01/25/2007 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB24|| SB39 | |
| SB41 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 24 | TELECONFERENCED | |
| *+ | SB 39 | TELECONFERENCED | |
| *+ | SB 41 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
January 25, 2007
1:34 p.m.
MEMBERS PRESENT
Senator Johnny Ellis, Chair
Senator Gary Stevens
Senator Con Bunde
MEMBERS ABSENT
Senator Bettye Davis
Senator Lyman Hoffman
COMMITTEE CALENDAR
SENATE BILL NO. 24
"An Act relating to the amount of the state's business license
fee."
HEARD AND HELD
SENATE BILL NO. 39
"An Act relating to the amount of the state's business license
fee."
HEARD AND HELD
SENATE BILL NO. 41
"An Act repealing the fee imposed on the sale of studded tires."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 24
SHORT TITLE: BUSINESS LICENSE FEE
SPONSOR(s): SENATOR(s) WILKEN
01/16/07 (S) PREFILE RELEASED 1/5/07
01/16/07 (S) READ THE FIRST TIME - REFERRALS
01/16/07 (S) L&C, FIN
01/25/07 (S) L&C AT 1:30 PM BELTZ 211
BILL: SB 39
SHORT TITLE: BUSINESS LICENSE FEE
SPONSOR(s): SENATOR(s) WIELECHOWSKI
01/16/07 (S) PREFILE RELEASED 1/5/07
01/16/07 (S) READ THE FIRST TIME - REFERRALS
01/16/07 (S) L&C, FIN
01/25/07 (S) L&C AT 1:30 PM BELTZ 211
BILL: SB 41
SHORT TITLE: REPEAL STUDDED TIRE FEE
SPONSOR(s): SENATOR(s) WIELECHOWSKI
01/16/07 (S) PREFILE RELEASED 1/5/07
01/16/07 (S) READ THE FIRST TIME - REFERRALS
01/16/07 (S) L&C, TRA, FIN
01/25/07 (S) L&C AT 1:30 PM BELTZ 211
WITNESS REGISTER
SENATOR GARY WILKEN
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of SB 24 and co-sponsor of SB 39.
DANA OWEN
Staff to Senator Ellis
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on the committee substitutes for
SB 24, SB 39 and on SB 41.
RICK URION, Director
Division of Corporations, Business and Professional Licensing
Department of Commerce, Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Supported the committee substitutes to SB 24
and SB 39.
GREG WAITSCHICK
Alaska Tire World
Anchorage AK
POSITION STATEMENT: Supported SB 39 and SB 41.
SENATOR BILL WIELECHOWSKI
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Co-sponsor of SB 39 and sponsor of SB 41.
JOHANNA BALES, Supervisor
Excise Audit
Tax Division
Department of Revenue
PO Box 110400
Juneau, AK 99811-0400
POSITION STATEMENT: Supported SB 41.
ACTION NARRATIVE
CHAIR JOHNNY ELLIS called the Senate Labor and Commerce Standing
Committee meeting to order at 1:34:12 PM. Present at the call to
order were Senators Stevens, Bunde and Ellis.
SB 24-BUSINESS LICENSE FEE
SB 39-BUSINESS LICENSE FEE
1:39:42 PM
CHAIR JOHNNY ELLIS announced SB 24 and SB 39 to be up for
consideration as the first order of business. He invited Senator
Wilken, sponsor of SB 24 and co-sponsor of SB 39, and Senator
Wielechowski, co-sponsor of SB 39, to comment on them.
1:41:01 PM
SENATOR GARY WILKEN, sponsor or SB 24, referenced his sponsor
statement saying it repeals a 2003 law that increased the fee
for a business license to $100 annually and reestablishes it at
$25 per year. In the face of a possible $800 million budget
deficit in 2003, the legislature increased these fees from $25
to $100 per year. SB 24 recognizes that the financial picture
for the state of Alaska is dramatically different than four
years ago and now the GF balance is estimated to be $1.35
billion for FY '07. So, it is appropriate that the fee for a
business license return to $25 per year, the level it was from
1949 to 2003. He said:
The cost of processing a business license is covered
by an annual fee of $25. The use of technology has
streamlined both the initial application and the
renewal process. Percentages of licenses purchased and
renewed online has increased from 14 percent in 2003
to 36 percent in 2006. This positive trend has proven
to be cost effective for the Division of Occupational
Licensing. In addition, it is important to note that
the number of people applying for a business license
in 2003, the last year before the fees were increased
to $100, total $74,599 applicants. In three short
years the number of applicants has decreased 9.7
percent. The State of Alaska should encourage the
expansion of small businesses, not discourage the
growth. Setting the business license fee at $25
annually will demonstrate that the State of Alaska is
business friendly and welcomes new small business.
1:43:03 PM
SENATOR WIELECHOWSKI, co-sponsor of SB 39, read the sponsor
statement and said his presentation was similar to Senator
Wilken's. He added that he talked to people in his district,
specifically small hobby shop owners and day care providers, who
were concerned about the amount of the business fee. He noted in
particular the 10 percent drop in the number of business
licenses - from 74,599 in 2003 to 67,321 in 2006. He wanted to
do everything he could to encourage small businesses.
1:45:05 PM
SENATOR BUNDE opposed both bills saying:
If some businesses are in such desperate straights
that they can't maintain themselves in business for
$75 a year, we'd probably do them a favor by asking
them to get out before they are completely upside
down.
He also said that the fee would be over $200 by now if it had
been increased for inflation. His biggest concern was that the
state would lose $4 million to $5 million if this bill is
adopted and speculated that it would likely return to a deficit
position again. He also didn't see a correlation between the
amount of the fee and the number of licenses going down and
discouraging legitimate businesses. Some people just don't
bother to buy one.
1:48:14 PM
SENATOR BUNDE said the department has little enforcement
capability to require someone to buy a business license and
suggested putting more money into enforcement.
1:49:32 PM
SENATOR WILKEN related a little history. He believes that the
cost causer should be the cost payer and when he introduced the
bill for the governor in 2003, it was represented that
processing an application for a business license costs $100 and
that the state was losing money. He has found that now through
technology and economies of scale it costs less than $25. He
emphasized:
The amount of money isn't important, but we should
hold dear the theory wherever we are in government
that the cost causer is the cost payer and indeed we
are making money off the $25 license....
1:51:11 PM
DANA OWEN, Staff to Senator Ellis, said he discussed the
identical committee substitutes with the sponsors and Mr. Urion.
He explained that they establish the business license fee at $25
per year with an effective date of October 1, 2008. For the
interim they establish a procedure whereby people who now pay
$100 per year can buy a two-year license for $125 [instead of
$200] and people who pay $50 per year can buy a two-year license
for $75 [instead of $100].
1:53:35 PM
RICK URION, Director, Division of Corporations, Business and
Professional Licensing, supported both bills before the
committee.
1:54:11 PM
SENATOR STEVENS asked if he thought a $100 fee discouraged
business owners from buying a license.
MR. URION replied that he assumed it did because since the fee
went up, the numbers of compliance went down.
SENATOR BUNDE remarked that the numbers could have gone down
through updating of records and asked if $25 would pay for an
investigator to follow up on those who don't buy the licenses.
MR. URION replied yes that $25 would pay for an investigator.
SENATOR BUNDE asked if he would need more than one investigator.
MR. URION replied that his one investigator that handles
business license cases found that about half the people who
advertise in the Anchorage and Fairbanks phone books don't have
business licenses and that his case load is endless.
SENATOR BUNDE thought if the business license fee produced more
money, he could have more efficient investigations and perhaps
better compliance which would bring in more money. Mr. Urion
agreed.
1:56:50 PM
CHAIR ELLIS remarked that his interaction with the Palin
administration has been excellent so far and she meant it when
she said she didn't have interest in pride of authorship on
these important pieces of legislation - and everyone agreed that
was refreshing.
1:57:57 PM
CHAIR ELLIS asked Mr. Urion if he supported the committee
substitute.
MR. URION replied that he supported it, but took issue with the
effective date. He explained that business licenses expire
annually at the end of a year, unlike the state's fiscal year,
and his division had just finished a renewal period. Some people
renewed for one year and some renewed for two years. So, some
licenses won't expire until December 31, 2008. For that reason
he wanted to change the effective date so he wouldn't have to go
through a refund situation, which would be very costly. He also
didn't want any constituents to be mad because they paid $100
for a license and now it costs $25. He starts renewals for the
licenses that expire in December in October.
2:00:02 PM
MR. URION said his other suggestion had to do with the
transition language. He explained that half the business
licenses expire this year and the rest next year - to even out
the workload. He has 11 people who work with about 70,000
corporation and business licenses. He asked to be able to
continue to spread that out and suggested for those whose
licenses expire this year to have the choice of buying a two-
year license in 2008 for $125 or $50 for an old-timer.
2:02:13 PM
SENATOR STEVENS moved to adopt CSSB 24 (L&C), 25-LS0203\E. There
were no objections and it was so ordered.
SENATOR STEVENS moved to adopt CS SB 39(L&C), 25-LS0351\E. There
were no objections and it was ordered.
SENATOR ELLIS announced that the committee would proceed to the
markup phase of the discussion.
2:03:50 PM
SENATOR BUNDE moved to adopt Amendment A.1 to CSSB 39(L&C). He
explained he drafted this amendment after consulting with Mr.
Urion who said there currently is not a lot of enforcement.
25-LS0351\A.1
Bannister
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR BUNDE
TO: SB 39 and SB 24
Page 1, line 1, following "fee":
Insert "and to a penalty for not obtaining a business
license"
Page 1, following line 2:
Insert new bill sections to read:
"* Section 1. AS 43.05.290(h) is amended to read:
(h) A person engaging in or attempting to engage in a
business, trade, profession, or occupation for which a
license is required under this title, who willfully fails
to obtain the license, is guilty of a misdemeanor [,] and,
upon conviction, is punishable by a fine of not more than
$2,000, or by imprisonment for not more than six months, or
by both. This subsection does not apply to a violation of
AS 43.70.020.
* Sec. 2. AS 43.70.020 is amended by adding a new subsection
to read:
(e) A person who knowingly violates this section is
subject to a civil fine of not more than $300."
Page 1, line 3:
Delete "Section 1"
Insert "Sec. 3"
He said Amendment 1 would give the department a reasonable level
of enforcement to use on someone who chooses to do business in
Alaska without a business license.
2:06:15 PM
MR. URION commented that he asked his investigator what would
most help him in his job and he answered, "A fine a simple civil
fine." The fine today for not having a business license is a
maximum fine of $2,000 and/or six months in jail and the state
has never had any conviction under this penalty. His mission is
to get people in compliance and he is not interested in fining
people thousands of dollars. However, his investigator says that
some people just thumb their nose at him; the amendment would
encourage compliance and allow him "to sort of thump those
people."
CHAIR ELLIS asked if he would be able to publicize this so that
communities would know.
MR. URION replied that his investigators would know who to send
the message to.
2:07:40 PM
SENATOR STEVENS remarked that "willfully fails" might open an
area of contention and asked if it is necessary.
MR. URION replied that "willful" is existing language. New
language uses a person who "knowingly" violates this section on
line 14 of the amendment.
2:09:12 PM
SENATOR BUNDE asked if MR. URION had heard any complaints about
the $100 fee.
MR. URION replied the front desk receives a couple dozen
complaints every year.
SENATORS WIELECHOWSKI and WILKEN indicated they had no comments
on the amendments.
CHAIR ELLIS said he would hold the amendment for further public
testimony.
GREG WAITSCHICK, owner of Alaska Tire World, first addressed SB
39. He asked why the state of Alaska should punish business
owners by increased business license fees. He said the consumer
ultimately pays more. He urged them to support SB 39.
Because of his time constraints Mr. Waitschick asked to be able
to testify on SB 41; the Chair allowed him to do so.
2:10:48 PM
SB 41-REPEAL STUDDED TIRE FEE
CHAIR ELLIS announced that he would interrupt testimony on SB 24
and SB 39 so the committee would take testimony on SB 41 from
Mr. Waitschick, Alaska Tire World, because of his time
constraints.
MR. WAITSCHICK asked, "Why does the State of Alaska need to tax
the safety of our families during our winter months?" He said
that studded tires add safety to everybody on the road. The
$440,000 raised by the tax is a very small amount considering
the training curve and frustration it takes to use the online
system. A percentage of his customers couldn't afford the added
tax.
He next commented on the point-of-sale tire tax, or paying a tax
when you purchase tires. He couldn't see why people would want
to tax themselves more with the rising cost of energy and
materials.
CHAIR ELLIS thanked him for his comments and indicated there
were no questions from the committee.
SB 24-BUSINESS LICENSE FEE
SB 39-BUSINESS LICENSE FEE
CHAIR ELLIS brought the discussion back to Amendment 1 to CSSB
39 (L&C).
2:14:37 PM
SENATOR BUNDE moved to adopt Amendment 1 to CSSB 39(L&C). There
were no objections and it was adopted.
2:14:53 PM
SENATOR BUNDE moved to adopt Amendment 1 to CSSB 24(L&C) as
follows:
25-LS0351\A.1
Bannister
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR BUNDE
TO: SB 39 and SB 24
Page 1, line 1, following "fee":
Insert "and to a penalty for not obtaining a business
license"
Page 1, following line 2:
Insert new bill sections to read:
"* Section 1. AS 43.05.290(h) is amended to read:
(h) A person engaging in or attempting to engage in a
business, trade, profession, or occupation for which a
license is required under this title, who willfully fails
to obtain the license, is guilty of a misdemeanor [,] and,
upon conviction, is punishable by a fine of not more than
$2,000, or by imprisonment for not more than six months, or
by both. This subsection does not apply to a violation of
AS 43.70.020.
* Sec. 2. AS 43.70.020 is amended by adding a new subsection
to read:
(e) A person who knowingly violates this section is
subject to a civil fine of not more than $300."
Page 1, line 3:
Delete "Section 1"
Insert "Sec. 3"
There were no objections and it was so ordered.
2:15:17 PM at ease 2:15:40 PM
SENATOR ELLIS said he would schedule the bills for the next
meeting.
SB 41-REPEAL STUDDED TIRE FEE
2:16:30 PM
CHAIR ELLIS announced SB 41 to be up for consideration.
SENATOR WIELECHOWSKI, sponsor of SB 41, explained that this bill
was proposed in 2003 at the request of Governor Murkowski. It
proposed a new fee of $5 per tire for the sale of studded tires
with an effective date of July 1, 2004. In FY 2005, this tax
generated $436,440; in FY 2006, it generated $446,771. After
this bill was enacted, the legislature commissioned the
University of Alaska to prepare a report; it was entitled
"Socio-Economic Effects of Studded Tire Use in Alaska." The
report found that studded tires do cause some rutting in the
roads, but that they also create a significant increase in
traction, braking and acceleration, which ultimately results in
fewer accidents. An older Minnesota study also found a 100
percent increase in accidents when studded tires were banned
over a two-year period. With the current budget surplus he said
it was time to put peoples' safety first.
JOHANNA BALES, Supervisor, Excise Audit, Department of Revenue
(DOR), said she oversees the tire fee program and unlike other
excise tax programs that are levied at the wholesale level, the
tire fee is levied at the retail level and it affects a
significant number of small businesses. Over the life of the
tire fee, she has received numerous complaints from the small
businesses about how onerous the record keeping is. In 2006
about 606,000 tires, both studded and plain, were sold in the
state. Small businesses had to account for every single one of
the tires; they are also required to make the determination as
to whether or not that tire sale is taxable since the state has
some exemptions. She said, "The program is confusing and
burdensome for them." She concluded saying the department
supports repealing the studded tire fee and the tire fee program
as a whole.
2:22:09 PM
DANA OWEN, Committee Aide to the Labor and Commerce Committee,
explained that CSSB 41(L&C), version 25-LS0355\C, removes the
studded tire fee as the original bill does, but goes a step
further and removes the entire program including the $2.50 fee
on regular tires.
SENATOR WIELECHOWSKI supported that change.
2:23:37 PM
SENATOR STEVENS asked if there is a cost associated with
collecting the fee.
MS. BALES replied that this program has one full-time employee
and the cost incurred is about $56,000 per year.
CHAIR ELLIS asked if she had prepared her budget as if this bill
had become law and she replied yes.
CHAIR ELLIS thanked her for her testimony said he would hold
this bill over until Tuesday.
There being no further business to come before the committee, he
adjourned the meeting at 2:25:42 PM.
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