Streamlined sales tax implications for alaska
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Streamlined Sales Tax Implications for Alaska. Patty Ware Alaska Municipal League. Workshop Goals. Provide broad overview of streamlined sales tax project Discuss critical areas of the national Agreement as they pertain to Alaska

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Streamlined Sales Tax Implications for Alaska

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Streamlined sales tax implications for alaska

Streamlined Sales Tax Implications for Alaska

Patty Ware

Alaska Municipal League


Workshop goals

Workshop Goals

  • Provide broad overview of streamlined sales tax project

  • Discuss critical areas of the national Agreement as they pertain to Alaska

  • Get your input and recommendations about issues and questions important to local governments


History of the streamlined sales tax sst project

History of the Streamlined Sales Tax (SST) Project

  • Response to U.S. Supreme Court ruling limiting states from requiring remote sellers without nexus to collect use tax

  • Emphasis on simplification and uniformity of sales and use tax systems

  • Trade-off for local governments is ability to collect sales tax on remote purchases


History of the sst continued

History of the SST (continued)

  • Involvement by 42 states

  • Supported by NACO, NCSL, NGA, NLC

  • Governing Board established October ’05

  • Model Agreement adopted by 20 states


Primary elements of the ssuta

Primary Elements of the SSUTA

  • State level administration & collection

  • Uniform definitions

  • Uniform tax base (exemptions)

  • Uniform sourcing rules (destination-based) with some exceptions

  • Uniform tax return for SST taxes

  • Single sales and use tax rate for each jurisdiction

  • Prohibition on tax caps


What does the ssuta cover

What does the SSUTA cover?

  • Taxes outside the sales tax code are excluded from the SSUTA

  • Doesn’t apply to vending machine sales

  • Uniform sales/use tax rate requirement doesn’t apply to certain items

  • States can specify their own tax base

  • Changes BOTH intrastate and interstate (“outside”/electronic) sales tax processes


What about use tax

What About Use Tax?

  • Use tax not levied in Alaska

  • SSUTA applies to both sales and use taxes

  • Required in order to apply to the SST Board

  • SSUTA applies to both local and remote businesses and would require collection of sales and use taxes (including by AK businesses not currently collecting).


Potential benefits for state local governments

Potential Benefits for State/Local Governments

  • Increased revenue from e-commerce retailers

  • Improved climate for local businesses by “leveling the playing field” with on-line retailers

  • Benefits of simplification include improved sales tax administration, although not as clean as for business community


Ssuta impact on governments what are other states saying

SSUTA Impact on Governments: What are other states saying?

  • Taxing at point of delivery vs point of sale a problem for some states (TX, KS) or local governments (WA)

  • Centralized administration means loss of some local authority (AK, CO, AL)

  • Costs to local governments not yet sufficiently detailed

  • Problems with existing member states and achievement of “full” compliance


Local government concerns as voiced by other states

Local Government Concerns (as voiced by other States)

  • Loss of revenue for local governments

  • Extensive business lobbying to benefit particular industries at expense of government sector

  • Winners and losers, based on going from point of sale to point of use (delivery) system

  • Loss of local government authority for collection and auditing


Benefits of ssuta business perspective voluntary compliance retailers

Benefits of SSUTA: Business Perspective Voluntary Compliance Retailers

  • Simplification- Uniformity of: definitions, sourcing rules, tax base, auditing requirements, etc.

  • Use of technology to ensure accurate collection and reporting, paid for by states

  • Amnesty for uncollected back taxes

  • Vendor compensation from participating states for collecting sales tax


National revenue estimates from electronic commerce

National Revenue estimates from electronic commerce

  • Loss of national sales tax revenue from e-commerce estimated between $21.5-33.7 billion

  • Online commerce growing at 25% a year

  • Losses dependent upon population, tax base, tax rate


Cost benefit analysis

Cost-Benefit Analysis

  • No information yet from any participating state

  • Costs for state participation include SST dues (population-based/total sales tax) + travel

  • Much more significant costs for streamlining work, on-line filing requirements, administration uniformity (depends on state)


Alaska s interest in the sst or are we interested

Alaska’s interest in the SST… or, are we interested?

  • One of the early “alliance states”- focusing on local government issues

  • Given geographic isolation, significant internet use and on-line purchasing

  • Potential for increased revenues if sales tax collected on e-purchases


How much revenue for alaska

How Much Revenue for Alaska?

  • SW Alaska Municipal League Economic Geography Study ?

  • University of TN 2004 Study - Revenue loss Comparisons with small population, rural states and Alaska specific estimates ?


Southwest alaska an estimate

Southwest Alaska- An estimate

  • Southwest: Aleutians East Borough, Aleutians West Census Area; Bristol Bay Borough; Dillingham; Kodiak Borough; Lake & Peninsula Borough

  • Data sources: Surveys of households and businesses, origin-destination freight movement analysis, and input-output analysis

  • “Outside” purchases include internet- not 100% internet sales data


What of sw alaska sales were made outside

What % of SW Alaska sales were made “outside” ?

  • Total Household purchases 33.6%

  • Total Business purchases46.8%

  • Combined Total44.5% OR 347 million


Caveats cautions

Caveats & Cautions

  • Figures are for very remote region of AK

  • Internet purchases included in total outside sales, but not solely e-commerce

  • Must be very careful about applying these percentages to other regions or communities


Small population states with state sales tax useful comparisons

Small Population States with State Sales Tax- Useful Comparisons?

PopulationStateLocal

Vermont623,050 6% 1%

North Dakota636,677 5% 2.5%

South Dakota775,933 4% 2%


Projected local revenue losses from e commerce university tn 2004 study

Projected Local Revenue Losses from E-Commerce(University TN 2004 Study)

2008LowHigh

Vermont00

North Dakota4.6 M7.2 M

South Dakota13.3 M20.8 M


Show me the money alaska

Show Me the Money…Alaska

  • E-commerce losses estimated at 6.2% of total local general sales taxes

  • Alaska’s local governments local sales tax revenue of $148.5 million (2003-2004)

  • Rough estimate of Alaska’s localgovernment revenue loss = $9.2 million


Some alaska examples

Some Alaska Examples….

CitySales Tax RevenueLoss Estimate

Juneau30,539,500 1,893,449.

Kenai Pen14,910,977924,480.

Ktn Bor4,071,818252,452.

Bethel4,880,743302,606.

Wasilla7,135,574442,405.

Unalaska6,350,610393,737.

Kodiak7,130,691442,102.


More caveats and caution

More Caveats and Caution

  • Relies on high growth assumption for electronic sales

  • Assumes most electronic retailers DON’T have physical nexus in Alaska

  • Assumes low collection and remittance of taxes in Alaska from e-commerce purchases

  • Likely fairly good estimate IF Alaskans shop online more frequently than residents of lower 48 states


Recap what ssuta would mean

Recap- What SSUTA would mean

  • Form a statewide administrative entity to perform required SSUTA tasks

  • Adopt common tax base and uniform definitions for all local governments

  • Agree on deletion of all tax caps


More requirements

More Requirements…..

  • Pass a use tax in order to be able to apply to the Governing Board for acceptance

  • Adopt other, more detailed uniformity requirements of the SSUTA (sales tax holidays, reporting forms, etc.)


Possible next steps

Possible Next Steps

  • Obtain more detailed information on revenue loss estimates for Alaska

  • Compile information on local government sales tax exemptions and definitions

  • Convene workgroup of Alaskan communities interested in working on SST/tax simplification


Other suggestions

Other Suggestions …… ?

  • Develop list of questions and issues impacting local communities to guide a process

  • Review information from other states with active local government voices in the process

  • Discuss issues with State Department of Revenue


Additional sst information

Additional SST Information

  • http://wwwstreamlinedsalestax.org/ (General)

  • http://www.awcnet.org (WA League of Cities)

  • http://www.mrsc.org/focus/finadvisor/fina0706.aspx (Article in SST impacts to states)

  • http://www.sstregister.org (Business info)


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