Taxes drive cities to unify

April 26, 2005

KATE GOLDEN/Frontiersman reporter

PALMER - Sales-tax-code discrepancies, among other issues, brought the city councils of Houston, Palmer and Wasilla together for a rare meeting Monday, April 18.

Houston's tax is 2 percent; Palmer's is 3 percent. Wasilla has a 2.5-percent tax, .5 percent of which is scheduled to expire by 2007.

Beyond the rates themselves, variations in tax codes worry municipal officials.

For example, the cities differ as to whether they tax at the point of sale or the point of delivery. It's possible that someone who buys a two-by-four in Houston and has it delivered to Wasilla could pay sales tax twice on the same plank.

Tony Pippel, a Palmer city council member, pointed out that the loophole can work both ways: "The problem, I suspect, isn't that some people are getting dinged twice, but that some people aren't getting dinged at all," he said.

Palmer Mayor John Combs recommended, and everyone else seemed to agree, that all three cities should tax at the point of sale.

The above scenario, though, is only for the plank-buyers who don't have sales-tax exemptions.

Contractors can apply for exemptions, Ted Leonard, Wasilla's director of finance and administrative services, explained, because of the traditional philosophy that double taxation is unfair to the consumer. Without the exemption, a property owner who hires a contractor would pay taxes not only on the materials but on the contractor's services.

But the rules on who's eligible to get the breaks and how much the applications cost change as one drives across the Valley.

That can create competition between the cities, although not all city council members thought a contractor would drive to a different city just to pay slightly less tax.

Palmer City Manager Tom Healy said the differences in those and other tax exemptions are confusing for constituents.

"We'd like to get some consistency across the board," he said. "The public should not have to keep separate tabs on communities."

Leonard also argued that unified tax codes would give the municipalities a unified and therefore stronger voice in negotiations with the Mat-Su Borough or the state of Alaska when either of those larger entities decides to impose sales tax on the Valley -"instead of waiting for the finance director to call," he said.

No one dissented with Pippel's take on those behemoths' involvement.

"We have an absolute interest in keeping other government entities out of the rice bowl," he said.

At Healy's suggestion, the three city managers will research tax codes and convene to hash out the details of tax-code uniformity.

Kate Golden can be reached at 352-2284 or kate.golden@frontiersman.com.