03/18/2015 01:30 PM House FINANCE

HOUSE BILL NO. 88                                                                                                             
                                                                                                                                
     "An Act relating to remittance of tire fees; and                                                                           
     providing for an effective date."                                                                                          
                                                                                                                                
1:34:07 PM                                                                                                                    
                                                                                                                                
JERRY  BURNETT,  DEPUTY   COMMISSIONER,  TREASURY  DIVISION,                                                                    
DEPARTMENT OF  REVENUE, testified that the  bill would align                                                                    
the filing  date for tire fees  with other taxes filed  on a                                                                    
monthly  basis.  He shared  that  tire  fees currently  were                                                                    
filed every  30 days, after  the beginning of  each quarter,                                                                    
rather than the end of the month.                                                                                               
                                                                                                                                
BRANDON   S.   SPANOS,   DEPUTY  DIRECTOR,   TAX   DIVISION,                                                                    
DEPARTMENT  OF REVENUE  (via  teleconference), relayed  that                                                                    
the bill would align the  filing date for quarterly tire fee                                                                    
tax payers.  He said  that the tax  return and  payment were                                                                    
currently due after the end  of quarter, which confused some                                                                    
tax payers  during the months  of July, October  and January                                                                    
because  the quarter  ended one  day before  the end  of the                                                                    
month. He shared that the  confusion had led to late filings                                                                    
which  resulted  in their  losing  a  timely filing  credit,                                                                    
causing  complaints. He  stated that  the legislation  would                                                                    
eliminate confusion for tax payers,  as well as protect them                                                                    
from the 5 percent penalty for filing only one day late.                                                                        
                                                                                                                                
1:37:16 PM                                                                                                                    
                                                                                                                                
Co-Chair Thompson  recalled that  the committee  had studied                                                                    
the  change  when  it   examined  the  Indirect  Expenditure                                                                    
Report.  He  noted that  the  change  had the  potential  of                                                                    
costing  the state  money. He  believed  that filing  timely                                                                    
reports should be a practice of doing business in Alaska.                                                                       
                                                                                                                                
Vice-Chair Saddler understood that there  was a credit to be                                                                    
earned by vendors who filed in  a timely manner as well as a                                                                    
5 percent penalty for filing late.                                                                                              
Mr.  Spanos replied  in the  affirmative. He  said that  the                                                                    
penalty applied  to all  tax types in  the division  and the                                                                    
timely filing credit  was specific to only a  few tax types,                                                                    
the tire fee being one of those tax types.                                                                                      
                                                                                                                                
Vice-Chair  Saddler asked  how much  the fees  were and  how                                                                    
much of the fee was passed onto the consumer.                                                                                   
                                                                                                                                
Mr. Spanos answered that the tax  was $2.50 per new tire and                                                                    
the  additional studded  tire fee  of $5.00;  a new  studded                                                                    
tire  would  be  $7.00  total.   He  said  that  there  were                                                                    
exemptions for  tires not used  on roads, such as  tires for                                                                    
all terrain vehicles.                                                                                                           
                                                                                                                                
Vice-Chair Saddler asked  how much revenue came  in from the                                                                    
tire fees.                                                                                                                      
                                                                                                                                
Mr. Spanos replied that he did not have the figure on hand.                                                                     
                                                                                                                                
Mr. Burnett  interjected that  the figure  was approximately                                                                    
$1 million annually.                                                                                                            
                                                                                                                                
Co-Chair Thompson  noted that  the 5  percent of  the amount                                                                    
collected would  not exceed $900  per quarter. He  asked for                                                                    
further detail.                                                                                                                 
                                                                                                                                
1:40:54 PM                                                                                                                    
                                                                                                                                
Mr.  Spanos replied  that the  $900 per  quarter figure  had                                                                    
been created when  the fee was passed. He  believed that the                                                                    
cap stemmed from  concern that the state would  pay too much                                                                    
of an incentive for timely filing.                                                                                              
                                                                                                                                
Co-Chair Thompson understood that  the maximum was $900. Mr.                                                                    
Spanos replied in  the affirmative; if 5 percent  of the tax                                                                    
exceeded $900  dollars then the  credit would be  limited to                                                                    
$900.                                                                                                                           
                                                                                                                                
Representative  Kawasaki asked  for the  total value  of the                                                                    
indirect expenditure  credits. He  surmised that  the amount                                                                    
of money collected did not appear to be high.                                                                                   
                                                                                                                                
Mr.  Spanos answered  that he  did  not have  the detail  on                                                                    
hand.                                                                                                                           
                                                                                                                                
Co-Chair  Thompson wondered  why  the  vendors received  the                                                                    
credit.  He  did  not  believe the  state  gave  rental  car                                                                    
companies credits.                                                                                                              
                                                                                                                                
Mr. Spanos relayed  that he did not know. He  pointed out to                                                                    
the committee that there was a vehicle rental tax in place.                                                                     
                                                                                                                                
Mr.  Burnett  noted that  the  legislation  had been  passed                                                                    
during  the Murkowski  Administration. He  noted that  other                                                                    
credits were  being examined in  order to decide  whether it                                                                    
made sense to continue to honor them.                                                                                           
                                                                                                                                
Co-Chair  Neuman   asserted  that  there   were  significant                                                                    
requirements   for  tire   sales  that   made  the   credits                                                                    
necessary. He  referred to  data provided  by Dave  and Judy                                                                    
Schneider, Diversified  Tires, Wasilla. He wondered  why the                                                                    
type of tire sold was of such importance.                                                                                       
                                                                                                                                
Mr.  Spanos  replied  that  it  was  fairly  common  in  the                                                                    
division to  request gross  income before  a net  number was                                                                    
realized.  He  used  the example  of  cigarette  sales;  the                                                                    
division wanted  to know whether  the cigarettes  were being                                                                    
sold to  Indian Reservations  or being  exported out  of the                                                                    
state. He stated that for  exempt purposes the tire would be                                                                    
taxable except for the exemption; if  a tire was sold to the                                                                    
United States government for official  use then it would not                                                                    
be taxed  but the division  would still require a  record of                                                                    
the sale of the tire.                                                                                                           
                                                                                                                                
1:45:59 PM                                                                                                                    
                                                                                                                                
Co-Chair Neuman  noted that sellers were  required to report                                                                    
how  many tires  were  studded each  day.  He observed  that                                                                    
companies had  to stud  tires in September  to be  ready for                                                                    
the  winter season.  He opined  that the  businesses had  to                                                                    
physically  count  the  number  of  tires  each  season.  He                                                                    
believed  that  the  businesses were  subject  to  too  many                                                                    
requirements.                                                                                                                   
                                                                                                                                
Co-Chair Thompson observed that  state government was making                                                                    
the issue more complex than necessary.                                                                                          
                                                                                                                                
Representative  Gattis relayed  that she  spoke to  the same                                                                    
business  owners. She  thought  that the  bill insulted  the                                                                    
intelligence    of    business   owners.    She    expressed                                                                    
embarrassment that  the legislation was under  debate during                                                                    
the current fiscal climate.                                                                                                     
Mr. Burnett rebutted that the  bill would make it easier for                                                                    
tire dealers  to know  when to report.  He noted  that there                                                                    
had  been  confusion on  the  issue  and cited  examples  of                                                                    
businesses  reporting  at  the   incorrect  time  and  being                                                                    
penalized.  He said  that the  department had  reviewed some                                                                    
internal processes and that this  particular issue had risen                                                                    
to the forefront.                                                                                                               
                                                                                                                                
1:49:23 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki  thought the  change should  be made                                                                    
in regulation, not statute.                                                                                                     
                                                                                                                                
Mr. Burnett  replied that there  was a specific date  set in                                                                    
statute, which could not be changed by regulation.                                                                              
                                                                                                                                
Representative   Kawasaki  wondered   whether  it   was  the                                                                    
department's intention to include  language that changed the                                                                    
date to a specific day of the month.                                                                                            
                                                                                                                                
Mr. Burnett replied  that the date would be the  last day of                                                                    
the calendar month.                                                                                                             
                                                                                                                                
Representative  Kawasaki understood  that a  previous months                                                                    
tire receipts were due 15 days into the following month.                                                                        
                                                                                                                                
Mr. Spanos  clarified that  it was  currently 30  days after                                                                    
the  end of  the  calendar quarter.  He  explained that  the                                                                    
change would  be to the  end of  month following the  end of                                                                    
the calendar quarter.                                                                                                           
                                                                                                                                
Representative Kawasaki queried how  many Alaskans filed the                                                                    
tire tax.                                                                                                                       
                                                                                                                                
Mr.  Spanos  replied that  the  data  was available  in  the                                                                    
division's annual  report. He believed it  was approximately                                                                    
100 filers.                                                                                                                     
                                                                                                                                
Representative  Kawasaki   asked  for   the  title   of  the                                                                    
division's report.                                                                                                              
                                                                                                                                
Mr.  Spanos  answered  that  it  was  the  department's  tax                                                                    
division's annual report.                                                                                                       
                                                                                                                                
Representative Kawasaki wondered if  the report was provided                                                                    
to the legislature in paper form.                                                                                               
                                                                                                                                
Mr. Burnett replied  no. He shared that the  report could be                                                                    
found online.                                                                                                                   
                                                                                                                                
Representative Guttenberg understood that  the bill had been                                                                    
crafted as a  result of complaints from tire  tax filers. He                                                                    
wondered how many filers were  repeat offenders and what the                                                                    
average penalty was.                                                                                                            
                                                                                                                                
1:53:14 PM                                                                                                                    
                                                                                                                                
Mr. Spanos  responded was not  sure about  repeat offenders.                                                                    
He said that when filers  appealed they had claimed that the                                                                    
date had confused them and should be clarified.                                                                                 
                                                                                                                                
Representative  Guttenberg asked  how  the businesses  filed                                                                    
for the tax.                                                                                                                    
                                                                                                                                
Mr. Spanos answered  that the process included  a new online                                                                    
filing  option. Previously  filing  had been  only in  paper                                                                    
form; filers now had both options.                                                                                              
                                                                                                                                
Representative Guttenberg asked about  any feedback given on                                                                    
the integration of the two options.                                                                                             
                                                                                                                                
Mr.  Spanos  replied  that  there   had  been  hiccups,  but                                                                    
feedback had primarily been positive.                                                                                           
                                                                                                                                
Representative Guttenberg  whether the date change  would be                                                                    
problematic for the computerized filing process.                                                                                
                                                                                                                                
Mr. Spanos  replied no; it  involved in simply  changing the                                                                    
field on the computerized spreadsheet.                                                                                          
                                                                                                                                
Representative  Gara stated  that  the bill  was to  protect                                                                    
businesses who had been caught in  the glitch in the law. He                                                                    
thought that the  bill offered a simple fix  that would save                                                                    
the  state  money.  He  expressed  confusion  at  individual                                                                    
committee member's opposition to the legislation.                                                                               
                                                                                                                                
1:58:09 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Saddler believed  that  the  bill would  provide                                                                    
simplicity and consistency.                                                                                                     
                                                                                                                                
Representative Gattis  recommended that the  inventory forms                                                                    
for businesses be reviewed and changed.                                                                                         
                                                                                                                                
Representative Pruitt  wondered why  this tax item  had been                                                                    
chosen as  a priority.  He probed  whether there  were other                                                                    
opportunities within the tax division  for change that could                                                                    
be included in the bill.                                                                                                        
                                                                                                                                
Mr. Burnett answered  that the bill had come  up through the                                                                    
tax  division  to  the commissioner's  office  in  the  time                                                                    
needed  to get  a bill  introduced at  the beginning  of the                                                                    
current  legislative session.  He  believed  there would  be                                                                    
additional items in the future.                                                                                                 
                                                                                                                                
Representative  Pruitt wondered  whether the  possible other                                                                    
items would be introduced in multiple small bills.                                                                              
                                                                                                                                
Co-Chair Thompson replied in the negative.                                                                                      
                                                                                                                                
HB  88  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.