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 same. 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.