Legislature(2017 - 2018)BUTROVICH 205
04/03/2018 03:30 PM Senate STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB118 | |
| HB96 | |
| HB168 | |
| HCR10 | |
| HB20 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 118 | TELECONFERENCED | |
| + | HB 96 | TELECONFERENCED | |
| + | HB 168 | TELECONFERENCED | |
| + | HCR 10 | TELECONFERENCED | |
| + | HB 20 | TELECONFERENCED | |
| + | HB 152 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 96-TAXES; DEDUCTIONS; FEES; TAX STAMP DISCOUNT
4:08:42 PM
CHAIR MEYER announced the consideration of House Bill 96 (HB
96).
4:09:14 PM
REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature, Juneau,
Alaska, Sponsor of HB 96, provided an overview as follows:
House Bill 96 came about because 4 years ago we passed
HB 306 which addressed indirect expenditures and it
was passed and it's in the statutes now. Indirect
expenditures are discounts that corporations can take
against their state tax, it's a reduction in fees and
things like that that we don't ever see, those fees
never show up in the budget, we don't see them. So, HB
306 required that the Treasury Department every two
years must make a report showing all of the foregone
revenue that the state didn't receive due to indirect
expenditures and discounts and reductions in fees;
they make that report, they turn it over to
Legislative Finance and they then produce a report
that is passed out to all of the legislators so we can
see the lost fees that we don't receive. HB 96
addresses 4 of those indirect expenditures and it will
save the state or bring back to the state over
$350,000.
He added that his staff member would address the four indirect
expenditures that HB 96 addresses.
4:10:44 PM
FORREST WOLFE, Staff, Representative Thompson, Alaska State
Legislature, provided an overview of HB 96 as follows:
HB 96 repeals or removes 4 minor-indirect expenditures
from state law which would provide a modest
[inaudible] increased revenue to the State of Alaska.
The first removes the deduction of federal taxes from
the adjusted gross income when calculating the state
tax collected on gambling onboard large cruise ships.
The second is a provision that allows an investigation
of expense under the Alaska Small Loans Act to replace
a few required under the Alaska Businesses License
Act.
Third, it removes a four-tenths of one percent
deduction from the tobacco tax for the expense of
accounting and filing of that tax return each month.
Finally, the fourth one is it repeals a discount on
cigarette tax stamps which was originally intended to
be compensation for physically affixing these stamps
to the packages themselves.
According to the fiscal note provided by the
Department of Revenue, it is estimated that HB 96 will
increase revenue by at least $339,500 if FY2019, of
which about $220,000 will go to the unrestricted
general fund.
In this time of financial instability and economic
hardship, the state needs to find increased revenue
where ever it can, and HB 96 is a step in the right
direction.
CHAIR MEYER asked why the bill will generate revenue to the
state. I noted that the state would no longer be paying for tax
stamps to be placed on cigarettes packs.
4:12:53 PM
REPRESENTATIVE THOMPSON explained that the state pays quite
amount of money to cigarette companies to affix the tax stamp on
the bottom of the pack of cigarettes. He specified that the
expenditure was originally put into place so that the cigarette
companies could pay for the equipment used to affix the tax
stamps. He conceded that the tax-stamp equipment has been paid
for many times over and the savings would be the largest amount
of money from the legislation. He added that the discounts for
filling out forms amounts to some money while the cruise ship
tax is indeterminate and will be explained by Mr. Alper, [Tax
Division Director].
CHAIR MEYER asked if each tobacco company affix tax stamps to
their cigarette packs or does a single distributor affix tax
stamps for all tobacco brands.
REPRESENTATIVE THOMPSON replied that everyone must go through
one machine. He specified that the state must pay for the tax
stamp to be affixed to the cigarette packs.
CHAIR MEYER asked to confirm that the state does not know if the
equipment has been paid for and the equipment payoff is
speculation.
REPRESENTATIVE THOMPSON answered that if there is a cost that is
going to happen for affixing the tax stamp, the cost will have
to be added to a pack of cigarettes. He reiterated that the
state continues to allow the fund to take a very large discount
off corporate taxes.
4:15:07 PM
SENATOR GIESSEL thanked Representative Thompson for bringing HB
96 forward and identifying four-indirect expenditures. She said
she looked at the indirect expenses report and could hardly
believe the expenditures that were in place.
SENATOR EGAN asked to confirm that the tax stamps prove that
"it's Alaska." He noted that he has friends that buy cigarettes
from tribes in Washington state and the cigarette packs do not
have tax stamps.
REPRESENTATIVE THOMPSON explained that cigarettes sold
commercially in the State of Alaska must have the state's tax
stamp affixed.
SENATOR EGAN replied that he understood the tax stamp
requirement.
REPRESENTATIVE THOMPSON specified that commercial sellers of
cigarettes without the state's tax stamp are liable for a very
large fine. He noted that people could possibly buy cigarettes
online to avoid paying the tax.
SENATOR EGAN asked if the cigarettes sold onboard cruise ships
have the state's tax stamp.
REPRESENTATIVE THOMPSON suggested Senator Egan's question be
posed to Mr. Alper.
CHAIR MEYER asked how other states deal with their cigarette tax
stamps.
REPRESENTATIVE THOMPSON replied that he does not know. He noted
that there is a big movement across the nation to address
indirect expenditures at the state level. He pointed out that
indirect expenditures do not show up in a budget and nobody
really sees how much money that are forgone.
CHAIR MEYER asked how long the state has been dealing with
indirect expenditures.
REPRESENTATIVE THOMPSON suggested that Chair Meyer's question be
posed to Mr. Alper.
4:18:14 PM
KEN ALPER, Director, Tax Division, Alaska Department of Revenue,
Juneau, Alaska, said three of four items in the bill relate to
the Tax Division. He explained that the first item relates to
the cruise-ship-gambling tax, which was a component of the
initiative that put the $50 head tax on cruise ships in the 2006
election. He said large cruise companies file the gambling tax
which is 33 percent of net profits tax on the activities while
ships are in state waters. He detailed that the tax brings in
about $6 million per year in general funds. He noted that the
cruise ship gambling tax is one of ten excise taxes that
includes: alcohol, tobacco, motor fuels, mining, tires, vehicle
rental, marijuana, and remnants of the film-tax program.
He explained that the two other items in the bill relate to the
tobacco tax, the second item in the bill eliminates the four-
tenths of one-percent discount for timely filing, an activity
that is not unusual in the taxing world. He said the third item
is eliminating the cigarette-tax-sticker discount. He explained
that the tax is unusual because the stickers are presold to the
tobacco distributors in Alaska. He detailed that the stickers
are discounted by 1 to 3 percent, amounting to approximately
$250,000. He noted that Alaska's cigarette tax annually brings
in $20 million to $25 million to the state.
4:22:55 PM
CHAIR MEYER noted that Senator Egan addressed cigarettes
purchased from tribes without tax stamps and inquired if
military bases have similar privileges.
MR. ALPER replied that he did not know the military rules but
noted that there are maritime tax-off stamps. He disclosed that
the tax division has a criminal investigations unit. He
concurred that there are online sources for cigarettes and noted
that purchasing online is not inherently illegal, but the person
that does purchase online is obligated to pay the state's excise
tax, $20 per carton.
CHAIR MEYER asked if Mr. Alper would like to see any changes or
modifications to HB 96.
MR. ALPER commented that elements within the bill are fine and
noted that he would not have an issue if the committee addressed
other indirect expenditures like an early filling discount for
motor fuel. He pointed out that HB 399 is a bill that would
eliminate some corporate income tax loopholes, savings that
would amount to $6 million to $7 million. He summarized that
bit-by-bit it is important to scoop up revenue that is "being
left on the table," especially before adding any new taxes.
4:26:23 PM
CHAIR MEYER said he questioned the gambling activities onboard
the cruise ships and noted that the calculation of the tax was
"kind of a mystery."
MR. ALPER pointed out that the gambling tax only applies to
large vessels with more than 500 passengers that are in state
waters. He remarked that the gambling tax is not one that the
division has massive resources to invest in auditing the
timeclocks on the cruise ships' casinos, so a little bit of
trust is involved with the tax collections. He said regarding
what happens with the deduction of federal taxes and not being
able to forecast their federal taxes, predicting what the number
is hard but estimated that the amount is in the low six figures,
a relatively small increment on top of the existing tax.
4:27:44 PM
CHAIR MEYER opened and closed public testimony.
4:28:12 PM
CHAIR MEYER held HB 96 in committee.