Municipalities may try to collect online sales tax revenue
Local governments in Alaska see gold in a recent U.S. Supreme Court decision allowing states to collect sales taxes from online purchases from Amazon and other retailers.
Unalaska City Manager Thomas E. Thomas cited the June 21 decision in South Dakota vs. Wayfair that said states can require online retailers to collect sales taxes. Now, he hopes it applies to local governments.
It’s a matter of fairness to the local “brick and mortar” businesses that invest in communities and hire local residents, said City of Kenai Finance Director Terry Eubanks.
“We’d like to see that all retailers are treated the same,” said Eubanks, saying the online retailers’ tax-exempt status gives them an advantage over local businesses collecting a 6 percent sales tax, half for the city and the other half for the Kenai Peninsula Borough.
The decision “could be one of the of most significant cases to impact Alaska cities in recent years,” said Thomas, who is pursuing the new funding source along with the city attorney.
“We are working on recommendations to bring to city council regarding how to legislatively address this issue locally and at the state level, if needed,” he said.
Unalaska’s city attorney, Brooks Chandler, in Anchorage, said other local governments with sales taxes are interested, and while the Supreme Court decision specifically applies to state taxes, the principle is likely the same.
“The underlying reasoning and logic would appear to apply to a local sales tax as well,” Chandler said.
For municipalities with a sales tax already in place, a new online sales tax does not require a vote of the people, Chandler said. But if the state’s biggest city wanted to tax Amazon sales, that would require referendum approval, because Anchorage does not have a local sales tax, he said.
Alaska Municipal League Executive Director Nils Andreasson said nearly every local government in the state is interested, but there are “a lot of unknowns.”
“There’s a lot of information gathering yet to be done,” including financial figures on how much Alaskans spend online, Andreasson said.
AML’s finance directors’ association is working closely on the issue, he said. AML lobbies the state Legislature on behalf of its member city and borough governments, and is the umbrella group for associations of specialized local officials including harbormasters, city clerks and finance directors.
At a June City Council meeting, Unalaska Mayor Frank Kelty noted that an online purchase tax would add to the costs local residents pay when shopping online. Amazon is a popular shopping choice in the Aleutian Islands community, as evidenced by the empty cardboard boxes discarded at the Dutch Harbor Post Office, and customers leaving the building carrying stacks of boxed online purchases of a wide variety of products.
Thomas said that while Alaska has no state sales tax, Unalaska has a 3 percent local sales tax which was applied to $7 million in purchases in the last calendar year.
“Recently, I discovered that Unalaska generated $3.2 million in online sales last calendar year. We are getting no sales tax from these purchases,” Thomas said.
At the 3 percent tax rate, that would have meant $96,000 in local revenues.
In overturning the ban on states collecting taxes from companies without a physical in-state presence, the Supreme Court’s majority opinion cited the “internet revolution” in rejecting an “artificial, anachronistic rule that deprives states of vast revenues from major businesses,” according to the decision viewed online at supremecourt.gov/opinions.
In the 5-4 majority were justices Samuel Alito, Neil Gorsuch, Anthony Kennedy, Clarence Thomas and Ruth Bader Ginsburg. Dissenting were Chief Justice John Roberts, Elena Kagan, Sonia Sotomayer and Stephen Breyer.
Jim Paulin can be reached at [email protected]