
REPRESENTATIVE NEUMAN related that Representative T. Wilson
provided information and is doing a good job for her
constitutents.
4:16:56 PM
KATHIE WASSERMAN, Executive Director, Alaska Municipal League
(AML), referred to the tables in the materials provided from the
Legislative Research Services, noting that the lists contain
municipalities. She clarified that none of the ones listed as
are communities, but are actually municipalities. She recalled
living in Pelican, with fuel sold by the tribal entity, and
while the entity did not have the ability to tax, it could raise
the price on products.
CHAIR OLSON agreed, relating that the costs were sometimes
excessive.
4:18:21 PM
MS. WASSERMAN stated that she called many communities for input
on HB 340. She related that while she did not find any
community in full support of the bill, some members of an
assembly wanted to consider this approach as an option. Many
remote municipalities were opposed to the concept of a tax cap
on motor fuel since fuel prices are very high in rural
communities. Since the rural communities do not have any method
to reduce fuel costs, the municipalities would lose potential
sales taxes when tax caps would be imposed. This bill would
have a large impact on a community, yet it would not save
individual members very much. She did not have a unanimous
viewpoint on behalf of communities, but suggested that AML
believes that communities should have an option to choose
whether to implement a tax cap.
MS. WASSERMAN said that she favored local control, which has
been AML's "top message" for the legislature. She also
commented on the ease of working with the sponsor's staff on
this issue even though the AML was somewhat in opposition to the
bill.
4:21:01 PM
CHAIR OLSON commented that it was important to hold a hearing on
HB 340 in order to have the issues discussed. He pointed out
that the state has significant problems with high prices on
motor fuel taxes, especially on fees attached to commodities
that are not taxes, but represent a type of surcharge.
4:22:12 PM
CHAIR OLSON announced that HB 340 would be held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB245 ver A.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 245 |
| HB245 Sponsor Statement ver A.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 245 |
| HB245 Sectional Analysis ver A.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 245 |
| HB245 Fiscal Note-CED-CBPL-2-21-10.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 245 |
| HB245 Board of Op Examiners Annual Report.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 245 |
| HB245 Highest Level Req for Licensure Survey of States Jan2010.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 245 |
| HB245 Letter D Halverson 2-22-10.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 245 |
| HB340 ver E.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 340 |
| HB340 Sponsor Statement ver E.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 340 |
| HB340 Sectional Analysis ver E.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 340 |
| HB340 Fiscal Note-CED-CRA-2-24-10.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 340 |
| HB340 Leg Research Report 6-15-09.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 340 |
| HB340 Letter City of North Pole 2-26-10.pdf |
HL&C 2/26/2010 3:15:00 PM |
HB 340 |