Legislature(2015 - 2016)BARNES 124
02/10/2016 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB248 | |
| HB252 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 194 | TELECONFERENCED | |
| *+ | HB 263 | TELECONFERENCED | |
| *+ | HB 248 | TELECONFERENCED | |
| *+ | HB 252 | TELECONFERENCED | |
HB 248-ELECTRONIC TAX RETURNS & ALCOHOL TAX
3:19:17 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 248, "An Act requiring the electronic submission
of a tax return or report with the Department of Revenue;
relating to the excise tax on alcoholic beverages; and providing
for an effective date."
3:20:26 PM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue, provided a PowerPoint presentation entitled, "Alcoholic
Beverage Tax HB 248," dated 2/10/16. He informed the committee
HB 248 is an act requiring the electronic submission of a tax
return or report with the Department of Revenue (DOR), relating
to the excise tax on alcoholic beverages, and providing for an
effective date [slide 2]. Mr. Spanos said the alcoholic
beverage tax was first imposed in 1933, and the basic structure
has remained unchanged since 1937. The tax is charged and
collected monthly at the wholesale level. The tax rate has
increased along with inflation and with the rates of other
states; the last major change was in 2002, when the tax was
raised to $0.10 per drink by legislation that also created the
Alcohol and Other Drug Treatment & Prevention Authority fund
which is funded by 50 percent of the tax collected. Currently,
revenue is about $40 million per year and $20 million is
deposited to the drug abuse treatment and prevention fund
[slides 3 and 4]. For current tax rates, one drink portion is
considered one ounce of distilled spirits, five ounces of wine,
and twelve ounces of beer, which is taxed about $0.10 per drink,
with the exception of small-rate breweries - by federal
definition - which are taxed $0.35 cents per drink for their
first 60,000 barrels [slide 5].
CHAIR OLSON asked how many breweries in Alaska produce over
60,000 barrels of beer.
MR. SPANOS pointed out that the tax applies also to breweries
importing into Alaska; however, none of the breweries in Alaska
produce enough to meet the federal definition for the full tax,
nor do many that import beer into the state [slide 5]. He
further explained that small-brewery beer is taxed at $0.35
cents for the first 60,000 barrels, distilled spirits are taxed
at $12.80, and the proposed bill would double the existing
taxes. The bill also includes an electronic filing requirement,
and a change to the minimum bond requirement [slide 6].
CHAIR OLSON asked whether DOR must take action on bonds
occasionally.
MR. SPANOS said he is not aware of action taken on a bond in
recent history, but to get a license from the tax division, a
bond is necessary.
3:25:37 PM
REPRESENTATIVE LEDOUX asked what the bond protects against.
MR. SPANOS responded that the bond is to protect the state in
case there is a default on taxes due. He returned to the
presentation, noting that Alaska's alcohol taxes are among the
highest in the country, however, many states with lower tax
rates on alcohol collect sales taxes, and others have state-
owned stores with hidden taxes and fees, and unknown revenue to
the state. The proposed bill would raise Alaska's tax to the
highest for wine, spirits, and beer [slide 7]. In response to
Representative LeDoux, he said spirits are hard liquor. The
department estimates that doubling the tax rate would nearly
double collections, and double the amount designated for the
Alcohol and Other Drug Treatment & Prevention Authority fund.
REPRESENTATIVE HUGHES has heard that raising taxes would reduce
the consumption of alcohol, but pointed out that DOR is
estimating that the same amount would be consumed. She asked
whether the tax increase in 2002 affected consumption habits.
MR. SPANOS said DOR has not done an analysis. He said, "It
seems that in the past, we've seen a dip initially, over that
first year, and it does eventually come back up. But again,
we've not done an analysis of that." The estimates were based
on the fall 2015 forecast, which did not account for changes in
alcohol demand or potential stockpiling [slide 8].
3:29:24 PM
REPRESENTATIVE HUGHES asked whether the amount diverted to the
Alcohol and Other Drug Treatment & Prevention Authority fund is
a statutory designation.
3:29:44 PM
MR. SPANOS confirmed that the 50 percent amount is established
in statute for the special fund. In a manner similar to the
other tax proposals from the administration, to implement HB
248, DOR must update its Tax Revenue Management System (TRMS)
and its Revenue Online (ROL) component in order to manage the
new tax rates, and update forms. These changes would be paid
for by an implementation cost of $50,000, and there are no
additional costs to administer the tax program [slide 9]. Mr.
Spanos advised that the alcohol tax fits into the
administration's plan to close the budget gap by providing
$40,000 in new revenue [slides 10 and 11]. Impacts of HB 248
are that alcohol would be slightly more expensive, which could
decrease consumption, and there could be stockpiling, although
DOR does not anticipate much of an effect overall [slide 12].
REPRESENTATIVE LEDOUX questioned how the administration could
forecast a decrease in consumption but at the same time forecast
double the amount of revenue.
3:32:20 PM
CHRIS HLADICK, Commissioner, Department of Commerce, Community &
Economic Development, speaking from his experience as a city
manager, said there may be a slight decrease initially, but the
rate of consumption would return to normal levels.
3:32:59 PM
MR. SPANOS directed attention to the sectional analysis for HB
248 [slides 13 and 14]:
· Section 1 adds a $25 or 1 percent tax penalty for failure
to file electronically unless an exemption is issued by DOR
· Section 2 requires electronic submission of tax returns,
license applications, and other documents submitted to DOR;
this changes the general tax statutes, AS 43.05, and would
apply to all tax types administered by the department;
provides a process to request an exemption if a taxpayer
does not have the technological capability to do so
· Section 3 changes the per-gallon tax rate for the three
major categories of alcoholic beverages
· Section 4 changes the per-gallon tax rate for the first
60,000 barrels sold in the state from small craft breweries
that meet the federal definition of a small brewer
· Section 5 changes statutes describing tax filing so that
taxpayers must submit their statements electronically
· Section 6 changes the surety bond requirement
· Section 7 clarifies the effective date
· Section 8 is transitional language allowing for regulations
· Section 9 is the effective date for Section 8
· Section 10 is the effective date for the rest of the bill
3:35:11 PM
REPRESENTATIVE JOSEPHSON has been told the consumer would pay
more than the estimated $0.10 per drink, because there are
additional costs that the bar owner or wholesaler would pass to
the consumer.
MR. SPANOS suggested that the industry should respond to that
question.
REPRESENTATIVE JOSEPHSON asked whether the percentage of revenue
directed to the Alcohol and Other Drug Treatment & Prevention
Authority fund is an exception to the prohibition on designated
funds.
MR. SPANOS answered that the fund is a special fund subject to
appropriation.
REPRESENTATIVE JOSEPHSON posited that if the legislature imposed
an increase of $10 million, would the administration seek the
additional $30 million from another source.
MR. SPANOS stated the intent of the administration is to balance
the budget, but he could not directly address what would happen
in that situation.
3:37:13 PM
REPRESENTATIVE KITO questioned at what point the tax is assessed
or paid.
MR. SPANOS explained that the tax is placed at the wholesale
level, thus if alcohol is imported to a warehouse, and the
warehouse owner holds the license, the warehouse owner is the
taxpayer; when the liquor is sold to the bar owner, the tax is
paid. He characterized the tax as "a true excise tax meaning
the tax is hidden up the chain." An exception would be that
when liquor is shipped directly to a retail store, the store
owner is the taxpayer.
REPRESENTATIVE KITO asked how a wholesaler proves the tax has
been assessed and paid.
MR. SPANOS said that licensees have self-reporting requirements,
and all importers of alcohol are licensed with DOR, which
investigates and verifies purchases and reporting.
REPRESENTATIVE KITO asked whether the electronic reporting
requirements in HB 248 - and other legislation - have been
implemented or are brand new to taxpayers.
MR. SPANOS said corporate income taxpayers must file
electronically if required to do so for federal purposes. The
ROL system is in use, but this is a new requirement.
REPRESENTATIVE LEDOUX referred to the 50 percent payment
designated for the Alcohol and Other Drug Treatment & Prevention
Authority fund, and asked whether the payment to this fund can
be confirmed.
3:40:32 PM
MR. SPANOS expressed his understanding that the funds have been
appropriated every year; however, he will verify.
REPRESENTATIVE LEDOUX questioned whether the tax increase will
result in $40 million to the general fund (GF) and $20 million
to the Alcohol and Other Drug Treatment & Prevention Authority
fund.
MR. SPANOS said initially $40 million goes to GF, and from that
$20 million would be appropriated to the special fund.
REPRESENTATIVE HUGHES observed that if HB 248 passes,
individuals may choose to order liquor online. She asked
whether the administration completed an analysis on the
potential impact of online purchases of alcohol to small local
businesses and to jobs.
MR. SPANOS said DOR did not.
CHAIR OLSON opined that shipping wine is very expensive, and
liquor cannot be mailed, thus outside purchases would not affect
businesses.
REPRESENTATIVE HUGHES questioned why there was no analysis on
the potential economic impact of this and other revenue bills;
furthermore, she asked whether DOR considered that in rural
areas, the increased cost might encourage black market activity.
MR. SPANOS acknowledged that black market activity is always a
concern; he restated that the focus of the tax bills is to close
the budget gap, and their impact on revenue. He pointed out
that the funds directed to the Alcohol and Other Drug Treatment
& Prevention Authority fund is used to assist with "those types
of activities."
3:44:46 PM
REPRESENTATIVE HUGHES said she was troubled that there is a
focus on how to pay for government, without concern for
residents and their communities. She reviewed the changes to
taxes to small breweries and noted that breweries in her area
could grow and expand, but the tax would stop growth.
MR. SPANOS said he would confirm the production numbers of all
of the breweries in Alaska and the tax rates thereof.
REPRESENTATIVE JOSEPHSON returned attention to the increase in
funding to the Alcohol and Other Drug Treatment & Prevention
Authority fund and asked whether the increase would be offset
from another category such as behavioral health, or the Mental
Health Trust Authority.
MR. SPANOS said he will inquire.
CHAIR OLSON stated that HB 248 would impact constituents who may
be unaware of its consequences; in a manner similar to tobacco
taxes, the bill seeks to increase the cost to those who buy a
product from an industry that has "significant problems," but is
not illegal. He predicted there would be a response to the bill
if it passes.
3:49:22 PM
REPRESENTATIVE LEDOUX questioned whether the change to the
amount of the required bond intends to give DOR discretion with
respect to individuals who apply for a bond.
MR. SPANOS said currently DOR analyzes the estimated tax prior
to approving a bond, and the bond is usually double the amount
of the estimated tax amount, with a minimum of $25,000; however,
the removal of the minimum bond value allows DOR to accept a
smaller bond amount for a business with an expected tax amount
of $5,000, for example.
REPRESENTATIVE LEDOUX said, "But it doesn't say that the upper
amount, is like, 25 or 50, or something like that, it just gives
you total discretion."
MR. SPANOS responded that under the current statute, DOR has
total discretion to increase the amount to cover the estimated
tax. In further response to Representative LeDoux, he said he
would review the language in the regulations.
REPRESENTATIVE LEDOUX said, "So, you're telling me that if we
have a statute that says ... 'of $25,000', that by regulation
you can make it [$50,000] or [$100,000] or [$150,000]? That's
kind of perplexing to me."
3:52:17 PM
COMMISSIONER HLADICK said this provision in the bill addresses
doing away with the $25,000 minimum requirement, so the state
has the ability to charge a small businessman less.
REPRESENTATIVE LEDOUX asked, under the current law, if the state
has the discretion to raise the amount, why it does not have the
discretion to lower the amount.
MR. SPANOS said he will review the regulations.
REPRESENTATIVE HUGHES asked how many wholesalers - distributers
with a warehouse - would be affected, since the bars and liquor
stores would not be affected.
MR. SPANOS explained that the bill would address small wineries
that are producing wine and must get a tax bond, as well as
specialty importers. He agreed there are only a few large
warehouses, which are the main taxpayers.
[HB 248 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB248 ver A.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 248 |
| HB248 Sponsor Statement-Governor's Transmittal Letter 1-15-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 248 |
| HB248 Fiscal Note-DOR-TAX-01-13-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 248 |
| HB252 ver A.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 252 |
| HB252 Sponsor Statement-Governor's Transmittal Letter 1-15-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 252 |
| HB252 Sectional Analysis.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 252 |
| HB252 Fiscal Note-DOR-TAX-01-13-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 252 |
| HB252 DOR-Presentation to HLAC 2-9-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 252 |
| HB248 DOR-Presentation to HLAC 2-9-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 248 |