Legislature(2001 - 2002)

03/22/2002 09:20 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       March 22, 2002                                                                                           
                          9:20 AM                                                                                               
                                                                                                                                
TAPE HFC 02 - 62, Side A                                                                                                        
TAPE HFC 02 - 62, Side B                                                                                                        
TAPE HFC 02 - 63, Side A                                                                                                        
TAPE HFC 02 - 63, Side B                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 9:20 AM.                                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Eldon Mulder, Co-Chair                                                                                           
Representative Bill Williams, Co-Chair                                                                                          
Representative Con Bunde, Vice-Chair                                                                                            
Representative Eric Croft                                                                                                       
Representative John Davies                                                                                                      
Representative Richard Foster                                                                                                   
Representative John Harris                                                                                                      
Representative Bill Hudson                                                                                                      
Representative Ken Lancaster                                                                                                    
Representative Carl Moses                                                                                                       
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative  Gary  Stevens; Representative  Peggy  Wilson;                                                                   
Representative   Ethan  Berkowitz;   David  Teal,   Director,                                                                   
Legislative   Finance   Division;   Kevin   Ritchie,   Alaska                                                                   
Municipal  League,  Juneau; Peter  Ecklund,  Staff,  Co-Chair                                                                   
Williams; Denny  Dewitt, Staff, Representative  Eldon Mulder;                                                                   
Lori Backes,  Staff, Representative Whitaker;  Larry Persily,                                                                   
Deputy Commissioner, Department of Revenue;                                                                                     
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
There were no teleconference testifiers.                                                                                        
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 20     "An Act relating to state aid to municipalities                                                                       
          and certain  other recipients, and for  the village                                                                   
          public   safety   officer  program;   relating   to                                                                   
          municipal dividends;  relating to the public safety                                                                   
          foundation program;  and providing for an effective                                                                   
          date."                                                                                                                
                                                                                                                                
          CSHB 20 (FIN) was REPORTED out of Committee with a                                                                    
          "do pass" recommendation and with four new fiscal                                                                     
          impact notes: (3) CED and COR.                                                                                        
                                                                                                                                
HB 229    "An   Act  imposing  a   tax  on  employment;   and                                                                   
          providing for an effective date."                                                                                     
                                                                                                                                
HB 303    "An Act  relating to the  levy and collection  of a                                                                   
          sales tax; and providing for an effective date."                                                                      
                                                                                                                                
HB 304    "An Act  relating to  disposition of income  of the                                                                   
          permanent fund; and providing for an effective                                                                        
          date."                                                                                                                
                                                                                                                                
          CSHB 304 (FIN) was REPORTED out of Committee with                                                                     
          a "do pass" recommendation and with previously                                                                        
          published fiscal note: REV #1.                                                                                        
HOUSE BILL NO. 20                                                                                                             
                                                                                                                                
     "An  Act relating  to state  aid  to municipalities  and                                                                   
     certain  other recipients,  and for  the village  public                                                                   
     safety   officer   program;    relating   to   municipal                                                                   
     dividends;  relating  to  the public  safety  foundation                                                                   
     program; and providing for an effective date."                                                                             
                                                                                                                                
Representative  Carl Moses MOVED  to Rescind the  Committee's                                                                   
action  in  failing  to  adopt  Amendment  6  (Lancaster  and                                                                   
Moses). Representative Moses WITHDREW his motion.                                                                               
                                                                                                                                
Representative Carl  Moses MOVED to ADOPT Amendment  8: state                                                                   
aid to unincorporated communities:                                                                                              
                                                                                                                                
     Sec.   29.60.140.      State   aid   to   unincorporated                                                                   
     communities.  (a)  Subject  to  (c) of this section, the                                                                   
     [THE]  department  shall   pay  to  each  unincorporated                                                                   
     community  an entitlement  each fiscal  year to  be used                                                                   
     for a public  purpose.  The department  with advice from                                                                   
     the Department  of Law shall determine whether  there is                                                                   
     in   each  unincorporated   community  an   incorporated                                                                   
     nonprofit entity  or a Native village council  that will                                                                   
     agree  to receive  and spend  the entitlement.   If  the                                                                   
     community  is   located  in  a  borough   or  a  unified                                                                   
     municipality,  the department  may  pay the  entitlement                                                                   
     only   to  the  entity that  has  been  approved by  the                                                                   
     assembly, and the department  must have written evidence                                                                   
     of that approval.   If there is more than  one qualified                                                                   
     entity   in   an   unincorporated   community   in   the                                                                   
     unorganized borough, the  department shall pay the money                                                                   
     under the entitlement to  the entity that the department                                                                   
     finds  most qualified  to receive  and spend the  money.                                                                   
     The department  may not pay  money under  an entitlement                                                                   
     to a  Native village council  unless the  council waives                                                                   
     immunity from suit for claims  arising out of activities                                                                   
     of the council related to  the entitlement.  A waiver of                                                                   
     immunity from  suit under this  subsection must be  on a                                                                   
     form provided by the Department  of Law.  If there is no                                                                   
     qualified  incorporated   nonprofit  entity   or  Native                                                                   
     village council  in an unincorporated community  that is                                                                   
     willing  to  receive  money under  an  entitlement,  the                                                                   
     entitlement  for that unincorporated  community  may not                                                                   
     be paid.  Neither this subsection  nor any  action taken                                                                   
     under  it   enlarges  or  diminishes   the  governmental                                                                   
     authority or  jurisdiction of a Native  village council.                                                                   
     If  at   least  $41,472,000  is  appropriated   for  all                                                                   
     entitlements  under  as  29.60.010  -  29.60.310  for  a                                                                   
     fiscal  year, the  entitlement  for each  unincorporated                                                                   
     community  under this  subsection for  that year  equals                                                                   
     $40,000.  Otherwise, the entitlement equals $25,000.                                                                       
          (b)  In this section "unincorporated community"                                                                       
     means a place  [IN THE UNORGANIZED BOROUGH]  that is not                                                                   
     incorporated as  a city and in which 25  or more persons                                                                   
     reside as a social unit.                                                                                                   
                                                                                                                                
     *  Sec. 4.   AS  29.60.140 is  amended by  adding a  new                                                                   
     subsection to read:                                                                                                        
          (c)  The department may pay an entitlement under                                                                      
     (a) of this  section for an unincorporated  community in                                                                   
     a borough  only to a  qualified entity that  provides at                                                                   
     least  three  of  the  following   services  within  the                                                                   
     community:                                                                                                                 
          (1)  fire protection;                                                                                                 
          (2)  emergency medical;                                                                                               
          (3)  water and sewer;                                                                                                 
          (4)  solid waste management;                                                                                          
          (5)  public road or ice road maintenance;                                                                             
          (6)  public health;                                                                                                   
          (7)  search and rescue.                                                                                               
                                                                                                                                
Co-Chair Williams OBJECTED for the purpose of discussion.                                                                       
                                                                                                                                
Representative Lancaster  explained that the  amendment would                                                                   
allow  the funds  to  go to  the  borough or  organized  area                                                                   
outside of the small community  that is organizing; otherwise                                                                   
it is identical to Amendment 6.                                                                                                 
                                                                                                                                
KEVIN  RITCHIE,  ALASKA  MUNICIPAL  LEAGUE,  JUNEAU  provided                                                                   
information  on  the  amendment.  He noted  that  the  Alaska                                                                   
Municipal  League  did  not request  the  amendment  but  has                                                                   
assisted in its drafting. He explained  that only unorganized                                                                   
communities  in  the  unorganized  borough  receive  capital-                                                                   
matching  grants. If  a borough were  formed to  incorporated                                                                   
surrounding small  [unorganized] communities they  would give                                                                   
up their capital  matching grants. The borough  would receive                                                                   
a small grant, but it would not  be as much as they currently                                                                   
receive as  small communities.  The amendment would  remove a                                                                   
disincentive for  communities to organized. The  same capital                                                                   
matching  money  would  be  provided   to  small  communities                                                                   
whether or not they are in a borough.  The amendment would be                                                                   
an incentive  to incorporation.  Currently, if there  were 10                                                                   
small villages that wanted to  form a borough they would have                                                                   
to  give up  their capital-matching  grants  of $25  thousand                                                                   
dollars each when they became  part of a borough. The borough                                                                   
would receive a  grant but it would be much  smaller than the                                                                   
combined amount of the separate grants.                                                                                         
                                                                                                                                
Representative  Croft  concluded  that  the  amendment  would                                                                   
compliment Amendment 2 (adopted  by the committee on 3/20/02)                                                                   
and would encourage incorporation.                                                                                              
                                                                                                                                
Vice-Chair  Bunde agreed  that  the amendment  would  provide                                                                   
encouragement  for incorporation. He  observed that  he would                                                                   
support  the amendment  with the  expectation  that it  would                                                                   
lead  to the  creation  of local  revenue  stream that  would                                                                   
allow communities  to remain incorporated. He  suggested that                                                                   
future legislatures  would need  to address  the issue  if it                                                                   
does  not  lead  local  communities   toward  self-sustaining                                                                   
revenues.                                                                                                                       
                                                                                                                                
Mr.  Ritchie   explained  that  each  unorganized   community                                                                   
receives  between  $3  -  $4   thousand  dollars  in  revenue                                                                   
sharing. There would be between  20 - 30 communities affected                                                                   
by the legislation. They would  have to provide three or more                                                                   
of the following services:                                                                                                      
                                                                                                                                
     (1) fire protection;                                                                                                       
     (2)  emergency medical;                                                                                                    
     (3)  water and sewer;                                                                                                      
     (4)  solid waste management;                                                                                               
     (5)  public road or ice road maintenance;                                                                                  
     (6)  public health;                                                                                                        
     (7)  search and rescue.                                                                                                    
                                                                                                                                
If there were 20 or 30 communities  the total cost of revenue                                                                   
sharing  would be  approximately $100  thousand dollars.  Mr.                                                                   
Ritchie  observed that  each  of these  20  - 30  communities                                                                   
would receive $25 thousand dollars  from the capital matching                                                                   
grant  program.  The  capital-matching   grant  combines  the                                                                   
municipal  and unincorporated  portions. The amendment  would                                                                   
add 20 -30  communities to the unincorporated  portion, which                                                                   
would prorate the amount down.                                                                                                  
                                                                                                                                
There being NO OBJECTION, Amendment 8 was adopted.                                                                              
                                                                                                                                
Representative Foster  MOVED to report  CSHB 20 (FIN)  out of                                                                   
Committee with  the accompanying fiscal note.  There being NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
CSHB 20 (FIN) was REPORTED out  of Committee with a "do pass"                                                                   
recommendation  and with  four new fiscal  impact notes:  (3)                                                                   
CED and COR.                                                                                                                    
HOUSE BILL NO. 304                                                                                                            
                                                                                                                                
     "An Act relating to disposition of income of the                                                                           
     permanent fund; and providing for an effective date."                                                                      
                                                                                                                                
Co-Chair   Williams  observed   that  a  proposed   committee                                                                   
substitute,  work  draft  22-LS1207\L,  3/21/02  changed  the                                                                   
split ratio to 40/40/20.                                                                                                        
                                                                                                                                
PETER ECKLUND,  STAFF, CO-CHAIR  WILLIAMS explained  that the                                                                   
proposed committee  substitute  uses the endowment  principle                                                                   
and percent of market value payment  method for the Permanent                                                                   
Fund.  He  explained that  7  percent  of  the value  of  the                                                                   
Permanent Fund  would be  taken in FY03,  6 percent  in FY04,                                                                   
and 5  percent thereafter.  An education  fund of 40  percent                                                                   
would  be created  in  the  General Fund.  An  infrastructure                                                                   
account  would  be created  and  receive  20 percent  of  the                                                                   
funds.  Dividends  would  be   paid  from  the  remaining  40                                                                   
percent.  He emphasized  that deferred  maintenance needs  of                                                                   
the state of Alaska are over one billion dollars.                                                                               
                                                                                                                                
Representative Hudson acknowledged  the work of the chairman.                                                                   
He  agreed  with  most  aspects  of  the  proposed  committee                                                                   
substitute,  with  one exception.  The  5 percent  of  market                                                                   
value  principal originated  with the  Alaska Permanent  Fund                                                                   
Corporation.  The  five percent  payout  would  automatically                                                                   
inflation proof  the fund. He observed that  Governor Hammond                                                                   
referred   to   a  30/30/30   payout:   inflation   proofing/                                                                   
dividend/general  government.  If you  take  5 percent  after                                                                   
inflation  proofing  and divide  it  on  a 50/50  basis,  the                                                                   
result  would be  35  percent to  general  government and  35                                                                   
percent  to the  dividend. He  explained  that the  five-year                                                                   
average shows a  reducing dividend. He spoke in  support of a                                                                   
50/50  dividend/state split,  which would  keep dividends  at                                                                   
approximately the same level.  The FY04 dividend amount would                                                                   
only  be $35  dollars  less  than  the current  amount  under                                                                   
Representative Hudson's  proposal. He asked the  Committee to                                                                   
consider changing  the dividend amount to 50  percent on page                                                                   
2, line 17.  The infrastructure percentage on page  3, line 3                                                                   
could be 10 to 15 percent and  the education account could be                                                                   
40 - 35 percent. He pointed out  that the 50/50 provision has                                                                   
been  well addressed.  A  40  percent division  would  reduce                                                                   
dividends by $300 per person.                                                                                                   
                                                                                                                                
Representative Whitaker observed  that the proposed committee                                                                   
substitute no longer resembles  the original legislation, but                                                                   
indicated  that  he  would  support  the  proposed  committee                                                                   
substitute.  He  noted  that the  legislation  has  become  a                                                                   
reformulation  of  the  Permanent  Fund.  He  recognized  the                                                                   
challenges before  the legislation, but stressed  that action                                                                   
must be taken.                                                                                                                  
                                                                                                                                
Representative   John  Davies   spoke  in   support  of   the                                                                   
legislation. He pointed  out that the provisions  of the bill                                                                   
have been well discussed. There  was discussion by the Alaska                                                                   
Permanent Fund  Corporation and  the fiscal policy  group. He                                                                   
felt that  the changes  recommended by Representative  Hudson                                                                   
would assist passage of the bill.                                                                                               
                                                                                                                                
Representative Croft  spoke in support  of a 50/50  split. He                                                                   
noted  that  Alaska is  the  only  state  that has  a  common                                                                   
ownership  of  its resources.  The  public might  not  accept                                                                   
anything less  than 50/50. He  maintained that a  50/50 split                                                                   
would be fair.                                                                                                                  
                                                                                                                                
Representative  Lancaster   stressed  that  the   plan  would                                                                   
protect the  dividend into the  future and expressed  support                                                                   
for the 50/50 provision.                                                                                                        
                                                                                                                                
Vice-Chair Bunde  summarized that "100 percent  of nothing is                                                                   
still  nothing"  and pointed  out  that  the dividend  is  in                                                                   
danger if no action is taken.                                                                                                   
                                                                                                                                
Co-Chair   Mulder   MOVED   to   ADOPT   proposed   committee                                                                   
substitute, work draft, 22-LS1207\L, Cook 3/21/02.                                                                              
                                                                                                                                
RECESSED:                                                                                                                     
                                                                                                                                
The Committee recessed at 10:05 a.m.                                                                                            
                                                                                                                                
RECONVENED:                                                                                                                   
                                                                                                                                
The Committee reconvened at 2:40 p.m.                                                                                           
                                                                                                                                
Representative  Hudson  provided  members  with  Amendment  1                                                                   
(copy on file). He explained that  the amendment would pay 45                                                                   
percent to dividends, 35 percent  to education and 20 percent                                                                   
to the  infrastructure or  economic development account.  The                                                                   
FY03 dividend would  not change. He observed  that, under the                                                                   
amendment,  dividends would  be  $100 dollars  less in  FY04.                                                                   
Dividends would  still grow, at approximately  $100 less than                                                                   
under the status quo. In FY03,  $965 million dollars would be                                                                   
available  for  to  the  General   Fund.  Approximately  $839                                                                   
million dollars  would be  available in  FY04. By FY10  there                                                                   
would be  approximately  $948 million  dollars to offset  the                                                                   
deficit. Inflation  proofing would  continue at 7  percent in                                                                   
FY03,6 percent in FY04, and 5 percent in FY05 and out.                                                                          
                                                                                                                                
Representative Hudson MOVED to  ADOPT Amendment 1: 45 percent                                                                   
to dividends, 35 percent to an  education fund and 20 percent                                                                   
to the infrastructure/economic development account.                                                                             
                                                                                                                                
Representative  John  Davies  questioned  why 5  percent  was                                                                   
taken   out   of   education   instead   of   infrastructure.                                                                   
Representative Hudson  responded that the amendment  would be                                                                   
a statutory allocation  and pointed out that  the legislature                                                                   
could  chose to  change  the ratio.  He  stated  that he  was                                                                   
responding to the need for deferred  maintenance. He observed                                                                   
that there is  a one billion dollar need and  reiterated that                                                                   
it could be changed in the future.  He explained that by FY10                                                                   
the education fund  would be more than $600  million dollars.                                                                   
The intent  is to find a  middle ground while  protecting the                                                                   
Permanent Fund and dividends.                                                                                                   
                                                                                                                                
Representative   Croft   observed  that   the   spreadsheet's                                                                   
projected  rate of return  is 8.25  percent. He thought  that                                                                   
the  Alaska Permanent  Fund Corporation's  projected rate  of                                                                   
return  was  7.95 percent.  He  expressed  support  for a  50                                                                   
percent  payout to  dividends. He  stated that  he would  not                                                                   
object  to the  amendment because  it  moved the  legislation                                                                   
closer to the 50 percent target.                                                                                                
                                                                                                                                
There being NO OBJECTION, Amendment 1 was adopted.                                                                              
                                                                                                                                
Representative Croft  MOVED to ADOPT Amendment  2: 35 percent                                                                   
to  education, 50  percent to  dividends, and  15 percent  to                                                                   
infrastructure. Co-Chair Williams OBJECTED.                                                                                     
                                                                                                                                
TAPE HFC 02 - 62, Side B                                                                                                      
                                                                                                                                
Representative Whitaker  referred to the Constitution  of the                                                                   
state of  Alaska, Article 9,  section 16. He  maintained that                                                                   
the amendment  has been  ignored since it  was put  in place.                                                                   
The constitutional amendment would  dedicate one-third of the                                                                   
expenditures of  the state of  Alaska to be spent  on capital                                                                   
projects. He noted that the issues  are whether an additional                                                                   
$100 dollars  would go to dividends  or be used to  build the                                                                   
state.                                                                                                                          
                                                                                                                                
Representative John Davies interpreted  Article 9, section 16                                                                   
to mean not  more than one-third of the state's  budget would                                                                   
go  to  infrastructure.  He observed  that  the  1999  ballot                                                                   
initiative  indicated  that  the   public  wants  to  protect                                                                   
dividends. He  emphasized that it  is easy for the  public to                                                                   
understand a 50/50 split.                                                                                                       
                                                                                                                                
Representative Whitaker spoke against the amendment.                                                                            
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Croft, Davies, Foster, Moses                                                                                          
OPPOSED:  Bunde,   Harris,   Hudson,   Lancaster,   Whitaker,                                                                   
          Williams, Mulder                                                                                                      
                                                                                                                                
The MOTION FAILED (4-7).                                                                                                        
                                                                                                                                
Representative Foster  MOVED to report CSHB 304  (FIN) out of                                                                   
Committee with  the accompanying fiscal note.  Representative                                                                   
John Davies OBJECTED for the purpose  of discussion. He noted                                                                   
that he still supports a 50/50 split.                                                                                           
                                                                                                                                
Representative  Foster WITHDREW his  motion to move  CSHB 304                                                                   
(FIN)                                                                                                                           
                                                                                                                                
Co-Chair Mulder MOVED to ADOPT  Amendment 3: "The legislation                                                                   
may appropriate  to the dividend  fund the additional  amount                                                                   
needed  so that  the total  amount  of the  2002 dividend  is                                                                   
$1,540. He explained  that the intention is to  keep the FY02                                                                   
dividend at it's current level.  There being NO OBJECTION, it                                                                   
was so ordered.                                                                                                                 
                                                                                                                                
Co-Chair  Mulder  MOVED  to  report CSHB  304  (FIN)  out  of                                                                   
Committee with  the accompanying fiscal note.  Representative                                                                   
John Davies and Representative Croft OBJECTED.                                                                                  
                                                                                                                                
Representative  Croft  stressed  that  there  are  structural                                                                   
problems with the  manner that the dividend  and earnings are                                                                   
calculated. He  maintained that  dividend creep has  to stop.                                                                   
He  did not  think  that  the  proposal would  be  successful                                                                   
without  substantial  sideboards,  new  revenues and  a  more                                                                   
clear and fair distribution.                                                                                                    
                                                                                                                                
Representative  Hudson  spoke   in  support  of  the  amended                                                                   
legislation.  He  maintained  that  the  Permanent  Fund  was                                                                   
intended  to  meet the  demand  for  state support  when  oil                                                                   
revenues declined. He stressed that the plan was balanced.                                                                      
                                                                                                                                
Representative Whitaker spoke  in support of the legislation,                                                                   
but emphasized  that it  cannot stand-alone.  He pointed  out                                                                   
that [the  1999 ballot  initiative  to use  a portion of  the                                                                   
Permanent Fund] was not supported.                                                                                              
                                                                                                                                
Representative  John  Davies  pointed  out  that  the  amount                                                                   
available for  the education fund  would be diminished  in FY                                                                   
05, but  would start  to grow again.  He stressed  that there                                                                   
would need  to be an $80  million dollar increase  in general                                                                   
funds to  maintain full funding  for education when  the fund                                                                   
dips.                                                                                                                           
                                                                                                                                
Co-Chair  Williams stressed  that the  legislation is  a tool                                                                   
and that the intent is to fully fund education.                                                                                 
                                                                                                                                
Vice-Chair  Bunde maintained  that education  has never  been                                                                   
reduced,  although  he  acknowledged  that it  had  not  been                                                                   
increased.                                                                                                                      
                                                                                                                                
A roll  call vote was  taken on the  motion to move  the bill                                                                   
from Committee.                                                                                                                 
                                                                                                                                
IN FAVOR: Bunde,    Foster,   Harris,   Hudson,    Lancaster,                                                                   
          Whitaker, Williams, Mulder                                                                                            
OPPOSED: Croft, Davies, Moses                                                                                                   
                                                                                                                                
The MOTION PASSED (8-3).                                                                                                        
                                                                                                                                
CSHB  304 (FIN)  was REPORTED  out  of Committee  with a  "do                                                                   
pass"  recommendation and  with  previously published  fiscal                                                                   
note: REV #1.                                                                                                                   
HOUSE BILL NO. 229                                                                                                            
                                                                                                                                
     "An Act imposing a tax on employment; and providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
Co-Chair  Mulder  stated that  it  would be  appropriate  for                                                                   
Representative Croft  to add his name to the  legislation and                                                                   
allow   Representative   Stevens   to  withdraw   his   name.                                                                   
Representative Croft agreed.                                                                                                    
                                                                                                                                
Representative   Croft   provided   members   with   proposed                                                                   
committee substitute,  work draft 22-LS0842\L,  2/22/02 (copy                                                                   
on file).  He explained that  the committee substitute  would                                                                   
provide  the income  tax  recommended  by the  fiscal  policy                                                                   
caucus, an  alcohol tax  at 10-cents a  drink, a  cruise ship                                                                   
head tax and a motor fuel tax.                                                                                                  
                                                                                                                                
Representative Croft MOVED to  AMENDED the proposed committee                                                                   
substitute  by removing the  cruise head  tax portion  of the                                                                   
bill. There being NO OBJECTION, it was so ordered.                                                                              
                                                                                                                                
Co-Chair  Mulder indicated  that the  original sponsor  would                                                                   
like to  remove their name  from the legislation  as amended.                                                                   
Representative  Croft  stated  that  he  would  takeover  the                                                                   
sponsorship of the legislation  in whatever manner was deemed                                                                   
appropriate.                                                                                                                    
                                                                                                                                
Representative Croft spoke in  support of the legislation. He                                                                   
explained that the  legislation as amended would  provide a 4                                                                   
percent of taxable  income tax. The proposal  is a compromise                                                                   
between  a flat tax  and a  more progressive  tax based  on a                                                                   
portion of  tax liability. A  taxable income tax  would allow                                                                   
deductions.  The motor  fuel tax  portion of  the bill  would                                                                   
allow a mechanism to fund deferred maintenance.                                                                                 
                                                                                                                                
Representative  Hudson   requested  that  a   spreadsheet  be                                                                   
created to show  the approximate amounts to be  earned by the                                                                   
different elements. Representative  Whitaker pointed out that                                                                   
a new fiscal note would be appropriate.                                                                                         
                                                                                                                                
Co-Chair Mulder  explained that the  intent would be  to take                                                                   
action on the legislation on Monday after review.                                                                               
                                                                                                                                
Representative  Harris MOVED to  AMEND on  page 12,  line 11:                                                                   
increase existing taxes on alcohol by 50 percent.                                                                               
                                                                                                                                
Representative  Croft OBJECTED.  He observed  that under  the                                                                   
committee  substitute  the  alcohol  tax  increase  would  be                                                                   
approximately  .10 cents  a drink. A  fifty percent  increase                                                                   
would only  increase the tax by  about a cent and a  half per                                                                   
drink. He  noted that the  tax has not  been increased  for a                                                                   
long time  and would not come  close to addressing  the needs                                                                   
of the state.                                                                                                                   
                                                                                                                                
Co-Chair  Mulder clarified  that  there would  be 50  percent                                                                   
increase over the current taxation in all three categories.                                                                     
                                                                                                                                
Representative  John  Davies  reiterated  that  the  increase                                                                   
would be less than .02 cents a drink.                                                                                           
                                                                                                                                
Representative Croft stressed  that most items have increased                                                                   
beyond 50 percent since 1960.  The increase beginning in 2002                                                                   
would not come near to the pre inflation cost.                                                                                  
                                                                                                                                
Representative  Harris  WITHDREW  his  motion  to  amend  the                                                                   
alcohol tax to 50 percent.                                                                                                      
                                                                                                                                
HB  229  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
HOUSE BILL NO. 303                                                                                                            
                                                                                                                                
     "An Act relating to the levy and collection of a sales                                                                     
     tax; and providing for an effective date."                                                                                 
                                                                                                                                
Co-Chair Mulder MOVED to ADOPT  proposed committee substitute                                                                   
work draft, 22LS1206\T, Kurtz,  3/22/02 (copy on file). There                                                                   
being NO OBJECTION, it was so ordered.                                                                                          
                                                                                                                                
DENNY  DEWITT, STAFF,  REPRESENTATIVE  ELDON MULDER  reviewed                                                                   
the  committee  substitute.  He noted  that  the  legislation                                                                   
would bring  a sales  tax before  the Committee. He  reviewed                                                                   
the primary issues  discussed by the subcommittee.  The first                                                                   
issue  was preemption.  The legislation  would preempt  local                                                                   
government  from  charging a  different  sales  tax from  the                                                                   
state.  Local governments  could add  a local  tax using  the                                                                   
guidelines  of the  bill,  which would  be  collected by  the                                                                   
state at no charge to the municipality.  There would one type                                                                   
of sales  tax, one set of  exemptions, and local  governments                                                                   
could decide if they wanted to  add a percentage to the state                                                                   
tax. Businesses  that  collect the  tax and  remit it to  the                                                                   
state appropriately, within the  appropriate timeframe, would                                                                   
keep one  percent of the  amount collected  as a fee  for the                                                                   
collection process.                                                                                                             
                                                                                                                                
Representative Davies  summarized that the  legislation would                                                                   
require  any local  entity  to  use the  exemption  structure                                                                   
contained in the bill.                                                                                                          
                                                                                                                                
Mr.  DeWitt noted  that local  options for  special taxes  in                                                                   
Title 29 would not be affected: including bed taxes.                                                                            
                                                                                                                                
Mr. DeWitt  reviewed the  legislation  by section. Section  1                                                                   
assists boroughs  with their  taxes. Establishes  the initial                                                                   
sales tax and eliminates the collection  portion, which would                                                                   
shift to the state.  Sections 2 and 3 confirm  privacy at the                                                                   
state level.  Section 4 is  the assessment and  collection of                                                                   
taxation. Section 5 allows a borough  to levy a general sales                                                                   
tax on goods and services consistent  with the state. Section                                                                   
6 allows  cities the same  opportunity. Section 7  begins the                                                                   
collection  of the  sales  tax and  authorizes  the state  to                                                                   
collect on behalf  of the municipality. Section  8 begins the                                                                   
sales  and use  tax. This  provision  is needed  in order  to                                                                   
access  the  use tax  through  Internet  sales. The  use  tax                                                                   
follows the  sales tax and  is consistent. There  are several                                                                   
areas that would need technical  amendments to be recommended                                                                   
by the Department of Revenue.                                                                                                   
                                                                                                                                
Mr. DeWitt reviewed technical  amendments. On page 3, line 3:                                                                   
delete "in  the state."  He noted the  state already  has the                                                                   
ability  to  levy  the  tax.  Subsections  (b)  and  (c)  are                                                                   
rewritten  to  replace  "tangible   personal  property"  with                                                                   
"goods or use  of real property". He explained  that language                                                                   
would provide consistency.                                                                                                      
                                                                                                                                
Mr. DeWitt noted that subsection  (2) on page 3, line 26 - 27                                                                   
would be  amended: "real  property" and "and  transportation"                                                                   
would be removed.  "Property" on line 27 would  be changed to                                                                   
"goods".                                                                                                                        
                                                                                                                                
LORI BACKES,  STAFF, REPRESENTATIVE WHITAKER,  explained that                                                                   
the intent  is to  allow an exemption  for services  that are                                                                   
performed in  the act  of creating a  component of  a product                                                                   
for resale.                                                                                                                     
                                                                                                                                
TAPE HFC 02 - 63, Side A                                                                                                      
                                                                                                                                
Representative  Lancaster clarified  that plumbing  installed                                                                   
in a house being  built would not be taxed because  the house                                                                   
would be  taxed when  sold. Representative Hudson  questioned                                                                   
if house  components would be  subject to the sales  tax. Co-                                                                   
Chair Mulder explained  that only the finished  product would                                                                   
be taxed. Mr.  DeWitt noted that there is a  specific section                                                                   
regarding construction.                                                                                                         
                                                                                                                                
Mr. DeWitt  reviewed exemptions  under section 43.44.020  and                                                                   
observed  that  they  attempted to  include  all  educational                                                                   
institutions were included.                                                                                                     
                                                                                                                                
     (1)  goods sold, real property sold, rents, or services                                                                    
     performed that are                                                                                                         
          (A)  explicitly exempted from taxation under                                                                          
          another provision of state law; or                                                                                    
          (B)  exempt from taxation under federal law,                                                                          
          including sales to the federal government, and                                                                        
          purchases made with                                                                                                   
               (i)  food coupons, food stamps, or other                                                                         
               types of certificates issued under 7 U.S.C.                                                                      
               2011 - 2036 (Food Stamp Act); and                                                                                
               (ii)    food instruments,  food  vouchers,  or                                                                   
               other  types of  certificates issued  under 42                                                                   
               U.S.C.  1786 (special  supplemental  nutrition                                                                   
               program for women, infants, and children);                                                                       
                                                                                                                                
     (2)   sales  of goods,  real property,  or services  for                                                                   
     resale,  including   the  sale  and   transportation  of                                                                   
     property  that  are  used  in connection  with  or  will                                                                   
     become  an  ingredient    or  component  part  of  goods                                                                   
     manufactured, processed, or fabricated for resale;                                                                         
                                                                                                                                
     (3)  electricity,  natural gas, water and  sewer utility                                                                   
     services,   and   fuel   for   heating   or   electrical                                                                   
     generation;                                                                                                                
                                                                                                                                
     (4)     funeral,  cemetery,  and  crematory   goods  and                                                                   
     services;                                                                                                                  
                                                                                                                                
     (5)  health care services  provided by a person licensed                                                                   
     or certified  to provide those services under  AS 08, by                                                                   
     a public home  care provider as that term  is defined in                                                                   
     AS  47.05.017(c), by  a health  care facility  operating                                                                   
     under a certificate of need  issued under AS 18.07, by a                                                                   
     hospital  licensed under  AS  18.20, or  by an  assisted                                                                   
     living home licensed under AS 47.33;                                                                                       
                                                                                                                                
     (6)     prescription   drugs,   devices,  and   supplies                                                                   
     prescribed  by  a  person licensed  to  prescribe  those                                                                   
     goods under AS 08;                                                                                                         
                                                                                                                                
     (7)  interest earned or paid  by banks. savings and loan                                                                   
     associations, credit  unions, and investment  banks, and                                                                   
     the  following sales  and  services  provided by  banks,                                                                   
     brokerage firms,  savings and loan associations,  credit                                                                   
     unions, and investment banks:                                                                                              
          (A)     services   associated   with  any   deposit                                                                   
          accounts,  including   service  fees,  insufficient                                                                   
          funds fees, and attachment fees;                                                                                      
          (B)   fees for the  purchase of bank  checks, money                                                                   
          orders,  traveler's  checks, and  similar  products                                                                   
          for payment;                                                                                                          
          (C)   loan  fees and  points  associated with  loan                                                                   
          transactions;                                                                                                         
          (D)    pass-through  charges on  loan  transactions                                                                   
          that include sales tax;                                                                                               
          (E)   services associated with the  sale, exchange,                                                                   
          or transfer  of currency, stocks, bonds,  and other                                                                   
          securities;                                                                                                           
                                                                                                                                
     (8)    sales  by federal,  state,  or  local  government                                                                   
     entities;                                                                                                                  
                                                                                                                                
     (9) wages, salaries, commissions,  and any other form of                                                                   
     remuneration paid to employees for personal services;                                                                      
                                                                                                                                
     (10)  educational  services provided by  a non-exempt or                                                                   
     exempt  religious  or other private school  reporting to                                                                   
     the  commissioner  of education  and  early  development                                                                   
     under   AS   14.45.030   or   14.45.110(b)   or   by   a                                                                   
     postsecondary  educational   institution  authorized  to                                                                   
     operate under AS 14.48;                                                                                                    
                                                                                                                                
     (11)  refined petroleum products taxed under AS 43.40;                                                                     
                                                                                                                                
     (12)   real  estate rentals  of 30  consecutive days  or                                                                   
     more;                                                                                                                      
                                                                                                                                
     (13)  construction services;                                                                                               
                                                                                                                                
     (14)  admission to museums and historic sites;                                                                             
                                                                                                                                
     (15)   sales made  to an entity  described in  26 U.S.C.                                                                   
     501(c)(3)  (Internal  Revenue   Code)  and  exempt  from                                                                   
     federal income tax under 26 U.S.C. 501(a);                                                                                 
                                                                                                                                
     (16)   sales made  by an entity  described in  26 U.S.C.                                                                   
     501(c)(3)  (Internal    Revenue Code)  and  exempt  from                                                                   
     federal income tax under  26 U.S.C. 501(a) if the income                                                                   
     from the sale is exempt from federal income taxation;                                                                      
                                                                                                                                
     (17)  casual  and isolated sales or rentals  by a seller                                                                   
     who  does  not  regularly  engage  in  the  business  of                                                                   
     selling goods  or services, or making rentals,  but only                                                                   
     if (A)  the total sales do  not exceed $1,000 a year and                                                                   
     the sales  of goods do not  occur for more than  14 days                                                                   
     in a calendar year; or (B)   the sales of goods are made                                                                   
     by a licensed  business to sell business  equipment used                                                                   
     in the business and not held as inventory;                                                                                 
                                                                                                                                
     (18)   sales  of  insurance and  bonds  of guaranty  and                                                                   
     fidelity, and commissions on those sales.                                                                                  
                                                                                                                                
Mr. Dewitt recommended  that brokerage firms be  added to the                                                                   
subsection   7   exemptions.   He   also   recommended   that                                                                   
subsections  (A) -  (E) include  a  subsection (F):  interest                                                                   
earned and paid.  It was the intent of the  subcommittee that                                                                   
subsection (8)  refer to sales  and purchases.  In subsection                                                                   
(10)  definitions were  used to  recognize  all schools  that                                                                   
could generally be  brought under the rubric, in  terms of K-                                                                   
12.  Postsecondary schools  operate under  AS 14.48.  Refined                                                                   
petroleum  products that  are  currently taxed  would not  be                                                                   
subject to  the sales tax, such  as aviation and  marine fuel                                                                   
taxes.  Short-term  hotel  rentals would  be  exempted.  They                                                                   
would be available to be taxed  on a bed tax basis with local                                                                   
governments.                                                                                                                    
                                                                                                                                
Representative  John  Davies  questioned  how  the  provision                                                                   
would  affect contracts  with  tour groups,  which block  off                                                                   
hotel rooms for a season. Mr.  Dewitt thought that they would                                                                   
be  under the  less  than 30-day  provision,  since they  are                                                                   
eventually   rented    to   individuals.    Co-Chair   Mulder                                                                   
acknowledged  that it is  the intent  of the subcommittee  to                                                                   
include blocks of rooms under the 30-day provision.                                                                             
                                                                                                                                
Mr. Dewitt  observed that  subsection  (15) applies to  sales                                                                   
made  to a  non-profit  entity.  Subsection (16)  applies  to                                                                   
sales made  by the  non-profit entity,  which would  apply to                                                                   
the  sale  of  Girl Scout  cookies  and  other  fund  raising                                                                   
activities. The purchase  and sale of Girl Scout  cookies and                                                                   
other fund  raising items by  churches and other  non-profits                                                                   
would be exempted.                                                                                                              
                                                                                                                                
Mr. Dewitt  noted that garage  sales would be  exempted under                                                                   
subsection  (17),  unless  the   gross  would  exceed  $1,000                                                                   
dollars a year. Representative  Hudson questioned if arts and                                                                   
craft shows at malls would be  included in the exemption. Co-                                                                   
Chair Mulder  responded that  if they are  a weekly  event it                                                                   
would not be a  causal sale and they would be  subject to the                                                                   
sales tax. The provision is for  causal sales: the occasional                                                                   
sale. Non-profits would be excluded.                                                                                            
                                                                                                                                
Representative  Lancaster questioned  if a certificate  would                                                                   
be  needed to  collect  the tax.  Ms.  Backes  stated that  a                                                                   
certificate would  not be required to collect the  tax, but a                                                                   
certificate would be required for exempt groups.                                                                                
                                                                                                                                
Mr. Dewitt  noted that  Sec. 43.44.030  (a) limits  the sales                                                                   
and use taxes  levied under AS 43.44.010 to  the first $2,000                                                                   
dollars of each separate sale,  rent, or service transaction,                                                                   
or a maximum tax of $60 dollars.                                                                                                
                                                                                                                                
Mr.  Dewitt   continued  his   review  of  the   legislation.                                                                   
Subsection  (b)  discusses  taxation  of  long-term  personal                                                                   
property  leases.  Subsection  (c)  deals  with  transactions                                                                   
involving  payment of  services  rendered  or delivered  over                                                                   
time,  such  as an  accountant  billed  on a  monthly  basis.                                                                   
Subsection (d) addresses  services on account or  billed on a                                                                   
monthly  purchase.  The  most   recently  billed  or  monthly                                                                   
process  would be  used. Subsection  (e)  provides that  each                                                                   
night's rental  would be  a separate transaction.  Subsection                                                                   
(f) addresses  long-term property leases, such  as automobile                                                                   
leases.                                                                                                                         
                                                                                                                                
Mr. Dewitt  explained that the  seller would collect  the tax                                                                   
and remit it  to the department. The seller  would be allowed                                                                   
to keep one percent of the collections  as long as they remit                                                                   
in  a timely  fashion with  completed  forms. Exemptions  are                                                                   
given  for  coin  operated  devises,  food  and  beverage  at                                                                   
concession  stands,  bars,  movable   vendor  carts,  metered                                                                   
sales. He observed  that the intent is to add  taxis that use                                                                   
a metering  devise  to the list.  Taxis that  charge by  zone                                                                   
could include the tax.                                                                                                          
                                                                                                                                
Vice-Chair  Bunde questioned  why the  total price could  not                                                                   
include  the tax.  Mr. Dewitt  agreed that  the ticket  price                                                                   
would include the tax.                                                                                                          
                                                                                                                                
In response  to a  question by  Vice-Chair Bunde, Ms.  Backes                                                                   
explained that people want to  see how much the tax is and if                                                                   
it is included  in the sales price  it wouldn't show  up as a                                                                   
separate item on the invoice or receipts.                                                                                       
                                                                                                                                
LARRY  PERSILY, DEPUTY  COMMISSIONER,  DEPARTMENT OF  REVENUE                                                                   
explained that  the department  thinks that consumers  should                                                                   
know how the price breaks down.  Most states require that the                                                                   
sales tax  be shown, so that  businesses cannot use  it as an                                                                   
unfair advantage.                                                                                                               
                                                                                                                                
Mr. Dewitt  reviewed the use tax  provision. The use  tax for                                                                   
items brought  into the  state would  be the  same as  if the                                                                   
item was purchased in the state.                                                                                                
                                                                                                                                
Proceeds  would be  deposited  into the  General  Fund and  a                                                                   
certificate of  exemption would be  issued to those  that are                                                                   
exempt from  the sales tax.  Nexus language allows  the state                                                                   
to  tax companies  using Internet  or mail  order sales  that                                                                   
have a presence in the state.                                                                                                   
                                                                                                                                
Mr. Dewitt noted that "or use"  needed to be added to page 7,                                                                   
line 12.  He added that language  in subsection (b)  would be                                                                   
amended  in order  to tighten  it up. The  effective date  is                                                                   
January 1, 2003.                                                                                                                
                                                                                                                                
Representative Lancaster questioned  how Sec. 43.44.070 would                                                                   
be  implemented.  Mr.  Persily explained  that  a  contractor                                                                   
would  have to  show  a resale  certificate  to the  building                                                                   
supply  store when  buying lumber.  Representative  Lancaster                                                                   
questioned  how persons would  know that  the seller  has the                                                                   
authority  to   collect  the  tax.  Representative   Whitaker                                                                   
clarified  that  the business  license  would  give them  the                                                                   
authority to collect the tax.                                                                                                   
                                                                                                                                
Representative  Hudson asked if  the state  of Alaska  has an                                                                   
agreement  with  Seattle  regarding collection  of  tax  from                                                                   
Alaskan  residents. Mr.  Persily explained  that Seattle  put                                                                   
the exemption  in their tax  code to promote  business. There                                                                   
is no nexus. Someone  from Seattle would have to  pay the tax                                                                   
if it were implemented in Alaska.                                                                                               
                                                                                                                                
Representative  Hudson observed that  there are a  variety of                                                                   
municipal sales  tax exemptions such as for  senior citizens.                                                                   
He questioned if  local exemptions would be  permitted on the                                                                   
city sales  tax assessments. Mr.  Dewitt responded  that they                                                                   
would  not. The  senior  citizen property  tax  would not  be                                                                   
covered  in  the statute.  The  city  of Juneau  could  issue                                                                   
checks  to  seniors  that  would  cover  the  cost  of  their                                                                   
property tax. Other communities  such as Wrangle utilize this                                                                   
provision.  Representative  Hudson  observed  that  there  is                                                                   
concern with the uniformity of state law.                                                                                       
                                                                                                                                
Representative  Whitaker spoke  in support  of state  primacy                                                                   
manifested through  preemption. It would allow  continuity of                                                                   
business  throughout  the state  of  Alaska  and nation.  Ms.                                                                   
Backes  added  that the  legislation  requires  the state  to                                                                   
collect the  sales tax for  the municipalities, so  there may                                                                   
be savings to the municipalities  on the collection. Co-Chair                                                                   
Mulder clarified  that business  would retain  1% of  the tax                                                                   
collected.                                                                                                                      
                                                                                                                                
Representative  Hudson discussed  the local taxation  process                                                                   
and questioned if the municipal  tax amount would be limited.                                                                   
Mr.  Persily  clarified  that  the state  would  collect  the                                                                   
amount   indicated  by   the   municipality.   There  is   no                                                                   
restriction on  seasonal amounts.  He assumed that  municipal                                                                   
payments would be made monthly.                                                                                                 
                                                                                                                                
Co-Chair  Mulder observed  that it  does not  make sense  for                                                                   
small  vendors  to send  their  checks  in every  month.  Mr.                                                                   
Persily observed  that taxpayers  that make a  certain amount                                                                   
could  be required  to pay  quarterly and  those making  more                                                                   
than the  threshold could  pay monthly.  He recommended  that                                                                   
the legislature set a threshold  at $500 - $1,000 dollars. He                                                                   
cautioned  that businesses  in  trouble might  be tempted  to                                                                   
utilize the tax sales. Penalties  are already included in the                                                                   
tax code.                                                                                                                       
                                                                                                                                
Representative   Lancaster  questioned   how  exemptions   or                                                                   
special   collections   would   be  negotiated   within   the                                                                   
municipality or borough.  Mr. Persily replied that  it is the                                                                   
intent that municipalities  with bed, fuel, alcohol,  fish or                                                                   
other  taxes,  would collect,  enforce  and deal  with  those                                                                   
taxes on their  own. The legislation applies  only to general                                                                   
retail sales and use tax.                                                                                                       
                                                                                                                                
In  response  to  a  question  by  Representative  Lancaster,                                                                   
Representative  Whitaker  discussed the  amount  of tax  that                                                                   
would be  collected. He  explained that  there are  different                                                                   
models. The  Department of Revenue  uses a 1997  model, which                                                                   
is  not  as  sophisticated  as  desired.  The  Department  of                                                                   
Revenue  model  estimates  between   $250  and  $400  million                                                                   
dollars. The  Legislative Finance Division's  model estimates                                                                   
$198 million  (consumer) dollars.  He concluded that  the tax                                                                   
would  derive  between $250  and  $400 million  dollars.  Mr.                                                                   
Persily amended the Department  of Revenue's estimate to $240                                                                   
- $300 million dollars.                                                                                                         
                                                                                                                                
Representative  Lancaster asked about  the set-up  costs. Mr.                                                                   
Persily estimated operating costs,  after the initial set up,                                                                   
at $4.9 million  dollars. He stated that a  fiscal note would                                                                   
be provided.                                                                                                                    
                                                                                                                                
Representative  John  Davies  asked the  capital  costs.  Mr.                                                                   
Persily explained  that the capital cost would be  $1.75 - $2                                                                   
million  dollars. Much  of  the cost  would  be for  computer                                                                   
programming.  The  goal would  be  to  set something  up  for                                                                   
electronic filing.                                                                                                              
                                                                                                                                
Representative Hudson asked for  product values of 1-2-3% tax                                                                   
ranges. Co-Chair Mulder thought  that a 1% tax would generate                                                                   
between  $70  and  $125  million   dollars.  Each  additional                                                                   
percent would generate about $100 million dollars.                                                                              
                                                                                                                                
Representative  Lancaster asked about  bed and rent  tax. Mr.                                                                   
Persily replied  that no community  would be able  to collect                                                                   
sales tax on rent.                                                                                                              
                                                                                                                                
Representative  Lancaster questioned if  a special  tax could                                                                   
be  applied on  a local  level.  Ms. Backes  agreed that  the                                                                   
intent of the legislation is to allow local taxation.                                                                           
                                                                                                                                
Representative Hudson observed  that rent is anything over 30                                                                   
days.                                                                                                                           
                                                                                                                                
Representative  Lancaster  asked  if  the  point  of  service                                                                   
delivery  was  addressed.  Ms.  Backes  clarified  that  tour                                                                   
operators would not be tax-exempt.                                                                                              
                                                                                                                                
Representative Carl  Moses voiced concern with  not including                                                                   
the  sales  tax  in  the  price  structure.  Co-Chair  Mulder                                                                   
observed that the "unfair competition  clause" could apply if                                                                   
some businesses  included the sales  tax and others  did not.                                                                   
Representative  Carl Moses  responded  that if  the tax  were                                                                   
included,   the   person   would  be   at   a   disadvantage.                                                                   
Representative  Lancaster stressed  that disclosure  would be                                                                   
the issue.                                                                                                                      
                                                                                                                                
Discussion  ensued regarding  inclusion  of the  tax [in  the                                                                   
price  structure].  Representative Whitaker  reiterated  that                                                                   
the limitation would  be up to $2,000 dollars.  He emphasized                                                                   
that the legislation needs to  be consistent. Co-Chair Mulder                                                                   
agreed. Mr. Persily  added that a problem would  occur if the                                                                   
separation of tax were not disclosed.  The sales tax needs to                                                                   
be  disclosed, which  may  not be  practical.  Representative                                                                   
Lancaster recommended issuing  a certification with the rules                                                                   
and  regulations.  Vice-Chair  Bunde  asked  the  enforcement                                                                   
mechanism. Mr.  Persily commented  that the department  would                                                                   
be  using  business  licenses.  He emphasized  the  need  for                                                                   
sufficient  budget  support for  audit  work.  Representative                                                                   
Lancaster noted  that the fiscal  note could be  increased if                                                                   
the  Committee wants  more enforcement.  Representative  Carl                                                                   
Moses observed that  if the tax and sales price  is included,                                                                   
it could be backed into the worksheet.                                                                                          
                                                                                                                                
Representative  John Davies  asked if  there were any  reason                                                                   
that  a price,  which included  the  sales tax  could not  be                                                                   
reported separately  in the receipt. Mr. Persily  pointed out                                                                   
that  the tax  would have  to  be backed  out for  tax-exempt                                                                   
purchases.                                                                                                                      
                                                                                                                                
TAPE HFC 02 - 63, Side B                                                                                                      
                                                                                                                                
Representative Carl  Moses maintained that merchants  need to                                                                   
have records  of tax-exempt  products sold. Vice-Chair  Bunde                                                                   
spoke in  support of allowing  inclusion of the tax  within a                                                                   
sales price.                                                                                                                    
                                                                                                                                
Representative  John   Davies  requested  a   spreadsheet  to                                                                   
indicate the expected revenue  by the Division of Legislative                                                                   
Finance.   Co-Chair Mulder  responded that  there would  be a                                                                   
fiscal note.                                                                                                                    
                                                                                                                                
HB  303  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 4:58 PM                                                                                            
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects