Online retailers charging taxes, but municipalities still trying to collect
Some online retailers have begun charging sales taxes to sales originating in Alaska, though the question of how those taxes will be collected by municipalities is still unanswered.
The Supreme Court of the United States ruled in 2018 that the state of South Dakota had the right to collect sales taxes from online retailer Wayfair.com, stating that the rules South Dakota had in place did not place an undue burden on interstate commerce.
Online sales have been eating away at brick-and-mortar sales in the U.S. for years, and with online retailers largely not applying local sales taxes, they have been eating into local governments’ revenues as well.
Since January, online retail giant Amazon has been applying sales taxes to relevant municipalities in Alaska. A number of municipalities have noted that the company has applied for certificates to collect sales taxes, according to a newsletter from the Alaska Municipal League. It seems to not apply across the platform, though, as many of the items listed on Amazon are sold by third-party retailers.
“What Sitka and Juneau have found is that Amazon is only collecting and remitting sales tax on sales fulfilled by amazon.com from its own warehouses,” AML Executive Director Nils Andreasson wrote. “Taxes are not being collected on sales by Amazon subsidiaries and by its 3rd party retailers. This is very confusing to citizens as most don’t understand the difference – they think Amazon is Amazon.”
Amazon representatives did not respond to requests for comment on its Alaska sales tax collection policies and procedures.
In Juneau’s case, Amazon already had a sales tax certificate prior to Jan. 1, but a change in the corporate structure led to the tax being applied across a broader range of products, according to a Jan. 23 press release from the City and Borough of Juneau.
The Supreme Court’s online sales tax ruling has caveats, though — online retailers doing less than $100,000 in sales are not subject to the tax. The City and Borough of Juneau notes that online retailers only doing sales in Juneau aren’t included, either.
“Currently, other retailers that only conduct sales in Juneau via the internet are not yet subject to CBJ sales tax,” the release notes. “A recent Supreme Court decision may change this though, but it will take a standardized Alaska local sales tax program.”
Alaska is one of five states in the union that don’t have statewide sales taxes. Instead, individual municipalities have the authority to levy sales taxes, as do cities of some classes. That means that an online retailer like Amazon, conducting business all over the state, will have to apply to collect and remit sales taxes to about 100 different entities, Andreasson said.
AML, which represents the various city and boroughs in the state, convened a workgroup in August 2018 to discuss the implications of the Wayfair v. South Dakota case and how to implement it.
Among its conclusions was a recommendation to work together to develop a joint independent authority through AML to collect online sales taxes.
A joint authority would reduce the burden both on retailers and on municipalities, and would not require the implementation of a statewide broad-base tax.
The AML requested contributions from cities and boroughs to support the effort. How the final implementation looks could vary, Andreasson said; some contractors could provide services, for example. The AML doesn’t envision the state having a role in the collection, though, he said.
Online retail plays a major role in Alaska’s economy, in part because the small populations don’t always work out for brick-and-mortar locations and in part because the population is so spread out.
The AML’s workgroup noted that the Alaska Department of Revenue estimated approximately $1 billion was spent in online retail in the state. About 50 percent of that is in Anchorage and Fairbanks, though, which have no sales taxes.
The Kenai Peninsula Borough, which is considering an ordinance to appropriate $10,000 to support the AML’s efforts on online sales taxes, estimated that it stands to gain an additional $1.5 million in revenue if online retailers remit sales taxes.
Elizabeth Earl can be reached at [email protected].