Update: Before the Alaska Municipal League could complete its study, Amazon started collecting sales tax on online purchases made in Unalaska. For more on that development, click here.
How can Alaska municipalities collect sales tax on online purchases?
That’s a question the Alaska Municipal League (AML) has been working on since the 2018 U.S. Supreme Court decision South Dakota v. Wayfair, Inc.
“Basically, what that decision says is online sales tax is now available as an option, whereas before a physical presence was required by a retailer,” said AML Executive Director Nils Andreassen.
Online sales include anything you buy online – like Amazon purchases.
Alaska does not have a statewide sales tax. Instead, individual communities are able to set their own municipal sales taxes. Unalaska’s is 3 percent.
Andreassen said AML would like to create an independent arm of the organization to help Alaska communities figure out how they can collect online sales tax.
“The constitution gives municipalities authority for intergovernmental cooperation and you already have taxing authority, so working together on this is pretty straight forward.”
To set this up, Andreassen says all 100 existing state tax codes need to be compiled, definitions across municipalities need to be streamlined, and an administrator identified to complete a sales tax boundary map.
“So what we’re asking those jurisdictions that do have a sales tax [is to] contribute to our effort to do all that work over these next six to eight months,” Andreassen said.
As of Jan. 8, Andreassen said AML has raised $35,000 for the project from Juneau, Ketchikan, Bethel, Kenai, and Soldotna. He says the organization is hoping to raise a $100,000.
Based on Unalaska’s sales tax revenue, the City Council would be looking at committing $7,500 dollars.
Councilor Alejandro “Bong” Tungul said he’s interested in getting more information on what an online sales tax would look like.
“Where we live, we really order a lot of stuff out of town -- from clothing to supplies in the house -- so it would be good to get more study on it,” Tungul said.
His interest was echoed by Councilor Roger Rowland.
“I’m afraid, with our situation in the state, if we don’t grab this and run with it, the state will and we might get something jammed down our throats that we may or may not like and the state might get the money instead of us,” Rowland said. “So I’m in favor letting AML run with this for a little while.”
Tuesday night the City Council will decide if and how much they want to contribute to AML’s project.