Legislature(2021 - 2022)ANCH LIO DENALI Rm

09/03/2021 01:00 PM House WAYS & MEANS

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Audio Topic
01:03:28 PM Start
01:04:26 PM HB3006
01:55:26 PM Overview: Revenue Options
03:11:44 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Location Change --
-- Testimony <Invitation Only> --
Heard & Held
+ Overview: Revenue Options TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
                     HB 3006-STATE SALES AND USE TAX                                                                        
1:04:26 PM                                                                                                                    
CHAIR    SPOHNHOLZ       announced      that    the   first    order     of  business      would                                
be   HOUSE     BILL    NO.   3006,     "An    Act   relating      to   a   state     sales    and                               
use      tax;      relating        to     sales       and     use      taxes       levied       by                              
municipalities;          authorizing        the    Department       of   Revenue      to   enter                                
into    the   Streamlined        Sales    and    Use   Tax    Agreement;       and   providing                                  
for an effective date."                                                                                                         
1:04:33 PM                                                                                                                    
REPRESENTATIVE          GERAN     TARR,     Alaska     State     Legislature,         as   prime                                
sponsor,      presented       HB   3006    [hard     copy    of   presentation         included                                 
in    the    committee       packet].         She    gave    a   brief      history      of   the                               
bill's     inception,       emphasizing       her   willingness        to   see   it   modified                                 
and   the   importance       of   having     the   support     of   both    bodies,     as   well                               
as   the    governor.        She    talked     about    "spreading        the   burden     among                                
all     who     benefit        from     public       services"        and     indicated         an                              
acceptance       of   the   idea    to   establish      a   sales    tax.      She   noted    the                               
burden     on    Alaska's      small     population        to   pay    for    all   goods     and                               
services.        She    said    20  percent      of   the   state's     workforce       is   from                               
out    of   state,     and    2.26    million      visitors       come    to   Alaska.        She                               
said    Alaskans       who   travel     outside      the    state     pay   taxes     to   those                                
locales,      and    she    opined     that    visitors      to    Alaska     should     do   the                               
1:06:58 PM                                                                                                                    
REPRESENTATIVE          TARR    advised      that    in    coming     up   with     a  plan     to                              
raise     revenue,      two   questions       to   ask   are    how    much    revenue     could                                
be   raised    by   any   single     proposal      and   how   soon    that    revenue     could                                
come    to   the   state.       One    benefit     of   the    proposal      under    HB   3006,                                
she    said,      is   that     it    can    be    implemented         sooner.         With     an                              
effective       date    of   July    1,   2022,     for    Fiscal     Year    2022    (FY    22),                               
that    would    happen     faster     than   an   income     tax,   which     is  based     on  a                              
calendar       year.       Pointing       to   a   chart,      labeled      "Who    pays,     how                               
soon,"      she    listed      payers      as    Alaskans,        out-of-state         workers,                                 
tourists,        and    businesses/oil          companies,        and     she    said     it    is                              
likely     that    everyone     would     contribute       to  state     services      [through                                 
a  sales     tax].      She    said   that    is   not    likely     to   be  true    with    the                               
other     revenue     sources      [being     considered].           She   questioned        what                               
the     public's       reaction       would      be    to    multiple       revenue       source                                
proposals being introduced at one time.                                                                                         
1:12:39 PM                                                                                                                    
REPRESENTATIVE         TARR    turned     to  consideration         of   exemptions,       shown                                
on   the    next     two   pages     of    the   presentation.            Basic     essentials                                  
would     be   exempted      from    sales     tax,    including       groceries,       medical                                 
expenses,       child    care    services,      and    feminine      care    products.        She                               
mentioned       deductions       that     must    be   included,       and    she    indicated                                  
those     have    to   do   with     the   state     not    being     allowed     to    tax   the                               
federal     government       or   tribes.       Other    deductions       to   be   considered                                  
may include financial services and non-profit agencies.                                                                         
REPRESENTATIVE          TARR     talked     about      management       and     said    HB
3006    envisions      a  streamlined        approach      for   general     sales     and                                      
use    tax;    the    bill    has    provisions        to   allow     municipalities                                            
and    boroughs      the   ability      to   levy    tax,    and    the   state     would                                       
collect      the     tax    and    distribute        it    back     to   those      local                                       
governments.          She    indicated      that    the    exemptions       previously                                          
mentioned       would    also    become     exemptions       at   the    local    level.                                        
She    said    her   staff     would    offer     a  sectional       analysis      of   HB
3006.      She    said    it  would     include     Title     28,   regarding       motor                                       
vehicles;       Title      29,    regarding        municipal       government;         and                                      
Title 43, regarding revenue and taxation.                                                                                       
1:17:22 PM                                                                                                                    
REPRESENTATIVE          TARR    spoke     about     the    beginnings       of   her    efforts                                 
toward     HB    3006    and    other     legislation        addressing        the    issue     of                              
revenue.         She    spoke     of   issues      that    effect     the    economy.         She                               
addressed      the    impact    of   the   proposed      legislation,        which     would    be                              
a  2   percent      general     sales     and   use    tax.      She    said    those    in   the                               
lower    economic      income     brackets      would     "come    out    ahead"     under    the                               
proposed      legislation,        while    those    on   the   higher     end,    who   may   not                               
consider       their      permanent        fund      dividend       (PFD)      as    necessary                                  
income,      could    view    their     PFD    as   a  way    to   pay   the    higher     sales                                
tax   on   expensive       purchases,       such    as   a   new   vehicle.        She    called                                
this a "win-win" situation.                                                                                                     
1:22:39 PM                                                                                                                    
REPRESENTATIVE          TARR     offered      ideas      for    further       consideration,                                    
such    as   including      exemptions       for    diapers     and    other    supplies      for                               
children,       which      she    noted     could      be   included       under     the     food                               
definition       if    it   were    amended.        She    said    some    have     questioned                                  
the   necessity       of  state     management.         She   explained      that    [HB   3006]                                
was   based    off    a  draft    former     Governor      Bill   Walker     had   created      in                              
2015.      Since     then   an   online     sales     tax   has   been    implemented,        and                               
municipalities          have     had     to   track      the    online      sales      tax,     in                              
addition      to  their     own   local    taxes.       She   pointed     out   that    because                                 
there     is    software      "that     helps     delineate       all    of    that,"     so    it                              
could     be   that     state    management        is   not    necessary.          She    talked                                
about     splitting       the   collection        of   taxes     between      municipalities                                    
and    the    state    so    that    municipalities         can    maintain      their     sales                                
tax   and    not   lose    revenue.        She   related      another     conversation        has                               
been     held      regarding        501(c)      organizations          and     the    idea      of                              
allowing          exemptions           for       volunteer           fire        departments,                                   
organizations          for     veterans,        and     chambers       of    commerce,        for                               
example.         In   conclusion,        Representative         Tarr    acknowledged         that                               
HB 3006 may require numerous hearings to hone.                                                                                  
1:27:34 PM                                                                                                                    
REPRESENTATIVE         TARR,     in   response      to   Representative         Prax,     stated                                
that     the     Department        of     Revenue       has    figured       that     a    fully                                
implemented        sales    tax    would    garner     the    state    approximately         $300                               
million per year.                                                                                                               
REPRESENTATIVE          PRAX    asked     if    the    bill    sponsor       had    considered                                  
that    people     might     buy   more     expensive      items     from    states     without                                 
sales tax.                                                                                                                      
REPRESENTATIVE         TARR    talked     about    the   proximity      of   states     with    no                              
sales     tax   to   Alaska.       Oregon     has    income     tax,    but   no   sales     tax;                               
the   other     states     [with    no   sales    tax]    are    Delaware,      Montana,      and                               
New    Hampshire.         She    suggested      it    may   end    up   being     more    costly                                
for    someone      to    buy    a   vehicle,      for    example,       in    one    of   those                                
states      and     then     have     to   pay     to    ship     it    to    Alaska.         She                               
acknowledged         that     Alaskans      used     to    buy    items     in    Washington;                                   
however,      the    policy     that    allowed      non-residents         to   forgo     paying                                
the     State     of    Washington's          sales     tax     was    eliminated.            She                               
suggested the proposed sales tax for Alaska could include a cap.                                                                
1:31:44 PM                                                                                                                    
REPRESENTATIVE           PRAX     opined      that     those      factors       need     to     be                              
considered when addressing HB 3006.                                                                                             
1:32:11 PM                                                                                                                    
CHAIR    SPOHNHOLZ       asked    David     Song    to   give    the   sectional       analysis                                 
for HB 3006.                                                                                                                    
1:32:16 PM                                                                                                                    
DAVID     SONG,      Staff,      Representative          Geran     Tarr,      on    behalf      of                              
Representative         Tarr,    prime     sponsor     of   HB  3006,     read   the    six-page                                 
sectional       analysis      for    the    record     [hard     copy    available       in   the                               
committee packet].                                                                                                              
1:54:50 PM                                                                                                                    
CHAIR SPOHNHOLZ announced that HB 3006 was held over.                                                                           

Document Name Date/Time Subjects
HB3006A.PDF HW&M 9/3/2021 1:00:00 PM
HB 3006 Sponsor Statement.pdf HW&M 9/3/2021 1:00:00 PM
HB 3006 Sectional Analysis.pdf HW&M 9/3/2021 1:00:00 PM
HB 3006 Supporting Documents.pdf HW&M 9/3/2021 1:00:00 PM
Revenue bills comaprison table.pdf HW&M 9/3/2021 1:00:00 PM
DOR Presentation 9.3.21.pdf HW&M 9/3/2021 1:00:00 PM
HB 3006 Statewide Sales and Use Tax UPDATED.pdf HW&M 9/3/2021 1:00:00 PM