The Wrangell Chamber of Commerce recently issued a letter to the Borough Assembly in support of a statewide internet sales tax.
Addressed to Mayor David Jack, the letter suggests a sales tax on online sales would benefit local commerce by removing a “competitive advantage” sellers on the internet have by not having to pay out-of-state sales taxes. In other states, these earnings may still be gleaned through personal or business income taxes for retailers with a physical presence there.
In the case of major online retailers like Amazon, this extends to its warehouses and physical store locations. According to its website, the retailer currently collects sales taxes for 28 states already, and the Washington Post reported Amazon has announced it would start collecting sales tax for purchases headed to Washington D.C. on October 1.
Alaska has no statewide sales or income taxes by which to
collect revenue, either from online retailers or those in-state. It does currently have in place a net corporate income tax, which collects revenue based on profits in a tiered structure, up to 9.4 percent.
With elections by then behind them and the approaching
legislative session set to start in January, Alaska’s lawmakers are expected to begin discussing different ideas for new sources of income to help reduce the annual deficit. Among these are
proposals to make use of the Permanent Fund for state functions, raise existing taxes on liquor and tobacco, or instituting personal income and statewide sales taxes.
The Chamber notes a number of these ideas for new revenue may be adopted, some of which may not be beneficial to communities like Wrangell.
“Many of these forms of suggestions will include forms of
taxation that will invariably impact some individuals and
groups more, or less, than others. The challenge then becomes to find a tax that fairly distributes the tax burden across a variety of socioeconomic boundaries,” it reads.
To begin with, Wrangell already has one of the highest sales taxes in the state, at seven percent. Were a statewide tax added atop of that, local businesses may have a harder time keeping customers having to pay 10- or 11-percent rates.
Of the possible options, the Chamber
suggested a state internet sales tax may be of benefit to the community’s merchants.
Citing a Stanford University study from 2014, the Chamber made the case that internet sales have been shown to drop as taxes on the
purchase of items bought online were
levied. In the instance of the study, the number of purchases decreased by two percent for every percentage point increase in the sales tax.
“One can conclude that this would
result in increased local commerce since
customers would still be making their purchase, and most certainly comparison shop,” it said.
Signed by Chamber president Christie Jamieson, the board’s letter requests that a support resolution in favor of an internet sales tax from the Southeast Conference be submitted to the governor’s office and Alaska Legislature.
The Chamber’s letter follows a
decision by the Assembly at its Sept. 13 meeting to reject a proposal to issue a letter of its own in favor of such a tax. At the time, dissenting members had expressed the view the city was taxed too high as it is, and that an online sales tax would be too complex to implement.
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