ANCHORAGE — At the Alaska Municipal League Conference this week, 15 communities signed on to be part of the Alaska Remote Sales Tax Commission, regulating sales tax collection from online retailers.
The United States Government Accountability Office estimated that states lost $13 billion in 2017 from the inability to collect online sales tax. In June of 2018, the U.S. Supreme Court issued a 5-4 decision on South Dakota vs. Wayfair, upholding the right to require online sellers to collect and remit sales tax. AML began research toward implementation in June of 2018 and the commission formed this week hopes to have their plan implemented in spring of next year.
“There’s two reasons to do this, one is to protect our community and the other is to enhance our community through additional revenue. So being involved in that process form the start is always a good thing, regardless of if it’s sales tax or police powers outside the city limits and things all those things that go into protecting the community,” Palmer City Manager Nathan Wallace said.
Wallace has been instrumental in the early stages of examining how municipalities within the state can collect tax from online sellers. In February, the Palmer City Council voted to give $5,000 in support of the research prior to the formation of the commission for collecting online sales tax. Internet commerce accounted for $500 billion in sales in 2018 and the commerce department estimated that 14 percent of total retail sales in the United States was online last year. Once complete, the council can adopt changes to the code to collect sales tax from online retailers doing business inside of the city limits. Some online retailers have already begun paying their share of online sales tax since the Wayfair decision in 2018. Wallace said that in 2019, Palmer has collected $89,000 in sales tax, nearly triple the amount collected last year.
Wasilla has a seat on the seven-member governing board that will continue forward, and Sabrena Combs not only serves on the Palmer City Council, but also as the District 4 Director on the AML board.
“I think it’s time that we implement something that’s fair across the board,” Combs said. “There was also a lot of really knowledgeable people at the table from other places that have already implemented things so it’s not being done blindly. It’s been done. It’s happening across the U.S.”
Combs said that they do not want any future sales tax to affect local municipal taxes and praised Wallace for his diplomatic disposition and seeking out the facts in his work on online sales tax.
“I think it’s extremely instrumental that Wasilla and someone from the Valley is on the commission as well as Palmer being one of the original signatories on forming the commission,” Combs said. “If you don’t have a seat at the table you don’t really have a voice.”
AML estimates that up to $20 million in online sales taxes could be collected annually. Wallace estimates that the work in researching how to implement the online sales tax among the 15 signatory communities is 80 percent complete or more. The costs for software, legal advice and hiring collection agencies will result in a small percentage collected by the Commission to remain operational.
“From my perspective, it doesn’t matter. It’s money that we’re not gaining now,” Wallace said. “What’s driving this whole commission is to make it so that it’s not burdensome on the online retailer or the remote seller. They are dealing with one organization and then that one organization divvies it out to the communities based on their sales tax codes.”
The cities signed onto the Alaska Remote Sales Tax Commission will then adopt and participate in the Alaska Remote Sales Tax Commission, handling the collection of tax from online sellers without becoming burdensome to the marketplace facilitator.
Combs also praised the direction of AML Director Nils Andreassen in bringing communities together to even the playing field for brick and mortar businesses.
“Nils Andreassen of AML has stepped up to the plate to take on this yeoman’s task of getting this done. Any entity could have taken the lead but AML is doing that and Nils has been at the forefront of that,” Combs said. “He’s making sure that every city in Alaska is getting their voice in.”