02/11/1998 08:40 AM Senate FIN

                                                                               
SENATE BILL NO. 240                                                            
"An Act repealing the tax on punchboards and coin-                             
operated amusement and gaming devices; and providing                           
for an effective date."                                                        
                                                                               
                                                                               
Bob Bartholomew, Deputy Director of the Division of Income                     
and Excise Audit, Department of Revenue, was invited to the                    
table to testify in support of this bill.  He gave a brief                     
history of events that lead to this request.  The original                     
tax was imposed by the Territorial Legislature in 1947.  Mr.                   
Bartholomew said he has been unable to find documentation to                   
show the reasoning behind this original action.  While the                     
tax rate was in increased in 1987, since that time, the                        
department costs of administering the program have risen and                   
can no longer be justified by the small amount of earnings                     
brought in.                                                                    
                                                                               
The department is trying to maintain a high level of service                   
on a continually decreasing amount of operating funds.  This                   
program requires approximately 500 man-hours a year to                         
administer and brings in less than $30,000 annually.  Mr.                      
Bartholomew said his office feels their efforts could be                       
better spent on enforcement of other programs that generate                    
higher revenues. He explained that although revenue from                       
this tax is distributed between municipalities and the                         
state, the municipalities have given their support for                         
repealing this tax.  Their reasons are the same as the                         
departments: focusing resources on collection of other tax                     
programs, with higher revenue, is more fiscally                                
advantageous.                                                                  
                                                                               
Mr. Bartholomew answered a question from Senator Torgerson                     
saying that repealing this tax will have no affect on a                        
municipality's authority to regulate businesses.  Senator                      
Donley noted this bill did not address vending machines and                    
asked if they were taxed.  Mr. Bartholomew told him that                       
other than cigarette machines, he was unaware of any other                     
vending machine taxes.                                                         
                                                                               
Senator Adams pointed out that the changes proposed in SB
 would affect 14 statutes.  He wondered if the                              
legislature would be required to address video machines and                    
pulltabs.  Mr. Bartholomew anticipated the need for                            
completely new regulations to govern gaming machines.  Co-                     
Chair Pearce shared that it is normal for states to collect                    
a percentage of the income generated by these machines                         
rather than impose a straight tax on their presence.                           
                                                                               
There was more discussion on the division's intent to focus                    
the savings into the Compliance Group if this measure                          
passed.  This group was formed within the Department to work                   
to bring taxable parties into compliance with the law.                         
                                                                               
Senator Adams moved SB 240 out of committee and without                        
objection, and with an updated zero fiscal note from                           
Department of Revenue, Division of Income and Excise Audit,                    
it was reported out.