Legislature(2003 - 2004)
04/01/2004 09:07 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 366
"An Act relating to the levy and collection of sales and use
taxes, to the levy and collection of municipal sales and use
taxes, and to municipal sales and use taxes on alcoholic
beverages; and providing for an effective date."
This was the third hearing for this bill in the Senate Finance
Committee.
Senator B. Stevens informed the Committee that new language in the
Version 23-LS1051\W working draft includes the addition of coal and
district heat in the exemption language in Section 17, Sec.
43.44.020. Exemptions. subsection (5) on page six, lines five and
six. In addition, the exemption pertaining to wages as specified in
Section 17, Sec. 43.44.020. Exemptions. subsection (8) on page six,
lines 19 through 21 was required in order to comply with the
federal Internal Revenue System code system.
Senator B. Stevens stated that other changes in Version "W" pertain
to clarification language regarding the collection of sales and use
tax as it applies to "sales from certain coin-operated or currency-
operated machines, sales of drinks in a bar, sales on the dock,
sales from street vending carts, admission fees, and other sales as
determined by regulation by the department." as specified in
Section 17, Sec. 43.11.030. on page seven, lines 10-13. Language
regarding deductions and procedures pertaining to bad debts has
been added as specified in Section 17, Sec. 43.44.035. on page
eight, lines seven through 23. Further clarifying language has been
added in Section 17, Sec. 43.44.199. subsection (2) on page 13
regarding a manufacturing definition clarification as specified on
line four as follows.
(2) "manufacturing" means combining or processing components
or materials, including the processing of ores in a mill,
smelter, refinery, or reduction facility, to increase the
value of the components or materials for sale in the ordinary
course of business; "manufacturing" does not include
construction;
Senator B. Stevens stated that the Department of Law fiscal note,
dated March 31, 2004 in the amount of $323,900 portrays the
projected cost of adding two attorneys for the enforcement
division.
Senator B. Stevens referenced language on pages two and three of
the Department of Revenue fiscal note, dated March 31, 2004 that
projects that, after exemptions, the State sales tax base would be
approximately $12,900,000,000 for a total projected revenue of
$516,000,000. However, were a sales tax limitation implemented that
would apply "only to the first $500 of each separate sale, rent, or
service transaction with some exceptions" as currently utilized by
the Kenai Peninsula Borough, there would be a projected Statewide
sales tax base of $8.4 billion and a projected sales tax revenue of
approximately $336,000,000. Furthermore, were all communities to
adopt a three percent or higher local sales tax, $84 million would
be rebated to those communities and the net sales tax to the State
could range between $252,000,000 and $320,000,000.
Senator B. Stevens, referencing language on page three of the
Department of Revenue fiscal note, stated that, "At the four
percent statewide rate in HB 366, the cap would be $1,500, but we
believe if Juneau kept its rate at five percent than a single $670
sale would exceed the cap." He explained that currently, the City
and Borough of Juneau (CBJ) receives $33.50 on a $670 sale at the
five-percent local tax rate. Were a nine-percent tax implemented as
a result of the State imposing a four-percent tax in addition to
the CBJ five-percent tax, the resulting tax paid on a $670 sale
would be $60.00. This is the tax limitation specified in SB 366.
Under the guidelines of the bill, the CBJ would receive $39.60 or
66 percent of the revenue. Were the CBJ to lower its current tax
rate to four-percent, a combined CBJ/State sales tax rate of eight-
percent would be charged and a $670.00 sale with an eight-percent
tax rate would garner the CBJ $33.23 or 62-percent of the total
sales tax revenue. In addition, the maximum sale amount through
which to obtain the $60.00 tax limitation factored by an eight-
percent sales tax would be $750.00. Of that amount, the CBJ would
receive 62-percent or a $67.00 return. Therefore, the CBJ would
receive more money, on a maximum purchase, were it to lower the
local tax rate one percent.
Co-Chair Wilken ordered the bill HELD in Committee.
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