Legislature(2003 - 2004)
05/08/2003 07:08 AM House W&M
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 293-STATE SALES AND USE TAX CO-CHAIR WHITAKER announced that the next order of business would be HOUSE BILL NO. 293, "An Act levying and collecting a state sales and use tax; and providing for an effective date." MR. PERSILY explained that originally HB 293 was a state sales and use tax. The version before the committee now includes an increase of $.12 per gallon in highway motor fuel tax that had been proposed by the governor at the beginning of the session. There are no changes in aviation gas, jet fuel, marine fuel, or off-road motor fuel, he added. Number 0223 CO-CHAIR HAWKER moved to adopt CS for HB 293, Version CSHB 293 bil.doc, dated 5/8/03, as the working document. There being no objection, Version CSHB 293 bil.doc, dated 5/8/03, was before the committee. Number 0225 MR. PERSILY explained that Section 1 of the bill is the enforcement provision for motor vehicles that might be purchased out of state. What this says is if an individual wishes to register his/her vehicle in Alaska, it will be necessary to show proof that the sales and use tax has been paid. Section 2 rewrites a significant portion of Title 29, it is rewritten to eliminate the municipal authority to enforce, collect, and administer sales and use taxes, he said. Under this version the Department of Revenue would be responsible for administration, enforcement, and collection of the sales and use tax. The exemptions would be set by the legislature in statute and would be applied to the rate rules municipalities want collected. The [tax] rate for municipalities would still be up to them, but the exemptions, rules, and enforcement would be handled by the state. MR. PERSILY went on to say Section 7 deals with the motor fuel tax increase which would go from 8 cents a gallon to 20 cents a gallon. He reiterated that this increase would not include aviation gas, jet fuel, marine fuel, or off-road motor fuel. Number 0409 REPRESENTATIVE WEYHRAUCH asked about Sections, 3, 4, 5, and 6. MR. PERSILY responded that those sections are the rewrites of Title 29. He explained that this legislation sets a combined cap of state and municipal sales tax of 8 percent. Section 3 covers a phase-in [sales tax]. This legislation specifies that when the tax goes into effect on January 1, 2004, whatever [tax] the municipality has in place at that time will remain in place. Therefore, if there is not sufficient room between the 8 percent cap and what the municipalities have [on the books], the state would collect less [in state sales taxes]. For example, if a city gets a 6 percent tax as of January 1, 2004, the state would collect 8 percent in that community, the city would receive its full 6 percent, and the state would receive 2 percent. Mr. Persily noted that this bill has a seasonal sales tax feature to it because there is a 2 percent sales tax from October 1 through March 31 and 4 percent sales tax from April 1 to September 30. He explained that he is providing an overview of the bill rather than going section by section. Number 0617 MR. PERSILY turned attention to Section 9, page 9, line 21, where it spells out the state's portion of the tax under the seasonal tax. Section 3, page 4, describes how the sales tax is shared with municipalities. REPRESENTATIVE WEYHRAUCH commented that this would mean if an individual purchased a car in the summer he/she would pay more tax than if it was purchased in the winter. MR. PERSILY responded that would depend on where the individual lives. For example, Petersburg has a 6 percent tax and because there is an 8 percent cap, those residents would pay 8 percent. However, if the buyer lives in Anchorage, there would be a 2 percent tax in the fall [and winter] and 4 percent tax in the spring and summer because Anchorage [don not already have a municipal sales tax]. REPRESENTATIVE WILSON asked if a Petersburg resident could buy a vehicle in Anchorage, pay the sales tax there because it is lower. She asked if the sales tax would only be charged where the vehicle was purchased, provided the purchase took place in state. Number 0745 ROBYNN WILSON, Revenue Auditor, Tax Division, Department of Revenue, answered questions on HB 293. In response to Representative Wilson's question, she replied that it would depend on whether that municipality had a use tax. She pointed out that many localities do not have a use tax. For example, if a car was purchased in Anchorage and taken to another city if that city had a use tax, there would be some rate adjustments. If the city where the purchaser lived did not have a use tax, then he/she would just pay the tax where it was purchased. Number 0809 REPRESENTATIVE WILSON concluded then that if she purchases a car in state, and returns home with it, she would not have to pay a tax where she lives. MS. WILSON replied that if the town where she lives does not have a use tax, that would be correct. If the town does have a use tax then there may be an additional fee. In further response to Representative Wilson, Ms. Wilson clarified that she would not pay the state tax again, but there may be a municipal portion that may be adjusted if the city [in which she lives] has a use tax. Number 0933 MR. PERSILY provided the following example. If an individual buys a vehicle in a community that has a 2 percent tax and brings it back to his/her community where there is a 5 percent use tax. In this case, the individual would owe the community the 3 percent difference. CO-CHAIR WHITAKER pointed out that is no different than [the current policy]. He explained his comment by saying that if she were to purchase a vehicle in Anchorage today and return to her community with the vehicle, she would have to pay her community's use tax. REPRESENTATIVE WILSON responded that she did not do that [when she purchased a vehicle]. MR. PERSILY pointed out that without the connection to the vehicle registration, enforcement is very difficult. Therefore, this legislation includes a provision that specifies that in order to register a vehicle there must be proof of sales tax payment. The aforementioned would ensure that individuals do not buy cars in the Lower 48 in order to avoid sales tax. Number 1036 MR. PERSILY told the committee that in Section 3 the department was directed by the co-chairs to craft a way to phase-in a point at which the state gets its full 2 percent and 4 percent, and the communities get their 2 percent and 4 percent. This would allow time for communities to adjust their sales tax to stay within the 8 percent cap. On January 1, 2004, any municipal sales tax that is in effect will be collected by the full amount by the state. On January 1, 2008, the maximum municipal sales tax would be 6 percent. In response to Representative Gruenberg, Mr. Persily specified that the aforementioned language is in Section 3 on page 4, line 22. Number 1141 CO-CHAIR WHITAKER announced that Mr. Persily will be working through the bill section by section, but if he comes to a point in the bill where it is necessary to look at another section to fully understand it, then he will move to that section. The committee is looking at Section 3, page 4, lines 21-26, he said. CO-CHAIR WHITAKER noted for the record that Representative Seaton had joined the committee. Number 1220 MR. PERSILY told the members that municipalities with a sales tax will continue to receive the full amount of the municipal tax for four years, through January 1, 2008. After January 1, 2008, state statute would specify that the maximum municipal sales and use tax would be 6 percent. Therefore, a community with a 7 percent sales tax would see a decrease in tax revenues by 1 percent. On Jan 10, 2010, the maximum municipal sales tax rate would go to 5 percent during the summer, because during the winter the state is only taking 2 percent so there is still 6 percent available for municipalities. However, during the summer of 2010 the maximum municipal rate would go to 5 percent. During the summer of 2012 the maximum municipal sales tax would be 4 percent, and the tax could still be 6 percent the rest of the year. The intent of this [phased-in approach] is to give municipalities time to adjust to a state-mandated lower rate and also allow municipalities to see how the state exemptions and state administered sales tax [impact revenues]. Mr. Persily noted that if this bill were to pass, many communities may find they could collect the same revenue with a lower tax rate. Number 1348 CO-CHAIR WHITAKER asked Mr. Persily to comment on what affect the period between January 1, 2004, and January 1, 2008, would have on municipalities. MR. PERSILY responded that during that time period the state would collect whatever sales tax rate is on the books and the cities would receive the full collections off of that rate. He agreed with Co-Chair Whitaker's statement that there is a 4-year adjustment period and then a four-year set-down period. Number 1431 REPRESENTATIVE SEATON asked for clarification that the percentage goes up to 4 percent in the summer because the state anticipates that there will be higher revenues then. However, he interpreted that to mean that when there are higher revenues, the municipalities will collect less taxes. MR. PERSILY clarified that what the state is saying in this legislation is that a seasonal feature is important to pass more of the burden on to nonresident visitors. Those cities that have sales taxes at 5-7 percent will have to reduce their rate to stay within the 8 percent cap for the eventual 4 percent state collection. Mr. Persily noted that because of fewer state exemptions these cities may not see a loss of revenue. It would be necessary, once the state code is adopted, to compare it with the municipal code item by item in order to see how it would affect local collections. Number 1542 REPRESENTATIVE SEATON surmised that legislators will not know what affect this required seasonal reduction in sales tax will have on municipalities until the entire process is complete. MR. PERSILY responded that each of the municipalities' finance officers could look at the bill, compare it to its existing code, and probably reach a good estimate with regard to how this bill would affect municipal collection. Number 1621 REPRESENTATIVE OGG said in the summer Kodiak has a lot of people buying groceries for the fishing season. Kodiak's current sales tax is 6 percent, [with this bill it] would be up to 8 percent. Therefore, he surmised that the tendency would be for people to purchase supplies in Anchorage where the sales tax would only be 4 percent. He asked if Mr. Persily believes that kind of impact will be felt [by communities such as Kodiak]. MR. PERSILY acknowledged that imposing a higher sales tax on communities that already have one, means there is a risk of affecting the local economy. He stated that he could not speculate on the impact, although it is something the committee will want to consider. Mr. Persily commented that human nature being what it is there will be some people who will go out of their way to save a little money. Adding to the sales tax is going to increase the cost of purchasing goods. He said he could not provide any estimates between communities, but common sense says that it would affect some spending decisions. Number 1815 REPRESENTATIVE OGG commented that most of the testimony heard on this bill has come from areas outside the metropolitan areas of Fairbanks or Anchorage and many of these communities already have high sales taxes. He said it would be good to know what impact this bill will have on small communities. He questioned whether this will cause commerce to flow out of smaller communities to [larger urban] areas. MR. PERSILY replied that the department does not have the ability to create a model to predict the impact of a higher sales tax and the effect it will have on shopping habits. Although there may be economists somewhere in the country that could do that, he said he does not know of anyone who could do a credible model. Number 1930 REPRESENTATIVE OGG said he believes there is a delicate balance and if it is altered, then things start to shift. He said he wants to know what that potential shift will be before moving into it. CO-CHAIR WHITAKER reiterated that if the legislature does not do something, the consequences are dire. He added that it will be necessary to make adjustments to the bill in this body as well as the other body. This bill allows for a time period of adjustment. CO-CHAIR WHITAKER noted for the record that Representatives Heinze and Kohring had joined the meeting. Number 2108 REPRESENTATIVE SEATON asked Mr. Persily if he understands this correctly. In communities that have, for example, a 6 percent sales taxes in place, the tax would be capped at 8 percent. The same 8 percent will be charged, but based on whether it is winter or summer will determine what [percentage] goes to the city and what [percentage] goes to the state. MR. PERSILY responded that is correct. Number 2149 REPRESENTATIVE WILSON offered a hypothetical example in which the sales tax is 6 percent in Kodiak. In such a situation, what would the City of Kodiak collect in 2004, she asked. MR. PERSILY replied that on January 1, 2004, the state would collect a total of 8 percent with 6 percent going to Kodiak and 2 percent to the state. Under this bill, in Kodiak's case there would be a 5 percent limit January 1, 2010. During the summer months the state would continue to collect 8 percent of which 5 percent would go to Kodiak and 3 percent to the state. In the winter months, the state would continue to collect 8 percent of which 2 percent would go to the state and 6 percent to Kodiak. On January 1, 2012, the final year of the phase-in, when the municipal limit is 4 percent in the summer months, the state would collect 8 percent, keep 4 percent, and give Kodiak 4 percent. In the winter the state would give Kodiak 6 percent and keep 2 percent. Number 2319 REPRESENTATIVE WILSON asked if she understands this correctly. In Kodiak's case the state will collect 8 percent, and give back 6 percent until the year 2010 at which time the state will continue to collect 8 percent, but only return 5 percent to Kodiak. MR. PERSILY responded that Kodiak will get 5 percent in the summer months, and 6 percent in the winter months when the state's rate drops. Mr. Persily turned to Section 5, page 5, which covers the same phase-in language for cities. It has the same effect, one for boroughs, and one for cities. Number 2417 REPRESENTATIVE GRUENBERG asked about unified municipalities. MR. PERSILY responded that he is not sure whether unified municipalities fall under boroughs or cities. Number 2440 REPRESENTATIVE SEATON related that the community of Homer has a 3.5 percent [sales tax] while the borough has a 2 percent [sales tax], and therefore the total sales tax is 5.5 percent. Which entity loses money, he asked. MR. PERSILY responded that since both the borough and city fall under the [8 percent cap], the state would lose out on collections while the city and borough would receive the full amount. Number 2559 MR. PERSILY pointed out that Sections 6-8 deal with motor fuel tax change. REPRESENTATIVE GRUENBERG noted that Sections 6 and 7 refer to 20 cents per gallon and Section 8 refers to 18 cents per gallon. He asked why there is a difference in [the motor fuel] tax. MS. WILSON replied that Section 8 addresses the fuel used on highways. Currently, an individual would pay [a tax of] 8 cents a gallon on fuel. If the fuel is used off-road, that individual would be entitled to a 6-cent refund, which means 2 cents would be paid. This bill does not change taxation of net fuel used off-road, so an individual would pay 20 cents for that gallon of fuel and then be refunded 18 cents. This section is a refund provision which maintains the status quo under which 2 cents per gallon is paid for off-road use. Number 2746 REPRESENTATIVE GRUENBERG commented that there is an increase of 12 cents per gallon. MS. WILSON replied that is correct. The fuel used on the highway is increased by 12 cents per gallon. To keep status quo on the off-road highway use, the refund is increased which keeps the fuel tax at 2 cents per gallon. REPRESENTATIVE WEYHRAUCH commented that many people pull their boats or RVs to the gas station, and fill-up both tanks at same time. He said he is pretty sure that most people do not apply for a refund even though these are off-road vehicles. Number 2853 MS. WILSON told the members that a boat is considered "marine use" and is in a separate section, so it is not consider off- road for state purposes. She agreed that it is true that refunds are available for off-road vehicles by submitting a form and receipt for purchase of the fuel to the state. Number 2905 REPRESENTATIVE OGG asked if this section delineates that the state will be the collector of sales tax. MR. PERSILY, in response to Representative Ogg, said that the state would administer, collect, enforce, audit, and send the checks to the communities where the state has collected on behalf of that community. Number 2940 REPRESENTATIVE OGG suggested that there may be [some economic advantage] by using tax collection systems that cities already have in place and suggested some flexibility be written into the legislation. Cities may be better at tax collection due to the fact that they know the people and the system is already in place. He reiterated that he believes it would be beneficial to allow the state to use the existing municipal tax structure to collect the sales tax. MR. PERSILY pointed out that this bill would bring Alaska into compliance with the Streamlined Sales Tax Project, which is a nationwide effort. This compliance would allow the state to obtain sales tax from the Internet purchases, mail orders, and catalog sales if Congress changes the law. This will be worth a lot in future. One of the requirements of [compliance] is that the state be the administrator of the sales tax. The idea is that businesses would send one check to the state rather than to many different local jurisdictions. Although this would not stop the state from working on contract or some other agreement with local municipalities to assist in enforcement work, in order to comply with the Streamlined Sales Tax Project the state must be the central administration point. Number 3143 REPRESENTATIVE OGG replied that is exactly his point; if the state is the central administration point why not give the state the option of allowing a city to be agent. The city as the agent would not mean that sovereignty of collecting the tax would passes to the municipality, but it could allow for tax collection locally. If this would save money and collect more taxes, he said he believes it would be a viable option. MS. WILSON explained that this is an effort to maintain simplicity for businesses, particularly for businesses that have commerce in multiple locations. The goal is for that business to write one check. For instance, a company could contact the state and ask for the sales tax rate for a particular zip code. This would enable businesses to rely on the state to advise them when there is a change in the rate. Ms. Wilson said that to the extent that arrangement is not threatened, a contract arrangement would not be a problem. The overall goal is to keep it simple for businesses and not to have, for example, 10 audit teams coming in to audit a business for 10 different localities. Only the state would do the audit; however, there would be nothing to prevent the state from contracting with a city to perform an audit. Number 3410 REPRESENTATIVE GRUENBERG referred to Section 7, page 7, and asked why the legislature would increase the tax on motor vehicle fuel when there is no increase on aviation gas, watercraft fuel, and aviation jet fuel. MR. PERSILY responded that was a decision made by the administration. He pointed out that in Alaska's case the motor fuel tax rate is the lowest in the nation and has not increased in over 30 years. Mr. Persily commented that those facts entered greatly into the decision. Number 3450 REPRESENTATIVE GRUENBERG asked how aviation gas, watercraft fuel, and aviation jet fuel rates compare with the rates in other states. MR. PERSILY commented that he could get that information. He said the collections on aviation gas, watercraft fuel, and aviation jet fuel is not very significant. If this is an effort to look for more revenues to pay for public services, there is a lot more gas that goes into cars, pickup trucks, and SUVs. Currently, there are exemptions written into state statutes for the cargo business out of Anchorage airport, he added. Number 3545 REPRESENTATIVE GRUENBERG questioned [why] this exemption [for cargo] is in state statute and is letting huge planes go through Alaska and not raising taxes at all. MR. PERSILY responded that the decision [to provide these exemptions] was made by the legislature some years ago as an incentive to help build the international cargo business in Alaska. Number 3621 REPRESENTATIVE ROKEBERG commented that it is a very complex issue, and not merely an incentive [to the international cargo business]. CO-CHAIR WHITAKER pointed out that this is not such a complex issue that an answer to Representative Gruenberg's question cannot be obtained. He told Representative Gruenberg that an answer to his question would be provided. Number 3652 MR. PERSILY explained that in Section 9, page 9, Chapter 44, is the sales and use tax language and most of the language deals with the mechanics of collecting and administering the tax. Page 9, line 21, covers the state portion of the tax, 2 percent in the winter and 4 percent in the summer, and explains that the amount is decreased based on what the city or borough tax may be. Mr. Persily pointed to one provision on page 10, line 22, which requires that the sales and use tax must be stated separately on the sales so the purchaser knows the amount of the tax and the amount of the goods. On page 11, line 3; he explained that "Nexus" means to the full extent under federal law and the U.S. Constitution. Therefore, if an entity has a nexus or any connection with the State of Alaska, a sales and use tax can be collected. Number 3829 REPRESENTATIVE GRUENBERG offered a technical amendment, on page 11, line 5, insert the word "a" before the words "nexus with the State of Alaska". There being no objection, the technical amendment was adopted. REPRESENTATIVE WILSON asked for an example of someone with a nexus with the State of Alaska. MS. WILSON posed an example in which a catalog company buys products. If the aforementioned company has no presence or connection in the state of Alaska, [the consumer] would be responsible for the use tax. If, however, that catalog company had an office or some a physical presence in the state, then that catalog company would have to collect the tax. Number 3927 REPRESENTATIVE GRUENBERG pointed out that the language on page 10, lines 27-28, AS 43.44.040(c), impinges on free speech in a commercial context and the ability to contract. He asked why the state has such an overriding interest in imposing such a prohibition. MS. WILSON replied that she is not an attorney; however, she related that most states have this provision. The goal of the provision is to ensure that all businesses are on a level playing field, so that there is not one retailer advertising that it will absorb the tax. REPRESENTATIVE GRUENBERG asked if anyone has checked to see if this provision [is allowable under the constitution]. Number 4028 CO-CHAIR WHITAKER replied that he would guess that it has not been checked. He told Representative Gruenberg that he is making notes of questions that need to be answered and a written opinion will be obtained from Legislative Legal and Research Services. Number 4044 MR. PERSILY referred to page 11, line 7, which deals with exempt sales. This legislation includes a requirement for certificates. If, for example, an individual is purchasing something that is exempt from sales tax, an exemption certificate would be presented to the business so the business has some assurance that it is a nontaxable item. The department shall provide these exemption certificates. REPRESENTATIVE HEINZE commented that she feels very frustrated that she did not have time to read the bill. The review of the bill is going so fast, she said, that she does not fully understand what the committee is doing. Number 4214 MR. PERSILY referred to page 12, line 6, which deals with exemptions. Line 6 explains that any sales to or by government agencies, whether federal, state, or municipal, would be exempt from sales tax. Subsection (b) on page [12] makes it clear that utilities are not exempt from the sales and use tax, he said. MS. WILSON pointed out that page 12, lines 11-12, clarifies that that although government entities are exempt, that exemption does not include utilities that might be provided by a city or governmental entity. Number 4411 MR. PERSILY further clarified that if there is a municipally operated utility that sells services to residents or businesses, those services are subject to a sales tax as opposed to the government, for example, selling land, which would be exempt. In response to Representative Wilson, Mr. Persily pointed out that the City of Wrangell provides utilities and charges a sales tax on those utilities. That practice would continue under this legislation, he said. Mr. Persily explained that although subsection (a) on page 12, line 6, specifies that government sales are exempt from sales tax, that exemption does not apply to utility services provided by government. Number 4506 MR. PERSILY addressed page 12, line 13, regarding sales to or by 501(c)(3) corporations. That language specifies that sales to or by the IRS are exempt from the tax. Mr. Persily clarified that this is about charitable organizations. Although there are other IRS tax-exempt organizations, a 501(c)(3) is the IRS' designation for charitable organizations. Number 4604 REPRESENTATIVE GRUENBERG directed attention to page 12, line 9, where it refers to federally recognized tribes and asked if that would include all Native organizations. MS. WILSON responded that there is a list of federally recognized tribes. MR. PERSILY added that the federally recognized list does not include regional Native corporations. TAPE 03-25, SIDE B Number 4648 REPRESENTATIVE WEYHRAUCH agreed that the federally recognized tribe list does not include regional corporations. Number 4631 MR. PERSILY reviewed exemptions from the sales tax starting on page 12, line 17, which provides that purchases made under the food stamp program or WIC program are exempt; line 23 provides that wages, salaries, and commissions are exempt; line 27 provides that insurance premiums are exempt; line 31 provides that dividends and interest are exempt; and page 13, line 5 provides that garage sales or isolated or occasional sales, and fundraising by nonprofit groups that may not be a 501(c)(3) are also exempt. Number 4500 REPRESENTATIVE SEATON asked why proceeds from the sales of stocks, bonds, or securities are exempt. MR. PERSILY said there would be very tough administrative problems with [taxing stocks, bonds, or securities]. For example, would the sales tax be on gross proceeds of the sale or just on the profit. Furthermore, if an individual lost money on the sale, would the state want to send back some sales tax on the amount the individual lost. Number 4417 MS. WILSON replied that traditionally sales tax has been applied to tangible personal property. This legislation is a broader bill and direction was given to exempt those items. REPRESENTATIVE GRUENBERG commented that he can see why the state might not want to tax a citizen who sold stock. He asked if that would also apply to the purchase of the stock. MR. PERSILY restated Representative Gruenberg's question by using the example of an individual who buys stock from Merrill Lynch. Does Merrill Lynch charge that individual sales tax on the purchase of the stock, he asked. MS. WILSON replied that the bill taxes sales of tangible personal property and services; stock is intangible so it falls outside the prevue of this bill. Number 4255 REPRESENTATIVE GRUENBERG asked if he is correct in saying that a copy write or a patent purchase is not taxable. MS. WILSON responded that is correct. Number 4228 MR. PERSILY explained that normally a sales and use tax deals with tangible personal property; those items Representative Gruenberg mentioned are intangible. He added that he is not aware of a constitutional prohibition against a sales and use tax on an intangible item, but it would put Alaska at the leading edge in finding things on which to assess a sales tax. REPRESENTATIVE SEATON asked if fishing permits would be nontaxable. MS. WILSON replied that is correct; it is an intangible asset. MR. PERSILY referred to page 13, line 13, which deals with household effects brought into Alaska and noted that these items would not be taxed. Number 4136 REPRESENTATIVE MOSES inquired as to whether the tax would apply to construction camps where there are bunkhouses and mess halls. MS. WILSON responded that real property is not being taxed. However, there is no exemption provided for meals, services, and lodging. If these meals and services are being sold there is no exemption, and therefore, they would be taxable. MR. PERSILY posed an example in which an individual contracted with a company to provide meal services to his/her work crew at a construction or fish site. The amount of money under that contract would be subject to taxation under this legislation. REPRESENTATIVE MOSES commented that [in many cases] it is in lieu of wages. MR. PERSILY replied that an argument could be made that a portion of all purchases goes to wages of someone who provided the service or someone who built the product. This is much like a sales tax that would have to be paid to an accountant to do a tax return, or to a mechanic who fixes your car, or to a company that provides meal services at the work site; they are services and would be taxed. Number 3940 MS. WILSON commented that in this situation, the business is in effect the consumer of the service. Although the benefit is passed on to the employees, the business is the consumer of the meal service. REPRESENTATIVE MOSES stated that he needs more clarity on this. On the North Slope [these companies] should be taxed. [There are employees] eating in mess halls or being provided lodging and not being charged. He stated he believes it is essential [that it be subject to sales and use tax]. MR. PERSILY posed an example in which an individual is operating a business on the North Slope and contracts with someone to provide meal service to the company's workers. That individual would have to pay sales tax on that service that was purchased. If the business is providing meals and lodging to the workers at no charge, as Representative Moses mentioned, there is no taxable transaction there. There is no tax charged to those workers because they did not purchase services or goods. Number 3800 REPRESENTATIVE OGG asked about the exemption for occasional sales. He asked about the language that refers to "other than a vehicle" and asked how that applies to a rowboat or sailboat. Would such items be taxed, he asked. MS. WILSON agreed that there needs to be some clarification in reference to the term "vehicle." The intent of this section is to not tax garage sales, for example; however, if an individual sells a car every five years that should be taxable. Ms. Wilson reiterated that the language could use some clarification either through statute or regulation. Number 3643 CO-CHAIR WHITAKER agreed with Ms. Wilson that there is need for clarification; however, he said he would be concerned if that clarification were to be done through regulations because this is quite a substantial issue. Number 3635 MR. PERSILY referred to page 13, line 18, where there is a cap on motor vehicles, watercrafts, aircrafts, and mobile homes, regardless of the purchase price of those items. A sales tax would be charged up to the first $5,000 of the price. For example, if there were an 8 percent sales tax and an individual bought a $30,000 car, sales tax would only be charged on the first $5,000. REPRESENTATIVE WILSON asked if the sales tax would be collected when [the buyer] changes the registration. MR. PERSILY said that is correct. [HB 293 was held over.]
| Document Name | Date/Time | Subjects |
|---|