Alaska doesn’t have a state-level sales tax.
That hasn’t stopped the Last Frontier’s cities, counties, school districts and other special districts from imposing their own local sales taxes. Now those local taxing jurisdictions, inspired by a U.S. Supreme Court ruling, are exploring ways to recoup revenues on remote sales to buyers within their borders.
The Alaska Municipal League is leading the way with a program to bring the local taxing entities into a simplified statewide approach, Nils Andreassen, executive director of the group, told Bloomberg Tax Aug. 29.
The Supreme Court’s 2018 South Dakota v. Wayfair ruling tossed out the court’s 1992 physical presence standard affirmed in Quill Corp. v. North Dakota, which had limited the ability of states to tax remote sales. The majority in the 5-4 ruling suggested strongly that South Dakota’s law requiring remote sellers to collect sales tax if they had more than $100,000 in in-state sales or 200 transactions would pass constitutional muster.
Since the ruling, dozens of states have passed versions of South Dakota’s law or are enforcing existing economic threshold laws and rules they already have on the books. Many states have also begun imposing duties on marketplace facilitators such as Amazon.com Inc., eBay Inc., and Etsy Inc. that host sellers on their sales platforms.
Recent moves by Nome and other local governments reflect “a broader movement to be able to collect taxes on online purchases,” Andreassen said. “Each of these taxing jurisdictions has different rates and rules about taxability, registration, collection and reporting.”
If the league succeeds, it will pull off an Alaska-centric streamlined system for local sales tax similar to the 24-state Streamlined Sales Tax Project, he said. States in the compact work together on creating and implementing uniform tax rules and compliance requirements.
Like the national streamlined sales tax group, the Alaska initiative “would produce a compact, and each taxing local government would be a signatory to it,” Andreassen said.
The system would be the sole administrator of local taxes, with a single portal for licensing, filing returns, and reporting, he said.
Nome’s city council approved an ordinance Aug. 26 imposing a sales tax remittance and collection requirement on remote sellers and marketplace facilitators. The requirement comes with economic thresholds of $100,000 in sales or 100 transactions. Andreassen said Nome was the first city he was aware of to adopt a specific requirement using defined triggering thresholds. The ordinance takes effect Sept. 1.
Ordinances like Nome’s are under consideration throughout the state, lending urgency to the AML project, Andreassen said. “If Nome was the only one, you could see online sellers say, this isn’t streamlined,” he said. “We have a greater certainty of success and we’ll have less conflict later on if we all do this together.” He said he was “pretty sure” the majority of taxing jurisdictions will participate.
However, without some kind of state-level administration, Nome and other locals could hit some headwinds, Scott Peterson, vice president for government relations at Avalara, Inc., told Bloomberg Tax Aug. 29.
“The U.S. Constitution only mentions the Federal government and states, and the Supreme Court opined on a state tax,” Peterson said. “I wouldn’t presume the courts will give Alaska local governments special treatment because there is no state tax.” Delaware, Montana, New Hampshire, and Oregon also lack a state sales tax.
The Alaska Muncipal League hopes to have a draft of the streamlined agreement ready by mid-September, with a vote on its adoption at the group’s annual meeting in November in Anchorage, Andreassen said.