Legislature(2015 - 2016)
2016-07-11 House Journal
Full Journal pdf2016-07-11 House Journal Page 3159 HB 5004 HOUSE BILL NO. 5004 by the House Rules Committee by request of the Governor, entitled: "An Act establishing a state sales and use tax; relating to taxes levied by cities and boroughs; providing authority to the Department of Revenue to enter into the Streamlined Sales and Use Tax Agreement; and providing for an effective date." was read the first time and referred to the Finance Committee. The following fiscal note(s) apply: 1. Fiscal, Dept. of Revenue The Governor's transmittal letter dated July 8, 2016, follows: "Dear Speaker Chenault: Under the authority of Article III, Section 18, of the Alaska Constitution, I am transmitting a bill relating to the establishment of a statewide sales and use tax. This bill would levy a statewide tax of three percent on sales and rents of tangible personal property and on sales of services beginning January 1, 2018. It is critical that a sales tax include a use tax in order to avoid purchases made out of state from being used in this state without paying the tax. Therefore this bill also would levy a tax on the privilege of using tangible personal property acquired on or after January 1, 2018, and either manufactured by the person using the property in this state, or acquired outside this state as the result of a transaction that would have been subject to sales tax in this state. This bill addresses important components of a workable, fair, and revenue-generating sales tax. First, the bill addresses the needs of municipalities, some of which also impose sales or sales and use taxes by continuing to allow municipalities to collect and enforce their current sales and use taxes through December 31, 2021. After that, the State will assume responsibility for administering a municipal general sales and use tax. Municipalities will receive their share of the tax 2016-07-11 House Journal Page 3160 levied by the municipality. Administration of the statewide sales tax by the Department of Revenue will result in a more efficient and less costly system to administer for both the State and municipalities. Municipalities would continue to be able to levy and collect specific sales or excise taxes on single items of tangible or intangible personal property or services such as bed taxes, car rental taxes, liquor, cigarette, motor fuel, and fish taxes. Further, in order to allow for efficient administration, the tax base, including exemptions, definitions, and sourcing rules shall be identical between the statewide sales and use tax and a general sales and use tax administered by a municipality. Additionally, my proposal would exempt certain transactions from the statewide tax, including government sales (including sales or use by the federal, state, or municipal body), union dues, intangibles (such as wages, salaries, tips, or commissions), financial services, groceries, isolated or occasional sales, sales for resale, and real property. My proposed exemptions are reasonable and target particular activities or sales for exemption, based on fundamental policy concerns of reducing the tax burden on those least able to pay. Further, the bill allows for a number of technical provisions needed for a sales and use tax, such as exemption certificates, direct pay permits, sellers' permits and remedies for improper use of a purchase obtained with an exemption certificate. Last, the bill would be effective January 1, 2018, to allow adequate time for preparation and education about the sales and use tax. The bill also would provide the Department of Revenue with authority to enter the Streamlined Sales and Use Tax Agreement, an agreement approved by the Streamlined Sales and Use Tax Governing Board, Inc., with the goal of simplifying and modernizing sales and use tax administration in order to reduce the burden of tax compliance for sellers. By considering the Streamlined Sales and Use Tax Agreement, and its usefulness to our state, the Department of Revenue may consider a regulatory action best designed to meet our state's needs. We must take meaningful and responsible action to close our fiscal gap and put in place revenue measures not tied to volatile natural 2016-07-11 House Journal Page 3161 resource commodity prices. Restructuring the Permanent Fund alone will not close the deficit. A broad-based tax is essential to a comprehensive fiscal plan, and this bill is a step in that direction. It is also an alternative option for the Legislature to consider in lieu of the proposed income tax. I am confident this legislature will see the benefits of comprehensive, broad-based, low-rate statewide sales and use tax and look forward to your prompt and favorable action on this measure. Further, this comprehensive broad-based tax is not targeted at only one group or industry. Instead, we will all contribute together to keep our state on a solid financial footing. Sincerely, /s/ Bill Walker Governor"