Legislature(2015 - 2016)

2016-07-11 House Journal

Full Journal pdf

2016-07-11                     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                                                             
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.                                                                                 
Bill Walker