A change to Alaska’s corporate income tax structure could add as much as $65 million a year to the state treasury by expanding the tax code to collect more from digital businesses, such as online merchants located outside the state.
The Alaska Senate voted 16-4 on April 15 to approve Senate Bill 113, which changes the state’s corporate income tax code to require online merchants and other businesses pay taxes in Alaska based on their sales into the state, even if they have no employees or property in Alaska.
Selling goods or services to Alaskans would be enough to bring them under the state’s corporate tax laws.
If passed by the House and approved by Gov. Mike Dunleavy, it would be the state’s first new revenue-generating measure in years.
Anchorage Sen. Bill Wielechowski, the bill’s sponsor, said that without the change, businesses can continue to avoid taxes even though they conduct business with Alaskans.
Passing the bill is a step toward resolving a major budget deficit, the senator said, adding that the change would not affect Alaskans. Thirty-six other states have adopted similar rules that set out the factors for determining a business’ taxable connection to a state.
The Alaska Department of Revenue, in its analysis of the bill, said the additional revenue “is indeterminate because there are many unknowns.” However, “the department estimates that the bill could generate total revenues to the state from $25 million to $65 million annually at full implementation.”
Anchorage Sen. Matt Claman said the bill is necessary to modernize the state’s tax system.
“You can get pretty much anything online and it comes to your door, and many of these companies that are doing business here in Alaska pay a little or no corporate income tax due to what has become, I think, an outdated structure for how we assess companies that are primarily located out of state,” he said.
Opposition came from four Republican members of the Senate minority, including Sen. Palmer Shelley Hughes, who said she believes it is inappropriate to pass a new revenue measure without also considering tightening the state’s spending cap.
SB 113 has been referred to the House Finance Committee for further hearings.
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