Legislature(2003 - 2004)
05/12/2003 07:30 AM House W&M
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
May 12, 2003
7:30 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Jim Whitaker, Co-Chair
Representative Cheryll Heinze
Representative Vic Kohring
Representative Norman Rokeberg
Representative Bruce Weyhrauch
Representative Peggy Wilson
Representative Max Gruenberg
Representative Carl Moses
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Ralph Samuels
Representative Paul Seaton
Representative Dan Ogg
Representative Sharon Cissna
COMMITTEE CALENDAR
HOUSE BILL NO. 293
"An Act levying and collecting a state sales and use tax; and
providing for an effective date."
- MOVED CSHB 293(W&M) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 293
SHORT TITLE:STATE SALES AND USE TAX
SPONSOR(S): WAYS & MEANS
Jrn-Date Jrn-Page Action
04/30/03 1202 (H) READ THE FIRST TIME -
REFERRALS
04/30/03 1202 (H) W&M, FIN
05/01/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
05/01/03 (H) Heard & Held --
Teleconference --
MINUTE(W&M)
05/06/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
05/06/03 (H) Heard & Held
MINUTE(W&M)
05/07/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
05/07/03 (H) Heard & Held -- Recessed to a
call of the chair --
MINUTE(W&M)
05/08/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
05/08/03 (H) Heard & Held -- Recessed to a
call of the Chair --
MINUTE(W&M)
05/09/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
05/09/03 (H) Heard & Held
MINUTE(W&M)
05/10/03 (H) W&M AT 8:30 AM HOUSE FINANCE
519
05/10/03 (H) Heard & Held
MINUTE(W&M)
05/11/03 (H) W&M AT 5:00 PM HOUSE FINANCE
519
05/11/03 (H) Heard & Held
MINUTE(W&M)
05/12/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
WITNESS REGISTER
LARRY PERSILY, Deputy Commissioner
Office of the Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions about the proposed
committee substitute (CS) for HB 293, Version Q.
ROBYNN WILSON, Revenue Auditor
Tax Division
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions about the proposed CS
for HB 293, Version Q.
KATHRYN KURTZ, Attorney
Legislative Legal and Research Services
Legislative Affairs Agency
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As drafter of the legislation, answered
questions about the proposed CS for HB 293, Version Q.
ACTION NARRATIVE
TAPE 03-31, SIDE A
Number 0001
CO-CHAIR JIM WHITAKER called the House Special Committee on Ways
and Means meeting to order at 7:30 a.m. Representatives Hawker,
Whitaker, Heinze, Kohring, Rokeberg, Weyhrauch, Wilson,
Gruenberg, and Moses were present at the call to order.
Representatives Samuels, Seaton, Ogg, and Cissna were also
present.
HB 293-STATE SALES AND USE TAX
CO-CHAIR WHITAKER announced that the only order of business
would be HOUSE BILL NO. 293, "An Act levying and collecting a
state sales and use tax; and providing for an effective date."
He confirmed that the proposed committee substitute (CS),
Version Q was before the committee for purposes of amendments.
REPRESENTATIVE WEYHRAUCH noted that in addition to his written
amendments, he has several conceptual amendments he would like
to discuss. He received permission to propose conceptual
amendments as well.
Number 0227
CO-CHAIR HAWKER moved Amendment 1, labeled 23-LS1064\Q.1, which
read:
Page 9, line 10:
Delete "The"
Insert "Except as provided in (d) of this
section, the"
Page 9, following line 27:
Insert a new subsection to read:
"(d) A municipality may levy a general sales and
use tax or increase the rate of an existing sales and
use tax so that the combined state and municipal sales
tax rate exceeds eight percent if it is approved by
the voters in a referendum election under
AS 29.45.670. The proposed total combined rate as
well as the proposed municipal rate must be clearly
stated to the voters in the referendum question. In a
municipality that imposes a general sales and use tax
at a rate that, combined with a three percent state
sales and use tax rate, exceeds eight percent, the
rate of the state sales and use tax imposed under this
chapter shall be three percent, notwithstanding any
other provision of this chapter or AS 29."
Number 0257
CO-CHAIR WHITAKER objected for purposes of discussion.
REPRESENTATIVE ROKEBERG requested that copies of the amendments
be made available before they are moved.
The committee took an at-ease from 7:33 a.m. to 7:49 a.m. to
distribute amendments.
CO-CHAIR WHITAKER noted that each amendment will be numbered as
the committee proceeds.
Number 0503
CO-CHAIR HAWKER reiterated that he moved Amendment 1, introduced
by Representatives Hawker and Whitaker.
CO-CHAIR WHITAKER noted that he objected for the purpose of
discussion.
CO-CHAIR HAWKER explained that this amendment, developed in part
by Representative Ogg, addresses the concerns of municipalities
that may choose to impose a sales and use tax in excess of the
cap, which aggregates the state and local taxes to 8 percent.
This allows the municipalities, through the referendum election,
to override that cap. It promotes the concept of local control
and self-determination. It, as a counterbalancing measure, also
prevents any municipality that chooses to override the 8 percent
cap from benefiting during the rate phase-in.
Number 0612
REPRESENTATIVE ROKEBERG offered a friendly amendment to
Amendment 1. On line 9, after "voters", insert "for the
purposes of capital improvements". He said the way the
amendment is drafted now it allows any municipality to set its
tax rate higher than the [8 percent] limit. This change would
allow an increased tax rate for a specific purpose such as a
bonded indebtedness for a particular project.
Number 0723
REPRESENTATIVE WEYHRAUCH objected to the proposed amendment to
Amendment 1 for purposes of discussion. He explained that
voters may want capital improvements or general government
services to implement or maintain a capital project. He said he
does not favor tying the hands of local government; this
proposed amendment would take away local control.
REPRESENTATIVE ROKEBERG said that if legislators are trying to
generate public acceptance of the sales tax, a cap with meaning
is important.
Number 0948
A roll call vote was taken. Representatives Rokeberg and Wilson
voted in favor of the amendment to Amendment 1. Representatives
Hawker, Whitaker, Gruenberg, Moses, Weyhrauch, and Heinze voted
against it. Therefore, amendment to Amendment 1 failed by a
vote of 2-6.
[With no further objection, Amendment 1 passed.]
Number 1008
CO-CHAIR HAWKER moved Amendment 2, which read [original
punctuation provided]:
New Sec # ___
State field offices: State may enter into
contractual agreements with municipalities that have
sales taxes on the effective date of this Act to be
field officer for that geographical area of the state.
CO-CHAIR HAWKER identified the Amendment 2 as one submitted by
Representative Ogg and introduced by Representatives Hawker and
Whitaker. He stated that the amendment was conceptual but it
will be to page 26, line 8, and the a new subsection will be
subsection (d).
CO-CHAIR WHITAKER objected for discussion purposes.
Number 1108
CO-CHAIR HAWKER explained that this clarifying provision
indicates that the state may enter into contractual agreements
with municipalities to act as the field offices or [conduct
other] administrative duties.
Number 1124
CO-CHAIR HAWKER corrected his earlier statement, saying
Amendment 2 is still a conceptual amendment with details as
suggested.
REPRESENTATIVE WEYHRAUCH stated that he supports Amendment 2.
He noted that to the extent that the legislature and local
communities can work together as cohesive units rather than
adversaries, everyone is better off.
Number 1203
REPRESENTATIVE GRUENBERG questioned whether the subtitle is
"offices" or "officers".
REPRESENTATIVE OGG clarified that the word is "offices".
Number 1257
CO-CHAIR WHITAKER removed his objection. There being no other
objection, Amendment 2 passed.
Number 1248
REPRESENTATIVE MOSES moved Amendment 3, which read [original
punctuation provided]:
On page 4, line 6: between "levy" and "specific"
insert "and collect"
CO-CHAIR WHITAKER objected for discussion purposes.
Number 1312
REPRESENTATIVE MOSES identified his amendment and clarified that
the municipalities will be able to collect any special taxes
such as bed taxes and fish taxes.
CO-CHAIR HAWKER noted that he supports this amendment.
CO-CHAIR WHITAKER removed his objection. Hearing no further
objections, he stated that Amendment 3 was adopted.
Number 1412
REPRESENTATIVE HEINZE indicated she did not have any amendments
at this time.
REPRESENTATIVE GRUENBERG identified his six amendments.
Number 1643
REPRESENTATIVE GRUENBERG moved to adopt Amendment 4, which read
[original punctuation provided]:
page 13 line 25
delete: "under a single contract"
CO-CHAIR WHITAKER objected for the purpose of discussion.
REPRESENTATIVE GRUENBERG said he offered Amendment 4 because, as
the committee discussed last night, there was no reason given
for exempting a sale only because it is under a single contract.
He said a good lawyer could group several transactions under a
single contract.
Number 1741
LARRY PERSILY, Deputy Commissioner, Office of the Commissioner,
Department of Revenue, commented at the request of Co-Chair
Whitaker. He said the main issue in terms of the dollar value
is the transportation of oil. If the legislature assessed a 3
percent tax on the tariff paid on the transportation of oil
through TAPS (Trans-Alaska Pipeline System), there would be $35
to $40 million a year in sales tax revenue; the state would
probably clear, after the reduced wellhead value, $30 million a
year. It's a question of how the legislature wants to treat
[the transportation of oil]. If the legislature exempts single
contracts, because the oil is moving under a single contract, it
is exempted from sales tax. If the legislature wants to tax the
oil moving from Prudhoe Bay to Valdez, then legislators would
write the bill so it becomes taxable.
REPRESENTATIVE GRUENBERG explained that he doesn't want to
affect the taxes collected [from TAPS] by doing this. If this
amendment is adopted, will it affect the amount of taxes
collected, he asked.
MR. PERSILY said yes, he believes it would.
Number 1855
ROBYNN WILSON, Revenue Auditor, Tax Division, Department of
Revenue, said that if she understands Amendment 4 correctly, it
would expand the exemption [for transportation services].
Regarding whether the state taxes TAPS tariffs, there is a
question about whether [subsection (a)] needs to be in or out of
the bill completely. She said she didn't think Amendment 4
would change whether TAPS would be taxed.
REPRESENTATIVE GRUENBERG restated Ms. Wilson's answer that she
doesn't think the amendment would make a difference but she's
not sure.
Number 1954
MR. PERSILY observed that the [proposed CS] as written states
that transportation of property within the state is exempt if it
is being transported interstate under a single contract. If the
words "under a single contract" are eliminated, TAPS is still
exempt because its [oil] is eventually being transported
interstate. So removing the words "under a single contract"
would not affect [the current taxes on TAPS]. He said that
Amendment 4 clarifies that the single contract is no longer an
issue; [TAPS] is still going to be exempt [from sales taxes
under HB 293] because it transports oil for interstate commerce.
He retracted his earlier answer.
Number 2034
REPRESENTATIVE SEATON asked if this [intrastate transportation
issue] only applies to the TAPS tariff. The section covers
transportation of persons or property. He asked if the
exemption would apply to in-state airline tickets if the
traveler was eventually going out of state.
MR. PERSILY said that federal law prohibits putting a general
sales and use tax on airline tickets. But if a person is moving
personal goods or freight [the exemption from sales tax would
apply]. TAPS is the largest single item. But Mr. Gruenberg is
correct in that removing the single contract [language] still
exempts transportation services if they're being transported
interstate or foreign commerce eventually.
Number 2121
REPRESENTATIVE SEATON pointed out the problem that any items -
such as logs or other materials bound for a mill - being
transported within the state under multiple contracts could
qualify for the exemption because the items would eventually be
shipped out of state. He cautioned that it's opening a can of
worms to say that at some point in time through many contracts
the items will go interstate.
MR. PERSILY said, as the [CS] is drafted now, the company has to
have the single contract to [transport the goods] out of state
to be tax exempt. Under Amendment 4, the company would not need
that single contract; the company would have to show the
department that [the goods] are destined for interstate or
foreign commerce.
Number 2244
REPRESENTATIVE WILSON asked if those moving out of state would
have to pay [sales tax] on shipping their goods.
MR. PERSILY said that is his understanding.
Number 2315
REPRESENTATIVE GRUENBERG withdrew Amendment 4 and asked the co-
chairs to offer the amendment in the House Finance Committee.
He said his intention was to stop litigation, not cause
problems.
Number 2346
REPRESENTATIVE GRUENBERG moved Amendment 5, which read [original
punctuation provided]:
page 11 line 6
after "by" insert "the state or"
CO-CHAIR HAWKER objected for discussion.
REPRESENTATIVE GRUENBERG said the committee talked last night
about the fact that the instrumentalities of the state in Title
39 [Public Officers and Employees] include the [State of
Alaska]. [Section 17 of the CS] is in Title 43 [Revenue and
Taxation]. He explained that in order to eliminate any
question, Amendment 5 lists the [State of Alaska] in this
section. He mentioned that the definition section could clarify
that instrumentalities of the state have the same definition as
the one Co-Chair Hawker read from Title 39. He said he just
wanted to be sure that sales to or uses by the State of Alaska
are also exempt [from sales and uses taxes]. He said he could
call the amendment conceptual in order to allow the drafter the
ability to insert it in the bill however [it is appropriate].
Number 2448
CO-CHAIR HAWKER removed his objection to Amendment 5.
REPRESENTATIVE ROKEBERG asked if Amendment 5 is redundant.
CO-CHAIR WHITAKER replied that it serves the purpose of being
absolutely certain [that the State of Alaska is exempted from
the sales tax.] Hearing no other objections, he said Amendment
5 was adopted.
Number 2515
REPRESENTATIVE GRUENBERG moved Amendment 6, which read [original
punctuation provided]:
1. page 8 line 20, after "property" add:
"and intangible personal property that is
not exempted under this chapter"
2. page 21 line 26, add a new subsection
"(3) intangible personal property means
personal property other than tangible personal
property as defined in this chapter."
renumber subsequent subsections.
CO-CHAIR HAWKER objected for purposes of discussion.
Number 2526
REPRESENTATIVE GRUENBERG noted that the committee has discussed
several times whether intangible personal property should also
be taxed. There is an exemption on page 11, starting on line
19, AS 43.44.110 [Exemption for intangibles.]
REPRESENTATIVE GRUENBERG asked to return to Amendment 5. He
requested that the bill drafter not include the language "the
state" if the drafter believes it isn't necessary.
REPRESENTATIVE GRUENBERG, returning to Amendment 6, said he
would like to be sure the state can tax intangible personal
property that is not exempted. Tangible personal property is
already defined in the bill in the definitional section, on page
24, lines 25-28. He said his definition states that intangible
personal property is personal property other than tangible
personal property as defined in the bill. Intangibles can
include patents, copyrights, software, and other [nonphysical]
items that have a lot of value.
Number 2713
REPRESENTATIVE ROKEBERG said he is concerned about [remuneration
for personal services for] independent contractors and whether
that would be considered a commission; the bill's drafter will
be looking into this area. He said it's a problem if this
amendment requires that the exempted intangible personal
property must be listed [in the bill]. If the committee isn't
careful, it will be at cross-purposes with AS 43.44.110, he
said. He noted that software that is sold is a [taxable] item,
but asked whether a license to use software is intangible
property.
REPRESENTATIVE GRUENBERG replied that [a license to use
software] would be considered [intangible property].
Number 2823
REPRESENTATIVE ROKEBERG suggested that [a license to use
software] be listed as non-exempt, rather than making a broad
stroke [of intangible personal property]. [Amendment 5] causes
contradictions from one section to another, he said.
REPRESENTATIVE GRUENBERG stated that the way the proposed CS is
drafted, Section 43.44.110 lists some types of intangible
personal property that are exempt. He said his intention
reflects the way the bill is currently drafted, which is that
things are taxed unless they are specifically exempted.
Number 2915
REPRESENTATIVE ROKEBERG replied that the committee must be clear
about which intangibles it doesn't want taxed.
MR. PERSILY said the Department of Revenue has some concerns
about taxing intangible property.
MS. WILSON said that the situs of the intangible is an important
consideration. She suggested [inserting] the clarifying
language, intangible personal property "used in the state". For
example, if a person owns and then sells a trademark, the state
could not tax it unless it was used in the state.
Number 3007
REPRESENTATIVE GRUENBERG said he would consider that suggestion
a friendly amendment and thus [in the first section of Amendment
6] after "and intangible personal property", he added "used in
the state".
Number 3030
CO-CHAIR HAWKER addressed Amendment 6 overall. He said that
this amendment completely restructures the concept upon which
this bill was founded. The subject of Amendment 6, the language
on page 8, line 20, is the [foundation] of the entire bill:
There is a sales tax and it shall be on tangible personal
property and services. The sponsors did not anticipate defining
intangible goods. The second paragraph of Amendment 6 states
that intangibles mean everything except what is defined in the
bill. Attempting to exclude inappropriate intangibles would
require creating a huge laundry list. He noted that while
taxing intangible property is a worthy subject, he recommended
focusing on the concept [of tangible property]. He said that
the subject of intangibles is a research project unto itself and
needs more scrutiny than the committee can give it.
Number 3238
REPRESENTATIVE GRUENBERG asked if Co-Chair Hawker prefers that
he withdraw Amendment 6.
CO-CHAIR HAWKER said yes, he would appreciate Representative
Gruenberg withdrawing Amendment 6. He said he'd be happy to
consider it at a later date.
REPRESENTATIVE GRUENBERG withdrew Amendment 6.
Number 3341
REPRESENTATIVE GRUENBERG moved Amendment 7, which read [original
punctuation provided]:
(insert a new section to read):
Sec. 43.44___ Exemption for sales to Alaska
residents 65 years of age and older. Sales of
services and of goods for personal use and consumption
to residents of Alaska sixty-five years of age and
older shall be exempt from the provisions of the sales
tax and use tax. Provision shall be made for said
exemption to apply to transactions made on behalf of
exempt seniors by the care-givers who shop for them
and pay bills for them.
CO-CHAIR HAWKER objected.
Number 3407
REPRESENTATIVE GRUENBERG explained that the next three
amendments are exemptions for three distinct groups of people.
Amendment 7 [co-sponsored by Representative Rokeberg] exempts
sales to Alaska residents 65 years or older. He said these are
people who live on fixed incomes, who are going to find life
more difficult now that the state is either eliminating or
creating a means test on the longevity bonus. Many communities
already receive exemptions from various types of taxation. It
is appropriate to exempt seniors from the statewide sales tax,
he said.
Number 3503
REPRESENTATIVE WILSON asked what percentage of the people in the
state are seniors. She pointed out that "baby boomers," which
could amount to about half of the people in the state, are aging
and thus the exemption in Amendment 7 could cut [the sales tax
revenue] in half.
MR. PERSILY said he did not know the percentage of seniors in
the state.
Number 3539
REPRESENTATIVE WEYHRAUCH opposed Amendment 7. He said this is
exactly what legislators will face as they implement this kind
of tax. The people are going to be lining up because they have
great reasons for exemptions. He said the people in this state
have a duty to help close the fiscal gap, and the legislature
has to apply this tax as broadly and as fairly as possible.
Given that taxes are inherently unfair and unpopular, everybody
ought to be inherently treated unfairly by having a tax assessed
on them.
REPRESENTATIVE HEINZE said that if medical and drugs were not
already exempt in the proposed CS, she said she would vote for
Amendment 7. She asked if a 65-year-old tourist would be exempt
under this amendment.
REPRESENTATIVE GRUENBERG said Amendment 7 applied to Alaska
residents only.
Number 3716
REPRESENTATIVE ROKEBERG spoke in support of Amendment 7. He
asked if the department could research the impact of tax
collections of a senior exemption. He's considering a provision
adding qualifying for social security, at least 65 years of age.
He said he'd like to know which communities exempt 65 year olds
from local sales tax.
REPRESENTATIVE SEATON opposed Amendment 7 because he believes it
opens a huge loophole in the bill. He predicted that many
seniors would shop for their family members.
REPRESENTATIVE SAMUELS agreed that anyone with a friend over 65
would shop for them [and use their senior exemption].
Number 3907
REPRESENTATIVE KOHRING said he supports Amendment 7 because it
moves in the direction of exempting everyone from the sales tax.
A roll call vote was taken. Representatives Gruenberg, Moses,
Rokeberg, and Kohring voted in favor of Amendment 7.
Representatives Hawker, Whitaker, Wilson, Weyhrauch, and Heinze,
voted against it. Therefore, Amendment 7 failed by a vote of 4-
5.
Number 3950
REPRESENTATIVE GRUENBERG moved Amendment 8, which read [original
punctuation provided]:
Add a new section to read:
AS 43.44.___ Exemption for sales on Military Post
Exchanges. Sales on military post exchanges shall be
exempt.
CO-CHAIR HAWKER objected.
Number 4003
REPRESENTATIVE GRUENBERG stated that people in the military are
serving their country; they're an important part of the economy,
and frankly, most of them do not make much money. He asked if
sales on post exchanges are included or excluded in the CS.
MR. PERSILY said that under federal law, sales on post exchanges
are excluded from sales tax. For example, Alaska cannot collect
cigarette taxes on sales on military bases. He suggested that
this amendment probably is not necessary.
REPRESENTATIVE GRUENBERG withdrew Amendment 8.
Number 4043
REPRESENTATIVE GRUENBERG moved Amendment 9, which read [original
punctuation provided]:
Add a new section to read:
AS 43.44.___ Sales to Alaska residents with
incomes below 200 percent of the federal poverty
level. Sales to Alaska residents with incomes below
200 percent of the federal poverty level shall be
exempt.
CO-CHAIR HAWKER objected.
REPRESENTATIVE GRUENBERG said this sales and use tax is a
regressive tax because people who have little money find it
harder to pay 3 cents on a carton of milk than a person with
more money. A sales tax may be less regressive in Alaska than
in other states because of the permanent fund dividend.
Amendment 9 makes the sales tax less regressive for people who
are on the very margins of society; it makes it a little fairer,
he said.
Number 4301
CO-CHAIR HAWKER said Amendment 9 goes to the core of the
distinction between a consumer-based revenue system and an
income-based revenue system. The intent of this bill requires
that every person who benefits from public services - regardless
of the degree of the benefit - shall share some element of the
cost of public services. He pointed out that the contribution
by someone of lesser means who is consuming less would be
smaller than for someone who is consuming more. He said he has
grave concerns about implementing this provision which would
require ID cards, which would document people as a certified
impoverished. He said he's not prepared to open a Pandora's box
to define that poverty line. He said the state offers many
other alternate programs that accommodate the most vulnerable
members of Alaskan society. He said the permanent fund dividend
program is the most progressive offsetting factor that the State
of Alaska provides to folks of lesser means. He said he opposes
Amendment 9 because it is inconsistent with the concept of this
bill.
Number 4432
REPRESENTATIVE ROKEBERG asked what number of dependents it would
take for people with $50,000 to $75,000 incomes to qualify [at
200 percent of the federal poverty level for the exemption].
MR. PERSILY said he didn't know but offered to research the
question.
REPRESENTATIVE WILSON suggested that a family of four at 200
percent of the poverty level earns up to $54,000.
CO-CHAIR WHITAKER suggested that this number includes the
permanent fund dividend.
Number 4526
CO-CHAIR HAWKER concurred with both observations. He said one
illustration of the unworkableness of this proposal is that
larger families with six or seven children can earn as much as
$80,000 and still be exempted at the 200 percent level. He
reminded that committee that HB 293 is a revenue measure. He
said the legislature needs to separate revenue measures from
social policy issues. He advocated keeping this bill as a
revenue measure rather than turning it into an instrument of
social policy.
REPRESENTATIVE GRUENBERG replied that the bill already provides
for exemption certificates, and he said the department could
develop a certificate for qualifying income levels.
TAPE 03-31, SIDE B
Number 4642
REPRESENTATIVE GRUENBERG stated that HB 293 is already an
instrument of social policy. He said it is the only revenue
legislative measure of any significance, which is a decision of
social policy. He said if there were other less regressive
[revenue] measures being considered, HB 293 wouldn't be so
essential. This bill will fall more heavily on the poor than on
the more wealthy members of society. The permanent fund
[dividend] could conceivably go away, but Amendment 9, if
adopted, would become an integral part of the sales tax
legislation.
A roll call vote was taken. Representatives Moses, Gruenberg,
and Kohring voted in favor of Amendment 9. Representatives
Whitaker, Hawker, Wilson, Weyhrauch, Heinze, and Rokeberg voted
against it. Therefore, Amendment 9 failed by a vote of 3-6.
Number 3900
REPRESENTATIVE WEYHRAUCH moved to adopt Amendment 10, which read
[original punctuation provided]:
Page 3, Line 3, after, "tangible"
INSERT: "or intangible"
CO-CHAIR HAWKER objected for purposes of discussion.
Number 3852
REPRESENTATIVE WEYHRAUCH noted that he had a friendly amendment
to his Amendment 10: on page 3, line 3, delete "personal".
With the friendly amendment, Amendment 10 would amend the
language on page 3, lines 1-3 to read: "Except as provided in
AS 04.21.010(c) and AS 29.45.750, a borough may levy a general
sales tax on the sale and rental of tangible or intangible
property." He explained that municipalities already levy taxes
on tangible or intangible property. Therefore, this amendment
would allow municipalities the leeway to define it [as] personal
so they could tax other kinds of property. This makes the
language a little broader; that's what boroughs already do, he
said. The general intent of this bill is to accommodate those
communities that have [local sales taxes], allowing them to
segue to the state's [sales tax system].
Number 3725
CO-CHAIR WHITAKER determined that the amendment to Amendment 10
was conceptual; if Amendment 10 passes, its amendment will pass
as well.
REPRESENTATIVE WILSON asked for examples of intangible property
besides patents and manuscripts.
REPRESENTATIVE WEYHRAUCH said examples of intangibles are legal
services, computer advice, and musicians singing.
Number 3617
MR. PERSILY said the department defines Representative
Weyhrauch's examples as services. Selling goodwill, a
copyright, or trademark are examples of intangibles, he said.
Work on a computer is the same as working on a car; it's a
service. He addressed the earlier question about Amendment 10.
He surmised that Amendment 10 allows municipalities to continue
their current practices during the first two years of the phase-
in of HB 293. After those two years, when municipalities have
to start collecting under state rules, they would no longer be
able to tax items that are not considered taxable under the
state sales tax code.
REPRESENTATIVE WEYHRAUCH agreed with Mr. Persily's summary of
Amendment 10.
Number 3534
REPRESENTATIVE SEATON asked if taxi permits, harbor slips, or
individual fishing quotas or permits are examples of
intangibles.
MR. PERSILY said a taxi permit is intangible, but he wasn't sure
about a boat slip.
MS. WILSON said that answering the question about a boat slip
may need additional research because there may be real property
rights.
REPRESENTATIVE SEATON explained he raised those examples because
boroughs and cities currently tax harbor slips.
Number 3431
CO-CHAIR HAWKER withdrew his objection to Amendment 10.
CO-CHAIR WHITAKER, hearing no other objections, said that
Amendment 10 is adopted.
Number 3405
REPRESENTATIVE WEYHRAUCH moved to adopt Amendment 11, which read
[original punctuation provided]:
Page 4, Line 6, after, "municipality may levy
specific"
INSERT: "sales or"
Page 4, Line 7, after, "of tangible"
INSERT: "or intangible"
Page 4, Line 7, "before "property or services"
DELETE: "personal"
CO-CHAIR HAWKER objected for purposes of discussion.
REPRESENTATIVE WEYHRAUCH said Amendment 11 accommodates
municipalities as they levy their own local sales and excise
taxes. It also governs how communities will have to deal with
[their taxes] through the transition period. On page 4, line 6,
the language reads with Amendment 3 [as passed earlier], "Except
as specifically prohibited or limited, a municipality may levy
and collect specific sales or excise taxes".
Number 3244
MR. PERSILY commented that this [Section 10] on page 4 is not
affected by the transition; this is the continuing authority
after the transition for cities and boroughs to have their own
specific levies. [Amendment 11] carves out as much authority as
possible for municipalities to have their own special taxes
after the transition to [the tax proposed in] this legislation.
He said he's still looking to see if the department has any
concerns about Amendment 11.
Number 3158
CO-CHAIR HAWKER said he is concerned about putting the word
"sales" in this paragraph because it violates the concept that
the general sales tax shall be the providence of this
legislation. He said he believes that the language excise tax
is sufficiently broad to accommodate all sorts of other taxes
that a municipality might levy.
REPRESENTATIVE WEYHRAUCH said he offered Amendment 11 to clarify
that under this law, a community may continue to adopt taxes;
this avoids lawsuits over a municipality's ability to levy its
own excise or sales taxes. It allows the municipalities to
determine if they want to continue their own taxes or go with
the state's tax, he said.
Number 3056
The committee took an at-ease from 9:50 to 9:51 a.m.
CO-CHAIR HAWKER commented that Representative Weyhrauch has not
addressed the other two components of Amendment 11.
Number 3039
REPRESENTATIVE ROKEBERG suggested that there may be a drafting
problem with Amendment 11. He suggested it belongs in the
uncodified law section of the bill, in Sections 19 or 20.
REPRESENTATIVE WEYHRAUCH said he would defer to the bill drafter
to determine how to achieve his intent.
MR. PERSILY stated that the department has an idea on the first
part of Amendment 11 with regard to achieving Representative
Weyhrauch's goal without calling the [locally-levied] tax a
sales tax.
Number 2918
MS. WILSON suggested adding a definition of excise tax. An
excise tax is a sales tax on a specific commodity. She
recommended that this approach would get to the heart of
Amendment 11 without the general misinterpretation that it is a
sales tax.
Number 2942
REPRESENTATIVE WEYHRAUCH objected to that solution, saying he
preferred to be more specific. Defining excise tax and sales
tax would open a can of worms later, he said.
CO-CHAIR HAWKER asked if it would accomplish his mission to
eliminate the word "excise" on page, 4 line 6.
REPRESENTATIVE WEYHRAUCH said that [eliminating the word
"excise"] did not [accomplish his intent]. He said that
communities need to know the ramifications [of continuing their
own sales and excise taxes]. They have the choice to levy taxes
or not. If [municipalities choose to levy taxes], then it is
clearly allowed [with this amendment].
Number 2709
CO-CHAIR HAWKER said he is trying to follow Representative
Weyhrauch's intent. Allowing municipalities to levy and collect
specific taxes on single categories of property and services is
an excise tax, he said. He predicted that a definition of
excise tax will show up in the next version of HB 293. He
offered deleting the word "excise" on page 4, line 6, as a
friendly amendment.
REPRESENTATIVE WEYHRAUCH accepted this friendly amendment,
noting it will be worked on in the House Finance Committee.
Number 2605
CO-CHAIR WHITAKER summarized that Amendment 11 has a friendly
amendment, which will be subject to further review.
CO-CHAIR HAWKER moved the friendly amendment to Amendment 11, on
page 4, line 7. After the word "specific" delete "excise".
There being no objection, the amendment to Amendment 11 was
adopted.
Number 2536
REPRESENTATIVE WEYHRAUCH explained that the second portion of
Amendment 11, page 4, line 7, after "of tangible" inserts "or
intangible", to be consistent in referencing tangible and
intangible. [The third piece of Amendment 11] on page 4, line
7, deletes "personal" before "property or services". Page 4,
line 7, would then read [in part] "single categories of tangible
or intangible property or services".
REPRESENTATIVE ROKEBERG asked if it's necessary to divide the
question. He said this moves into the earlier debate with
intangibles.
CO-CHAIR WHITAKER invited Mr. Persily to comment before the
committee looked at dividing the question.
Number 2445
MR. PERSILY said the department's understanding is that this is
a local issue, that the city could have its own specific tax on
whatever it chooses. The department has no objection to this
[part of the] amendment. This is the portion of the bill that
continues on; it is not the transition period. The intent here
is that once the state takes over, cities can continue to have
their own specific tax, and this would allow them to tax
intangibles.
Number 2401
CO-CHAIR WHITAKER specified that is why he asked the question;
Amendment 11 is not time specific. Co-Chair Whitaker asked if
the committee wishes to divide the question [on sections 2 and 3
of Amendment 11].
CO-CHAIR HAWKER objected.
Number 2335
CO-CHAIR HAWKER asked and was told the question regarding
whether to divide the question is debatable. After reviewing
Amendment 11 he withdrew his objection to the entire amendment
as it is posed, undivided.
CO-CHAIR WHITAKER noted that objection to Amendment 11 has been
withdrawn. He asked if there were any other objections. He
clarified that the question to divide Amendment 11 is not
officially before the committee. He asked if Representative
Rokeberg would still like to divide the question.
Number 2319
REPRESENTATIVE ROKEBERG maintained his concern about the
intangibles issue which would be reviewed in future committees.
If this amendment is adopted, he requested that the sponsors
keep this issue in mind.
CO-CHAIR WHITAKER, hearing no further objections, stated that
Amendment 11 was adopted.
Number 2152
REPRESENTATIVE ROKEBERG asked to return to the third section of
Amendment 11, which deletes "personal" before "property or
services." He asked if the purpose of the third section is to
encompass real property.
Number 2135
REPRESENTATIVE WEYHRAUCH replied that tangible or intangible
property is whatever a community may chose. It may or may not
include personal property, he said.
Number 2127
REPRESENTATIVE ROKEBERG replied that he strongly objects to the
[third section of] Amendment 11.
CO-CHAIR WHITAKER confirmed that the committee has returned to
Amendment 11 and an objection has been raised.
REPRESENTATIVE ROKEBERG asked if the intention [of the third
section of Amendment 11] is to include real property.
REPRESENTATIVE WEYHRAUCH replied that the intention is to
accommodate local communities that chose to sweep in real
property [as part of what they tax].
Number 2050
REPRESENTATIVE ROKEBERG moved to divide the motion, designate
the bottom section of Amendment 11 as Amendment 11B and the
upper two provisions as Amendment 11A. He said he has no
objections to 11A but does object to Amendment 11B.
CO-CHAIR WHITAKER ruled that the question has been divided.
Amendment 11A has been accepted.
CO-CHAIR WHITAKER, in response to Representative Gruenberg,
clarified that Amendment 11A consists of [the first two
sections]: page 4, line 6, and page 4, line 7. Amendment 11B
is [the third section], page 4, line 7, before "property or
services" delete "personal". He asked if there were any
objections to Amendment 11A; there being none, Amendment 11A was
adopted.
Number 1935
REPRESENTATIVE ROKEBERG spoke to his objection on Amendment 11B.
He explained that this language opens the ability of the
communities to place single category taxes on real property, and
he strongly objects to that.
CO-CHAIR WHITAKER said he was having difficulty understanding
the affect of real property being included in this section,
given that municipalities currently tax real property through
property taxes.
Number 1844
REPRESENTATIVE ROKEBERG said [adding real property to this
section of the bill] corrupts the intention of this section of
the bill which looks at single taxes.
CO-CHAIR HAWKER stated that the purpose of Amendment 11B is not
to create ambiguity but to affirm the broad-reaching powers that
are reserved for municipalities, which he characterized as
appropriate.
Number 1734
REPRESENTATIVE ROKEBERG said there may other amendments on the
table that will address his concerns and thus he withdrew his
objection to Amendment 11B.
CO-CHAIR WHITAKER asked if there were any other objections to
Amendment 11B.
Number 1705
REPRESENTATIVE OGG reminded members that there are two types of
property: personal and real. When "sales" is removed from the
bill, that changes the nature of the sales tax. The bill no
longer limits [municipalities to levying] sales tax to personal
property; Amendment 11B expands [municipalities' taxing power]
to include real property. Taking out the word "personal" allows
that expansion, he said.
REPRESENTATIVE ROKEBERG said Representative Ogg clearly makes
his point, and he reiterated his objection [to Amendment 11B].
A roll call vote was taken. Representatives Hawker, Gruenberg,
Moses, Weyhrauch, Kohring, Heinze, and Wilson voted in favor of
Amendment 11B. Representatives Whitaker and Rokeberg voted
against it. Therefore, Amendment 11B passed by a vote of 7-2.
Number 1517
REPRESENTATIVE WEYHRAUCH asked to set aside Amendment 12 for the
time being. He moved to adopt Amendment 13, which read
[original punctuation provided]:
Section 43.44.140
Page 12, line 4 is amended by adding after
"organizations."
Additionally, a sale by a commercial enterprise may
only considered "isolated or occasional" under this
section if the sale value of the item is less than
$1000.
CO-CHAIR WHITAKER objected for discussion purposes.
REPRESENTATIVE WEYHRAUCH explained that he moved Amendment 13 at
the request of Representative Seaton. He explained that the
language clarifies the words "occasional" and "isolated."
Number 1333
REPRESENTATIVE SEATON said Amendment 13 addresses the occasional
sale of a particular item by a business that competes with an
existing business that routinely sells the item. For example, a
contractor with a big project sells off 15 graders for $30,000
each on the open market, competing with a used equipment
company. In the current bill, a buyer would pay sales tax if
purchasing a bulldozer from a used equipment company but no
sales tax if buying it from a contractor who is closing down a
project. He said the state should not forego sales tax on this
large purchase just because it's being sold by a commercial
enterprise outside its normal course of business.
CO-CHAIR HAWKER said Amendment 13 does not really address the
occasional sale; it states that a commercial enterprise may not
be exempted under the isolated or occasional section unless it
is selling something for less than $1,000. Amendment 13
provides that all of a business's merger and acquisition
activity will be fully taxed, a poor fiscal policy, he added.
He said he strongly opposed Amendment 13.
Number 1120
CO-CHAIR WHITAKER suggested Amendment 13 could cover a merger,
acquisition, or liquidation.
REPRESENTATIVE OGG used the example of the sale of a fishing
boat that is worth $30,000 - $40,000. If the owner goes out of
business and sells the boat, no sales tax is charged. But a
commercial fishermen selling the boat must charge a sales tax
because the fishing business is a commercial enterprise. He
said this is wrong.
Number 1036
REPRESENTATIVE WILSON noted that Amendment 13, line 2, is
missing the word "be" after the word "only" so it reads, "may
only be considered".
CO-CHAIR WHITAKER noted the grammatical correction.
A roll call vote was taken. Representatives Moses, Kohring,
Weyhrauch, and Heinze voted in favor of Amendment 13.
Representatives Whitaker, Hawker, Gruenberg, Wilson, and
Rokeberg voted against it. Therefore, Amendment 13 failed by a
vote of 4-5.
Number 0928
REPRESENTATIVE WEYHRAUCH moved to adopt Amendment 14, which read
[original punctuation provided]:
Page 1, line 1
Insert after "...use tax;"
"relating to a real property sales and use tax;"
[Title change]
Page 2, line 16,
A new section is added to read:
*Sec.5. AS_________ Real property sale and use tax.
A sales tax of one (1) percent is applied to all real
property sales within the state. Verification of
payment of the real property transfer tax is required
before real estate sales are recorded by the State
Recorder's Office.
*Renumber sections and add conforming language as
appropriate.
CO-CHAIR WHITAKER objected for discussion purposes.
REPRESENTATIVE WEYHRAUCH said Amendment 14 adds a 1 percent tax
to all real property sales in the state.
Number 0910
REPRESENTATIVE ROKEBERG said that almost all municipalities and
organized boroughs assess some kind of property tax. With the 8
percent cap [on the sales tax], other municipalities may have to
raise mill rates on real property taxes to offset a loss of
income. Amendment 14 is not necessary, he said, and was not
contemplated in the initial draft of the bill. It does not
follow the guidelines for the streamlined sales tax system.
Number 0759
REPRESENTATIVE SEATON noted that real estate has been described
as the biggest business second to oil in Alaska. The tax on
vehicles that is now collected by the state and paid to local
governments is an example of a property tax. Amendment 14 would
be an analogous situation; it is a transfer tax or sales tax
when [real property] is transferred. There's no reason to
exempt this large category of sales, he said.
REPRESENTATIVE ROKEBERG stated he didn't think the public would
buy into this provision.
Number 0623
REPRESENTATIVE WILSON proposed a conceptual amendment to
Amendment 14. Then she withdrew her conceptual amendment,
noting she was referring to a different amendment.
A roll call vote was taken. Representatives Moses and Weyhrauch
voted in favor of Amendment 14. Representatives Whitaker,
Hawker, Gruenberg, Kohring, Wilson, Heinze, and Rokeberg voted
against it. Therefore, Amendment 14 failed by a vote of 2-7.
Number 0435
REPRESENTATIVE WEYHRAUCH moved to adopt Amendment 15, which read
[original punctuation provided]:
Section 16. AS 43.40.030(a) is amended to read:
Page 8 line 9,
delete 18
insert 15
CO-CHAIR HAWKER objected.
Number 0411
CO-CHAIR HAWKER explained the proposed increase on motor fuel
tax in the bill. He said lowering the tax 3 cents would not
[help] consumers or the state's [budget]. He then said he was
discussing a different aspect of the motor fuel tax and asked to
rephrase his comments.
REPRESENTATIVE WEYHRAUCH noted this debate will be repeated many
times in the future.
REPRESENTATIVE GRUENBERG asked whether Amendment 15 increases
the fuel tax because it decreases the refund.
Number 0158
MS. WILSON noted that the proposal to increase the motor fuel
tax, as currently written, doesn't affect the net tax due on
off-road [fuel]. She reiterated that fuel used in off-road
equipment is taxed at a net of 2 cents. The [proposed CS for HB
293] as it is currently drafted, exempts those items that are
taxed under the motor fuel tax chapter. This means that fuel
used on the highway, fuel used for marine use, and fuel used
off-road will not be assessed a sales tax. She said as she
understands Amendment 15, the off-road user would pay some sales
tax for fuel.
MR. PERSILY added that it's the equivalent of sales tax.
Number 0035
MS. WILSON said Amendment 15 is not an exact calculation, it's a
simplified approach, assuming that the price of a gallon of gas
is $1. When an off-road fuel user files a claim for a refund
with the department, the user is required to produce the
invoices for the fuel. So the department has the information to
calculate the rebate, but Amendment 15 has the off-road user pay
some sales tax
TAPE 03-32, SIDE A
Number 0010
MR. PERSILY explained that under Amendment 15, the off-road fuel
user would pay 5 cents instead of the 2 cents currently
specified in the legislation. When the tax is paid at the
wholesaler, it's not known what community [the tax] will go to,
but he said it would not matter under this provision. The
amendment would increase the state excise tax on off-road motor
fuel from 2 cents to 5 cents.
Number 0048
REPRESENTATIVE SEATON said that the state is now charging 8
cents and rebating 6 cents. Amendment 15 means that if the user
is not paying the 20 cents road tax, then the user will pay the
sales tax. This is another way to collect the money if the
department has the information and it would make more sense for
them to do a 3 percent calculation. It's another way to spread
the tax [across the public], he said.
Number 0148
REPRESENTATIVE GRUENBERG asked whether Amendment 15 would have a
disparate effect on the people in the Bush; he said he thought
it would be harmful to them.
[There was a mistake in the vote tally of the initial roll call
vote and thus the vote was taken again with the results below.]
A roll call vote was taken. Representatives Moses, Weyhrauch,
Wilson, Gruenberg voted in favor of Amendment 15.
Representatives Hawker, Whitaker, Rokeberg, Heinze, voted
against it. Therefore, Amendment 15 failed by a vote of 4-4.
Number 0407
REPRESENTATIVE WEYHRAUCH moved to adopt Amendment 16, which read
[original punctuation provided]:
Sec. 43.33.155
Page 12, line 10 through 13.
Delete entire section.
CO-CHAIR WHITAKER objected for discussion purposes.
REPRESENTATIVE WEYHRAUCH explained that Amendment 16 deletes the
exemption for motor vehicles, watercraft, aircraft, and mobile
homes. He said that if the high-income people can afford these
items, they should be paying the taxes.
Number 0440
CO-CHAIR HAWKER spoke against Amendment 16 because it would
delete and remove the cap from these purchases. He explained
that these four items can be capped under the streamlined sales
tax system. He said that these items don't have to be capped,
but the cap is fair because most everyone depends on a motor
vehicle.
REPRESENTATIVE SEATON said a sales tax is a consumption tax; but
the current bill allows a person to consume a lot and buy
expensive toys without having to pay [the full 3 percent tax] on
them. With the 3 percent tax capped at $5,000, if a person buys
a used car for $4,999, the 3 percent sales tax is $150. But if
a person buys a Lexus for $85,000, [the 3 percent tax on the
$5,000 cap results in $150 tax] or 0.17 percent sales tax. The
legislature should carry through its philosophy of taxing
people's choices. He said it removes the equity part of the
sales tax by saying that people don't have to pay as much [tax]
for expensive things.
Number 0632
REPRESENTATIVE ROKEBERG expressed concern about removing the cap
[of $5,000 on purchases on these four items] because of the
impact on buying patterns and shifting [purchases to out-of-
state businesses]. If the state plans to follow the multi-state
compact [for the streamlined sales tax system], it should avoid
encouraging buying in one jurisdiction over another, he said.
Under HB 293, a person may purchase something out of state and
therefore [owe the state] a use tax, although collecting that
tax will be difficult. Amendment 16 could have a major
[negative] affect on buying patterns.
Number 0747
REPRESENTATIVE SAMUELS asked about the discussion point on
Amendment 16 that references a $200,000 cap for commercial
aircraft. He noted that Beavers, Otters, and Saratogas - small
commercial aircraft - all cost less than $200,000. He noted
that all of the small commercial aircraft across the state will
be affected by Amendment 16.
REPRESENTATIVE SEATON said the example of $200,000 for
commercial vehicles should be in Amendment 12, not Amendment 16.
REPRESENTATIVE SAMUELS said if the $200,000 cap is lifted, jet
airplanes would be subject to sales tax.
Number 1002
REPRESENTATIVE OGG commented that the [$200,000 cap on
commercial vehicles] applies to [watercraft used in] the fishing
industry. There are lots of vessels that start at $10,000, he
noted. He described two policy [considerations]. One policy
makes sure that anybody who buys anything shares [the cost of
government by paying full sales tax]. The other policy concerns
the fishing communities and their existing business
infrastructure. He said that Amendment 16 would close every car
dealer in the outlying communities that [already] have an
existing sales tax because [the residents] would go to Anchorage
[to buy their cars]. That's not a policy the legislature should
adopt lightly, he said; the legislature needs to protect the
existing economies of the outlying areas. He stated his
opposition to Amendment 16.
Number 1120
REPRESENTATIVE ROKEBERG reiterated that under Amendment 16,
there would be no cap on any items purchased. He noted that
there is already a federal luxury tax of 6 percent on high
priced items like cars.
REPRESENTATIVE HEINZE noted that air charter services buy
aircraft that are not "expensive toys."
A roll call vote was taken. Representative Weyhrauch voted in
favor of Amendment 16. Representatives Hawker, Whitaker,
Gruenberg, Rokeberg, Kohring, Heinze, and Wilson voted against
it. Therefore, Amendment 16 failed by a vote of 1-7.
Number 1307
REPRESENTATIVE WEYHRAUCH moved to adopt Amendment 12, which read
[original punctuation provided]:
Page 12, line 12
Delete "$5,000"
Insert "$200,000"
CO-CHAIR WHITAKER objected.
REPRESENTATIVE WEYHRAUCH explained that Amendment 13 [introduced
at the request of Representative Seaton] increases the tax cap
from $5,000 to $200,000 [on motor vehicles, watercraft,
aircraft, and mobile homes].
A roll call vote was taken. Representative Weyhrauch voted in
favor of Amendment 12. Representatives Hawker, Whitaker,
Gruenberg, Kohring, Wilson, Heinze, and Rokeberg voted against
it. Therefore, Amendment 12 failed by a vote of 1-7.
Number 1417
REPRESENTATIVE WILSON moved to adopt Amendment 17, which read
[original punctuation provided]
Amend by adding the following
Section 43.44.115 Exemptions-Medical Related
Services
Charges for medical services provided by licensed
health care providers as defined in AS 09.55.560(1)
for the treatment of a medical condition, illness, or
injury and the supplies, prescriptions or equipment
used in that treatment are exempt from the sales tax
and use tax.
CO-CHAIR WHITAKER objected for purposes of discussion.
Number 1501
REPRESENTATIVE WILSON noted that page 14 of CSHB 293 contains
the exemption for health care. She asked if the current
exemption in the bill covers medical care, services, supplies,
and equipment.
MR. PERSILY said the current bill exempts health care services
provided by someone who is licensed or certified under AS 08
[Business and Professions]. Amendment 17 refers to AS
09.55.560, with which he said he was not familiar.
Number 1653
CO-CHAIR HAWKER explained that AS 09.55.560 [Definitions] is a
health care provider such as an acupuncturist, audiologist,
speech language pathologist, chiropractor, dental hygienist, all
of which are licensed under AS 08.
MR. PERSILY noted that Amendment 17 is a duplication because it
references the health care professionals already licensed under
AS 08 and covered by this exemption.
REPRESENTATIVE ROKEBERG suggested that [AS 09.55.]560 might be
the section listing the allowable reimbursements under
insurance.
Number 1743
REPRESENTATIVE GRUENBERG explained this is a definitional
section under [Chapter 55 of Title 9 Code of Civil Procedure]
and is in the medical malpractice statute. It's the definition
of health care providers under medical malpractice, which he
said he thinks is a narrower definition than Title 08. For
example, he didn't think it includes such professionals as
marriage and family therapists. He recommended that the
committee not use the narrower definition of Amendment 17.
Number 1829
REPRESENTATIVE WILSON withdrew Amendment 17.
Number 1844
REPRESENTATIVE ROKEBERG moved to adopt Conceptual Amendment 18
which read [original punctuation provided]:
Page 12 Line 14
Add as new Se. 43.44.160
Exemption for the conveyance and Improvement of
Real Property. The sale, lease or rental, and
improvements depreciable under (U.S. Tax Code cite)
to, real property is exempt from the sales and use
tax.
Renumber accordingly.
REPRESENTATIVE ROKEBERG noted that real estate transactions are
intended to be exempt under this [bill]. For clarity, he said
he wanted to make it black letter law. He said he also wanted
to add the provisions of improvements. He said that those items
that are depreciable under the U.S. Tax Code are usually part
and parcel of a real property assessment. So they are taxed
under real property theories, he didn't want to have a double
tax situation. It does not include furniture and fixtures which
would be added to property, particularly in a leasehold
situation.
Number 2117
The committee took an at-ease from 9:45 to 9:50 a.m.
REPRESENTATIVE ROKEBERG reiterated that the intention of
Amendment 18 is to exempt real property transactions from the
sales and use tax.
CO-CHAIR HAWKER asked if his intent is to exempt real property
for commercial purposes [and] impose a tax on noncommercial real
property.
REPRESENTATIVE ROKEBERG replied not really.
CO-CHAIR HAWKER asked about the impact of this amendment.
REPRESENTATIVE ROKEBERG said it's a policy call. He suggested
deleting "depreciable" from the term "improvements."
Number 2413
REPRESENTATIVE GRUENBERG questioned the term "improvement,"
because an improvement could be a new stove or a new
refrigerator. He said those things are taxable now, but would
not be under Amendment 18.
REPRESENTATIVE ROKEBERG agreed. He reiterated that Conceptual
Amendment 18 includes commercial depreciable property as well as
similar attached property that would be considered real property
by a tax assessor - but not chattel or personal property.
Improvements on commercial and residential property should be
included in this exemption.
REPRESENTATIVE GRUENBERG asked if he intended to tax the
purchase or sale of a stove that is put into the property.
REPRESENTATIVE ROKEBERG replied yes, unless it was part of the
property at the time it was purchased.
REPRESENTATIVE GRUENBERG said that would be a change because
[under the current bill] a stove would be taxed.
REPRESENTATIVE ROKEBERG clarified that refrigerators typically
are not [taxed], although stoves are.
Number 2539
REPRESENTATIVE GRUENBERG said that right now he would pay a
sales tax on the stove and hoped he would continue to do that.
REPRESENTATIVE ROKEBERG said the question then would be whether
the item for resale is still exempt as a component part.
MR. PERSILY asked if a homeowner buys a new window or a new door
to install in the home, is that purchase tax exempt under
Conceptual Amendment 18.
REPRESENTATIVE ROKEBERG replied that [such a purchase] would
normally be repair or maintenance, not necessarily an
improvement. Something that is a repair and maintenance item
should be taxable, but if it's purchased by a homebuilder, it
should not be taxable.
Number 2729
MR. PERSILY noted some definition problems between improvements
and maintenance.
REPRESENTATIVE ROKEBERG proposed removing the improvement aspect
for residential issues, and leave commercial aspects in
Conceptual Amendment 18 because those are clearer textbook
definitions. He said he would try to sort the issue out later,
so it doesn't delay the bill. In response to Co-Chair Whitaker,
Representative Rokeberg said he would leave in commercial
improvements as defined by the U.S. Tax Code.
Number 2809
REPRESENTATIVE GRUENBERG objected to Conceptual Amendment 18.
He said it is too complex to put in as a conceptual amendment.
He suggested Representative Rokeberg have it drafted by
Legislative Legal and Research Services and offer it in next
committee of referral.
REPRESENTATIVE ROKEBERG said he would remove the entire
[reference to] "improvement," because he wants to make sure the
next draft of HB 293 has the real estate exemption in it.
REPRESENTATIVE WILSON commented that if an owner makes
improvements on a rental property, for example, building on a
sunroom, that would be an improvement to the property. However,
it is deductible from the owner's income tax. She asked why the
legislature would exempt the owner from paying sales tax when
the state could collect sales tax and the owner would get the
deduction.
REPRESENTATIVE ROKEBERG agreed that if an owner added a sunroom,
the real property assessor would increase property taxes because
of the improvement. It's those kinds of items, he said, he
wants to exempt because it avoids a double taxation situation.
Number 2944
REPRESENTATIVE WILSON asked whether Conceptual Amendment 18
covers commercial or residential improvements.
REPRESENTATIVE ROKEBERG said he wants to leave in commercial
improvements but remove residential improvements from the
exemption.
REPRESENTATIVE SEATON said he has the same question. He used
the example of a person who buys materials to build a fence or
has a contractor come out to build the fence. Since this
improvement would be depreciable if it's commercial or become
part of the property assessment, the amendment would make that
tax exempt. Since the state doesn't tax real property, which is
only done by municipalities or boroughs, Conceptual Amendment 18
exempts from sales tax a large category of contracts for
improvements to buildings.
Number 3100
REPRESENTATIVE ROKEBERG emphasized that the state does have a
real property tax. The state sets the mill rate, taxes the
pipeline, and the state assessor reassesses the local area if
the local tax assessors aren't doing their job. Therefore, the
state has a vested interest to closely follow local real
property tax assessments.
MS. WILSON expressed concern that as [Conceptual Amendment 18]
is currently drafted it exempts rentals while the bill as
drafted includes transient lodging rentals in services.
Therefore, there appears to be some conflict.
MR. PERSILY interjected that this could be interpreted to
prohibit sales tax on hotel and motel rooms because that is the
rental of real property.
Number 3222
CO-CHAIR HAWKER surmised that [Conceptual Amendment 18] is
trying to do clarify that this bill doesn't include sales tax on
the sale, lease, or rental of real estate, with the exception of
transient [lodging]. Furthermore, [Conceptual Amendment 18] is
trying to make something explicit that is already implicit in
the legislation. In doing the aforementioned, Co-Chair Hawker
feared that there would be complications and the intent of this
bill would be violated. Co-Chair Hawker reminded the committee
that earlier it turned down an amendment that imposed a 1
percent tax on the sale of real estate. Therefore, it would
seem clear that this bill doesn't tax these real estate
transactions and thus [Conceptual Amendment 18] may be
redundant. Co-Chair Hawker suggested withdrawing [Conceptual
Amendment 18] and working with the Legal and Research Services
Division to incorporate language to make explicit what is
already implicit.
REPRESENTATIVE ROKEBERG said that he would stand by his
amendment because the improvements are only related to
commercial property, and therefore the drafter could be left to
work on these additional issues. Representative Rokeberg said
the debate that just occurred is precisely why this needs to be
defined. He indicated that the public would have the same
debate and that the problem with the entire bill is that in
order to be clear the pages start growing. Representative
Rokeberg said he wanted Conceptual Amendment 18 adopted as
drafted and he offered to work with the House Finance Committee
on this matter.
UNIDENTIFIED SPEAKERS objected to Conceptual Amendment 18.
A roll call vote was taken. Representatives Whitaker, Hawker,
Heinze, Rokeberg, and Kohring voted in favor of the adoption of
Conceptual Amendment 18. Representatives Gruenberg, Moses,
Wilson, and Weyhrauch voted against it. Therefore, Conceptual
Amendment 18 was adopted by a vote of 5-4.
Number 3614
REPRESENTATIVE ROKEBERG moved that the committee adopt
Conceptual Amendment 19, which read [original punctuation
provided]:
Page 14 Line 3
Add new subsection
(c) Intrastate transportation of oil and gas products
by pipelines are exempt from the sales and use tax.
CO-CHAIR WHITAKER objected for discussion purposes.
REPRESENTATIVE ROKEBERG recalled testimony that the intrastate
transportation of products, particularly to a refinery for
resale were already exempt under statute. He expressed the need
to clarify the aforementioned. He noted that it may raise a
question regarding the end use. Under the definition of
manufacturing the word refinery is included. For example,
transportation of gas to a hub point for further distribution
shouldn't be taxed for intrastate consumption. Representative
Rokeberg reiterated that he wanted to make sure it's clear.
Number 3755
MR. PERSILY related his understanding that the question is
whether [transportation services] for oil moving instate to a
refinery to be processed would be subject to a tax.
MS. WILSON said that at this point she didn't believe it was not
exempted.
MR. PERSILY clarified that at this point it isn't exempt and
thus Conceptual Amendment 18 would ensure that it is exempt.
REPRESENTATIVE OGG questioned whether fish products proceeding
through their pipeline would be exempt as drafted.
MS. WILSON said she believes the intrastate transportation in
the current draft isn't exempt. However, she recalled that the
matter is being reviewed as part of the manufacturing and
industrial research that is occurring.
REPRESENTATIVE ROKEBERG noted his willingness to withdraw
Conceptual Amendment 18 if the matter is still being massaged.
Upon Co-Chair Whitaker's request, Representative Rokeberg
withdrew Conceptual Amendment 19.
REPRESENTATIVE WILSON commented that the oil industry is being
taken care of and thus she wanted to make sure to take care of
the fishing industry.
CO-CHAIR WHITAKER emphasized that no one is being taken care of
but rather [the committee] is ensuring that commerce isn't being
stifled.
Number 4111
REPRESENTATIVE WEYHRAUCH asked if the fiscal note prepared by
the department would be negatively affected in terms of revenue
to the state by adoption of this type of amendment. He asked
that the aforementioned be kept in mind.
MR. PERSILY related his understanding that as the committee
attempts to craft something to deal with manufacturing, that
definition could be written to include the transportation of the
raw materials in order to cover the issues discussed earlier.
He said that [the intrastate transportation issue] is better
dealt with in the discussion of how to define a manufacturing
exemption and the components of the manufacturing process.
Number 4311
REPRESENTATIVE HEINZE moved that the committee adopt Amendment
20, which read [original punctuation provided]:
Page 12
Add to line 24: Exemption for a sale to a miner,
manufacturer, or oil and gas producer, explorer,
developer, refiner, or transporter.
Insert Subsection (C) For the purposes of this section
sales or use of both manufactured and raw components,
services, and data employed in the production,
exploration, development, refining or transportation
of oil or natural gas is exempt from the general state
sales and use tax.
CO-CHAIR WHITAKER objected for discussion purposes.
REPRESENTATIVE HEINZE read from the fall 2002 Revenue Resource
book as follows:
The Department of Revenue estimates there could be 8.5
billion barrels of additional production from
currently discovered North Slope fields, which are
Prudhoe, Kuparuk, Milne Point, Badami, et cetera.
Approximately 3.8 billion of those 8.5 could be
recovered with modest investment. Production of the
other 4.7 billion would require significant additional
investment. About one-half of that oil in this
forecast will require major additional investment. If
that investment is not made, is delayed, or is less
than anticipated, production will fall short.
REPRESENTATIVE HEINZE expressed the need to be careful that
"we're not trading off a tax for more business, more oil, more
exploration."
CO-CHAIR WHITAKER informed the committee that there the
administration and representatives of the oil and gas industry
as well as the leadership of both houses [are involved in
significant discussions on this matter].
Number 4520
CO-CHAIR HAWKER noted that this issue is clearly on the radar
screen and falls under the purview of the House Finance
Committee. Co-Chair Hawker related his belief that the
committee could be comfortable passing a broad bill in order to
continue the process. Therefore, he requested that
Representative Heinze withdraw Amendment 20 in order not to
constrain the process.
REPRESENTATIVE HEINZE asked if Amendment 20 can be refined in
the House Finance Committee if it is adopted. She inquired as
to the best scenario.
CO-CHAIR WHITAKER pointed out that the committee could vote
Amendment 20 up or down.
TAPE 03-32, SIDE B
CO-CHAIR WHITAKER specified that whether to maintain the
amendment or withdraw it is the decision of the amendment's
sponsor.
REPRESENTATIVE KOHRING said that he supports the amendment. As
the chair of the House Special Committee on Oil and Gas,
Representative Kohring noted his agreement to encourage the oil
and gas industry. Oil and gas is the centerpiece of our economy
and any additional tax burden on that industry will impact
Alaska's "golden egg." [The legislature] needs to do what it
can to encourage more development of the industry and one way to
do so is to keep taxes low.
REPRESENTATIVE WILSON noted that she agrees with Amendment 20.
However, she reiterated her concern that "we" aren't going to
take care of the timber and fishing industries, which, in her
district, is just as important as the oil industry.
REPRESENTATIVE OGG noted his agreement with [Representative
Wilson's comments]. He pointed out that agriculture would also
need something similar. Therefore, he expressed the need to
have more generic [language] that covered all natural resources.
Number 4411
REPRESENTATIVE HEINZE withdrew Amendment 20.
REPRESENTATIVE KOHRING remarked that many seem to recognize that
taxes have a detrimental affect on various industries.
Therefore, he believes that passage of a tax of this nature will
result in a negative impact on the overall growth of Alaska's
economy. From an economic perspective, this tax hurts more than
it helps.
Number 4138
REPRESENTATIVE KOHRING moved that the committee adopt Amendment
21, which read:
Add a new section to read:
"This act shall sunset on January 1, 2007."
CO-CHAIR WHITAKER objected for discussion purposes.
REPRESENTATIVE KOHRING explained that Amendment 21 applies a
sunset date to the legislation that would extend it to 2007. On
January 1, 2007, the legislature would revisit the issue and
decide whether to continue with the sales tax.
Number 4028
CO-CHAIR HAWKER remarked that in 2007 the sales tax would barely
be implemented. Furthermore, he said that he didn't see any
economic development or alternate sources of revenue on the
horizon that would compensate for the financial projection that
the Constitutional Budget Reserve (CBR) would be exhausted
within the next 3 years. Therefore, Co-Chair Hawker asked if
Representative Kohring would be willing to change the sunset
date to 2012, which he viewed as enough time to pursue
alternative revenue development.
REPRESENTATIVE KOHRING commented that he senses there is some
support for including a sunset date, and therefore he said he
was amenable to changing the sunset to 2012.
CO-CHAIR WHITAKER, upon hearing no objection to the friendly
amendment to change the sunset to 2012, Amendment 21 was amended
to implement a sunset on January 1, 2012.
REPRESENTATIVE WEYHRAUCH remarked that often sunsets allow [the
legislature] to delve deeper into the act and do more things.
He pointed out that another way to sunset something is to
introduce legislation to repeal it. Representative Weyhrauch
predicted that if the sunset is 2012, there will be another
"Christmas tree" of amendments and special exemptions.
Therefore, as a general policy, he opposed sunsetting
legislation.
A roll call vote was taken. Representatives Whitaker, Hawker,
Moses, Rokeberg, Wilson, Heinze, and Kohring voted in favor of
the adoption of Amendment 21, as amended. Representatives
Gruenberg and Weyhrauch voted against it. Therefore, Amendment
21, as amended, was adopted by a vote of 7-2.
Number 3749
REPRESENTATIVE KOHRING moved that the committee adopt Amendment
22, which read [original punctuation provided]:
Add a new section to read:
"This act shall take effect subject to a vote of the
public at the next General Election."
CO-CHAIR WHITAKER objected.
REPRESENTATIVE KOHRING explained that Amendment 22 would require
that before this legislation is enacted that it be approved by
the voters because "after all we are spending their money." He
acknowledged that at the ballot, the initial reaction to being
taxed would be negative. Representative Kohring related that
the correspondence he has received is heavily opposed to new
taxes and suggests that the focus be on the spending side.
Furthermore, he recalled that the overriding theme during the
last campaign was no new taxes, which seemed to reflect the
public's desire.
REPRESENTATIVE HEINZE highlighted that the state has a critical
fiscal gap and something has to be done as quickly as possible.
REPRESENTATIVE WILSON mentioned that through the deliberations
on this bill everyone has changed their minds after receiving
the facts. The reason legislators come to Juneau is to gather
together and obtain the facts [on issues], and therefore the
legislature should make the decision. She indicated that [the
general public] doesn't always have the facts to [use as a basis
for] a statewide vote. If the general public is dissatisfied
with the legislature's actions, the general public can vote out
its representative in the next election. Representative Wilson
announced her opposition to Amendment 22.
REPRESENTATIVE ROKEBERG said that he is conflicted by this
because his suspicion is that Representative Kohring's wish will
come true in a different form.
A roll call vote was taken. Representatives Gruenberg and
Kohring voted in favor of Amendment 22. Representatives Hawker,
Whitaker, Moses, Wilson, Weyhrauch, Rokeberg, and Heinze voted
against it. Therefore, Amendment 22 failed by a vote of 2-7.
Number 3255
REPRESENTATIVE ROKEBERG expressed concern about the exemptions
for intangibles and turned attention to page 11, line 27. He
pointed out that individuals pay commissions to brokers under
different types of arrangements and in some cases pay fees.
There seems to be some ambiguity and thus he said he would
almost like to go all the way and try to exempt financial
services. However, he offered Conceptual Amendment 23, which
would [on page 11, line 27, after "securities"] add a new
paragraph 5 that says, "financial services related to the sale
or purchase of stocks, bonds, or securities." He specified that
he was concerned that there would be sales tax when one
purchases shares on stock.
MR. PERSILY related the department's understanding that
brokerage services, similar to safety deposit boxes, would be
taxable.
CO-CHAIR HAWKER noted that he and Ms. Wilson had that discussion
during the drafting process and examined other state's statutes
on this subject. The conclusion and the intent is that the
overall exclusion of intangible items would cover the sale of
stocks, bonds, or equity security because what is being
transacted is an intangible right of ownership or an intangible
right to receive or an intangible obligation to pay.
MS. WILSON recalled that there was discussion with regard to
what could be handled through statute and what could be handled
through regulation. She also recalled that safety deposit fees
would fall under the exempt financial transactions while
brokerage fees for selling stocks and bonds wouldn't be exempt.
CO-CHAIR HAWKER agreed with Ms. Wilson. He said that the
intent, which hasn't been fully flushed out, is that the broad
exemption would include bank charges, brokerage accounts, and
the use of safety deposit boxes. However, the sale of something
truly tangible such as the sale of personalized imprinted checks
wouldn't be included. The aforementioned is consistent with
what other states have done.
Number 2924
REPRESENTATIVE ROKEBERG pointed out that this issue hasn't been
discussed before the committee. Representative Rokeberg noted
his concern with regard to capital formation, financial
consulting businesses, and individual portfolios. Therefore, he
said he believes it needs to be addressed and clarified.
Representative Rokeberg asked if individuals would take "a
pasting" on the service related to the sale.
MR. PERSILY specified that the question is whether sales tax
would be charged on the brokerage fee for the provider when
securities are sold.
MS. WILSON answered that as drafted, the above would be included
in services, which she believes to be consistent with her
conversation with Co-Chair Hawker.
REPRESENTATIVE ROKEBERG clarified that Conceptual Amendment 23
is that the financial services related to the sale or purchase
of stocks, bonds, and securities be exempt.
Number 2710
REPRESENTATIVE SEATON asked if "financial services" in
Conceptual Amendment 23 would include tax preparation and CPA
services.
REPRESENTATIVE ROKEBERG specified that only those financial
services related to the sale or purchase of stocks, bonds, and
securities.
CO-CHAIR HAWKER suggested using the language "financial
instruments" rather than "financial services".
Number 2650
REPRESENTATIVE WEYHRAUCH objected because again [exemptions] are
being carved out. He announced that he wanted this legislation
as broad as possible.
REPRESENTATIVE SEATON noted his objection to carving out an
exemption in professional services.
Number 2548
CO-CHAIR WHITAKER spoke in favor of Conceptual Amendment 23
because as policymakers there are times to make policy calls.
"As such, I think to compound the problems inherent to
transaction of potential loss in commerce is regrettable at
best, egregious at most," he said. Therefore, everyone needs to
be cautious and exercise some judgment.
A roll call vote was taken. Representatives Whitaker, Hawker,
Gruenberg, Heinze, Wilson, Rokeberg, and Kohring voted in favor
of Conceptual Amendment 23. Representatives Moses and Weyhrauch
voted against it. Therefore, Conceptual Amendment 23 was
adopted by a vote of 7-2.
CO-CHAIR HAWKER informed the committee that before the vote he
came to the conclusion that a brokerage fee on any transactions
becomes a part of the basis of the item being transferred.
Therefore, [a brokerage fee] is truly part of the intangible and
should be exempted.
Number 2308
REPRESENTATIVE WEYHRAUCH directed attention to page 14 of
Version Q, which specifies two types of services and equipment
that are exempt from the sales and use tax. He asked if this
provision would include those who provide healing services
through spiritual means such as a Christian Science
practitioner.
MR. PERSILY answered that those practitioners wouldn't be exempt
if they aren't licensed by the state under AS 08. However, [a
Christian Science practitioner serving under] a 501(c)(3)
nonprofit would be exempt.
Number 2124
CO-CHAIR HAWKER moved to report CSHB 293, Version 23-LS1064\Q,
Kurtz, 5/11/03, as amended, out of committee with individual
recommendations and the accompanying fiscal notes, which will be
updated to reflect the amendments.
Number 2058
REPRESENTATIVE GRUENBERG objected. He explained that he is
objecting because all the possible components haven't been
considered. Furthermore, there is no overall fiscal plan in
place. Moreover, the public hasn't been heard on this.
Therefore, Representative Gruenberg expressed the need to take
this legislation, as part of the fiscal plan, to public in the
interim and address it during the interim or at the beginning of
the next session. He related his belief that this legislation
lacks a number of amendments that weren't incorporated.
Representative Gruenberg specified his belief that the issue of
intangible personal property should be included and properly
defined. Therefore, this legislation needs more work done in
this committee.
Number 1907
REPRESENTATIVE WEYHRAUCH announced that he will vote for this
legislation with individual recommendations. Although the
original legislation wasn't palatable, the committee's changes
have allowed the sate to work with municipalities to develop a
segue that would provide a "soft landing." He noted his belief
that this is still a work in progress. While a larger fiscal
plan hasn't been articulated, the [legislature] is doing the
best it can to recognize the problem and develop ways in which
to deal with the state's fiscal problem. Movement on this bill
is a significant policy step as a state and is something that is
necessary as part of the fiscal plan. Representative Weyhrauch
said that the public has been heard from through e-mails and
telephone calls. He recognized that many people want an income
tax to be considered; an income tax should be considered in the
context of other measures of which a sales tax is a component.
Representative Weyhrauch noted that his primary concern is how
this becomes an exemption bill rather than a sales tax bill.
However, he expressed the need to move forward.
Number 1630
REPRESENTATIVE WILSON said this is difficult for her and she
wanted to echo Representative Weyhrauch's comments. She noted
her appreciation of all the hard work with this. Representative
Wilson announced that she is going to introduce an income tax
bill because there need to be options. She expressed her hope
that her income tax bill will receive the same consideration as
HB 293. Having said that, Representative Wilson said she will
allow HB 293 to move from committee, although it has a long way
to go before she would consider it a good bill.
Number 1457
REPRESENTATIVE ROKEBERG remarked that Alaskans have to recognize
the state's serious financial condition. He agreed with
Representative Wilson that this bill needs lots of work and he
has great concerns about it. Although he indicated that moving
this bill forward will be difficult for him, he said that it
needs to be moved along. He, too, agreed that the committee has
done good work in that it has focused the people of the state of
Alaska on the issue.
Number 1402
REPRESENTATIVE HEINZE said that she is going to vote for this
bill with trepidation. She mentioned that she had hoped to have
the summer to review this and address some of the major issues
she had. However, she realized that at some point she has to
trust the system and believe in the next committee of referral
and her colleagues. Therefore, she announced that she would
vote to move the bill out of committee.
Number 1301
REPRESENTATIVE KOHRING remarked that it's apparent that this
legislation is going to pass, although he is opposed to it.
Representative Kohring related his belief that the legislature
should emphasize the notion of reforms and cuts to the
bureaucracy because he believes the perception of the public is
that the legislature is too preoccupied with major taxes and the
revenue source. Therefore, it needs to be clear that if [the
legislature is going to move in the direction of taxes] then it
has to be in tandem with spending reductions and bureaucratic
efficiencies. He acknowledged that both co-chairs have
emphasized the spending cap and thanked them for that.
Number 1150
CO-CHAIR HAWKER remarked that he didn't believe that anyone
takes any pleasure in this bill and what it does because it is
asking Alaskans to contribute to public service in a way that
they haven't done in the past. However, he said he believes
it's the appropriate thing. First and foremost, the House of
Representatives has recognized the fiscal situation as the
gravest concern, which is why this committee was formed. The
committee was charged with finding efficiencies and revenues.
He said he believes that the committee has brought forth the
components of a broad fiscal plan, although he recognized that
this legislation isn't a silver bullet. [The committee] brought
forth a five-point fiscal plan. In fact, the first element of
that fiscal plan was the containment in cost and growth of
government. He reminded the committee that the first item
passed out of this committee was HJR 9, a constitutional
spending limit. The second element of the fiscal plan, HJR 26,
was to improve the management of the permanent fund in a manner
conducive to helping to resolve the state's fiscal issues
without compromising the dividend. The third step was a broad
base revenue structuring, which involved many bills. He
highlighted that this committee took on a significant component
of the general revenue system of the state in the form of the
statewide [sales tax, HB 293]. Everything that has been
forwarded, he believes to be mindful of the affects. He
stressed that there will be more hearings and more input and
process before this legislation comes close to becoming the law.
Lastly, Co-Chair Hawker pointed out that item 5 of the fiscal
plan is a mechanism that reconciles the fact that Alaska lives
in an oil and gas economy; it specifies the need to incorporate
a mechanism to mitigate the volatility of the oil and gas
industry. Co-Chair Hawker related his sincere belief that what
has been brought forth is a fair, complete, and adequate fiscal
plan and HB 293 is one component of that plan. He concluded by
requesting everyone's support for this legislation.
Number 0558
MR. PERSILY, in response to Representative Wilson, confirmed
that a sales tax would be charged to a charter boat service
because it is a service. However, it's not subject to the
[sales and use] tax because one isn't buying the boat regardless
of the fee for the charter for the day. He clarified that there
would be a sales tax on charter services like any other service,
unless exempted.
A roll call vote was taken. Representatives Hawker, Whitaker,
Wilson, Weyhrauch, Heinze, and Rokeberg voted in favor of CSHB
293 [Version 23-LS1064\Q, Kurtz, 5/11/03], as amended.
Representatives Moses, Gruenberg, and Kohring voted against it.
Therefore, CSHB 293(W&M) was reported out of the House Special
Committee on Ways and Means by a vote of 6-3.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
11:00 a.m.
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