HOUSE BILL NO. 444 An Act relating to direct marketing fisheries businesses, to the fisheries business tax, and to liability for payment of taxes and assessments on the sale or transfer of fishery resources; and providing for an effective date. REPRESENTATIVE PEGGY WILSON explained that HB 444 is the companion bill to Senator Stedman's SB 286. The House Special Committee on Fisheries recommended the legislation. It intends to encourage value-added processing and direct marketing for local fishermen. It would lower their tax from 5% to 3% because the current tax structure discriminates against small boat fishermen who process and market their own catch directly. These fishermen are taxed at the same rate as the large floating processors. The bill also clarifies that the tax is to be charged on the wholesale and not the retail value of the product. IAN FISK, STAFF TO SENATOR BERT STEDMAN, explained that the change in the tax rate from 5% to 3% for direct marketers would bring the mainly Alaskan vessels into line with the rate paid by the shore plants. He said that because the vessels operate out of Alaskan communities where they spend money to re-supply, it is felt to be the fair rate to tax small businesses. Importantly, it changes the point of taxation. Currently the processor pays the fisheries business tax based on the grounds price, or the price the fisherman receives on delivering to the dock. The direct marketer's tax is assessed at the first point of sale further down the supply chain, and it's often the retail price or the second wholesale price. He pointed out that it's a disincentive to add value to the resource. Mr. Fisk explained that the bill rectifies the due dates for all taxes that direct market businesses have to pay. Currently the businesses pay the Fisheries Business Tax collected no later than April 1 of the following year. A salmon fisherman is responsible for the enhancement tax for hatcheries and the salmon marketing assessments that are currently collected monthly. This bill simplifies their accounting and tax payment systems. Mr. Fisk pointed out that the bill applies to vessels of 65 feet and less, and it conforms to one of the licenses from the Department of Environmental Conservation. The bill applies only to product caught and sold by the same fisherman. In terms of fiscal impacts, the bill is revenue neutral. He concluded that the bill would level the playing field to enable small businesses to take advantage of direct markets. Representative Foster referred to the fiscal note and asked whether the funding of the Tax Technician II position is $25 thousand. Mr. Fisk affirmed, and said that it will be $25 thousand in the first year because it will be the first year the tax will be collected. It is not required to be a year- round position. The position the Department is requesting is reflected in the $50.2 figure. Representative Foster asked if it would cost the state $50 thousand a year to save the fishermen money. Mr. Fisk replied that the Department of Revenue felt it would be needed to assure compliance with the new law. KEN DUCKETT, EXECUTIVE DIRECTOR, UNITED SOUTHEAST ALASKA GILLNETTERS, VIA TELECONFERENCE, expressed strong support for the bill. He said that the fishermen have experienced a number of seasons of very low prices and they are working to survive by attempting to add value to their catch. He felt that this bill would facilitate that. He referenced their letter of support (copy on file.) BRENNON EAGLE, VIA TELECONFERENCE, WRANGELL, explained that he has direct-marketed salmon, halibut and shrimp for 12 years. He expressed strong support for both parts of the bill to define the value and lower the tax rate to put fishermen on an equal footing with shore-based processors. He expressed that this bill is part of the solution and it is important to pass it this year to encourage this segment of the industry. KATHY HANSEN, EXECUTIVE DIRECTOR, SOUTHEAST ALASKA FISHERMEN'S ALLIANCE, JUNEAU, stated that the Salmon Industry Task Force has worked intensively on this legislation during the past two years. It is a compromise bill resulting from work with industry, processors and all three agencies involved in direct marketing. She said that it is a tightly woven compromise that had unanimous support from the Salmon Industry Task Force, and it basically involves tax parity and a better business environment for small businesses. HB 444 was heard and HELD in Committee for further consideration.