SENATE BILL NO. 366 "An Act relating to the levy and collection of sales and use taxes, to the levy and collection of municipal sales and use taxes, and to municipal sales and use taxes on alcoholic beverages; and providing for an effective date." This was the third hearing for this bill in the Senate Finance Committee. Senator B. Stevens informed the Committee that new language in the Version 23-LS1051\W working draft includes the addition of coal and district heat in the exemption language in Section 17, Sec. 43.44.020. Exemptions. subsection (5) on page six, lines five and six. In addition, the exemption pertaining to wages as specified in Section 17, Sec. 43.44.020. Exemptions. subsection (8) on page six, lines 19 through 21 was required in order to comply with the federal Internal Revenue System code system. Senator B. Stevens stated that other changes in Version "W" pertain to clarification language regarding the collection of sales and use tax as it applies to "sales from certain coin-operated or currency- operated machines, sales of drinks in a bar, sales on the dock, sales from street vending carts, admission fees, and other sales as determined by regulation by the department." as specified in Section 17, Sec. 43.11.030. on page seven, lines 10-13. Language regarding deductions and procedures pertaining to bad debts has been added as specified in Section 17, Sec. 43.44.035. on page eight, lines seven through 23. Further clarifying language has been added in Section 17, Sec. 43.44.199. subsection (2) on page 13 regarding a manufacturing definition clarification as specified on line four as follows. (2) "manufacturing" means combining or processing components or materials, including the processing of ores in a mill, smelter, refinery, or reduction facility, to increase the value of the components or materials for sale in the ordinary course of business; "manufacturing" does not include construction; Senator B. Stevens stated that the Department of Law fiscal note, dated March 31, 2004 in the amount of $323,900 portrays the projected cost of adding two attorneys for the enforcement division. Senator B. Stevens referenced language on pages two and three of the Department of Revenue fiscal note, dated March 31, 2004 that projects that, after exemptions, the State sales tax base would be approximately $12,900,000,000 for a total projected revenue of $516,000,000. However, were a sales tax limitation implemented that would apply "only to the first $500 of each separate sale, rent, or service transaction with some exceptions" as currently utilized by the Kenai Peninsula Borough, there would be a projected Statewide sales tax base of $8.4 billion and a projected sales tax revenue of approximately $336,000,000. Furthermore, were all communities to adopt a three percent or higher local sales tax, $84 million would be rebated to those communities and the net sales tax to the State could range between $252,000,000 and $320,000,000. Senator B. Stevens, referencing language on page three of the Department of Revenue fiscal note, stated that, "At the four percent statewide rate in HB 366, the cap would be $1,500, but we believe if Juneau kept its rate at five percent than a single $670 sale would exceed the cap." He explained that currently, the City and Borough of Juneau (CBJ) receives $33.50 on a $670 sale at the five-percent local tax rate. Were a nine-percent tax implemented as a result of the State imposing a four-percent tax in addition to the CBJ five-percent tax, the resulting tax paid on a $670 sale would be $60.00. This is the tax limitation specified in SB 366. Under the guidelines of the bill, the CBJ would receive $39.60 or 66 percent of the revenue. Were the CBJ to lower its current tax rate to four-percent, a combined CBJ/State sales tax rate of eight- percent would be charged and a $670.00 sale with an eight-percent tax rate would garner the CBJ $33.23 or 62-percent of the total sales tax revenue. In addition, the maximum sale amount through which to obtain the $60.00 tax limitation factored by an eight- percent sales tax would be $750.00. Of that amount, the CBJ would receive 62-percent or a $67.00 return. Therefore, the CBJ would receive more money, on a maximum purchase, were it to lower the local tax rate one percent. Co-Chair Wilken ordered the bill HELD in Committee.