AML Background Impacts of a Supreme Court Case Wayfair vs South Dakota removed the requirement of physical nexus and opened up the opportunity for sales tax collection of current sales taxes on online sales ID: 1028321
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1. Online Sales TaxA Win-Win for Local Governments and Businesses
2. AMLBackgroundImpacts of a Supreme Court CaseWayfair vs South Dakota removed the requirement of physical “nexus” and opened up the opportunity for sales tax collection – of current sales taxes – on online salesThe Supreme Court gave broad guidelines for how that should occur, namely that collection should not create a burden on inter-state commerceThe Court further suggested that streamlined, statewide, single-level administration, with a clearly defined economic nexus, would meet this testStates have been updating their sales tax codes across the nation, taking into account economic nexus, the role of a marketplace facilitator, and a system of collection
3. AMLBackgroundImplications for AlaskaAlaska is the only state in the nation that doesn’t have a statewide sales tax but gives local governments the ability to collectAML has spent the last year researching this issue and developing a well-vetted and reasonable path forward17 local governments contributed funding and the time of their staff toward this effort, which represents strong collaborationLocal governments in Alaska have both taxing authority and the ability to enter into intergovernmental agreement under the State ConstitutionTogether, there has been consensus to work together to follow the Supreme Court decision
4. AMLWorking TogetherJune 6th in-person meetingMore than 40 managers, attorneys and finance officers met to discuss how to proceed, agreeing to economic nexus and centralized administrationDrafting CommitteeComprised of sales tax administrators, finance officers and attorneys, this group met weekly to discuss and finalize common definitionsGovernance CommitteeComprised of managers, attorneys and finance officers, this group met regularly and developed an intergovernmental agreement, draft bylaws and draft remote sales tax code
5. AMLWorking Together – Thanks!• Kenai Peninsula Borough• City and Borough of Juneau• Ketchikan Gateway Borough• City of Palmer• City of Wasilla• City of Nome• City of Palmer• City and Borough of Wrangell• City of Kodiak• City of Sand Point• City of Kotzebue• City of Soldotna• City of Unalaska• City of Adak• Landye Bennett Blumstein LLP• Boyd, Chandler, Falconer LLPDrafting and Governance Committee Participation
6. GovernanceIntergovernmental AgreementBylawsRemote Seller Sales Tax Code
7. Online Sales Tax CollectionIntergovernmental AgreementEstablishes a CommissionAgrees to:Designate a representative to the CommissionAdopt the online sales tax code; delegation of tax collectionEconomic nexusAML administration
8. Online Sales Tax CollectionBylawsGoverning documents of CommissionMembership and meetingsBoard of directors, electionsOversight of collection and remittanceBudgetPolicies and proceduresTo be approved by members at first meeting
9. Online Sales Tax CollectionRemote Seller Sales Tax CodeImplements the ability for collection of online sales tax, based on point of delivery, applicable to local governments that have signed the Agreement and passed the CodeIndividual tax rates and exemptionsCommon definitionsCentralized administration:Collection and RemittanceAddress softwareAudit and complianceVendor registrationFiling deadlines and penalties
10. AMLCentralized AdministrationStandard softwareAML has contracted with a software development company to collect, remit and manage online sales tax – vetted to be the most affordable and effective option for membersSoftware fees as a % of overall revenue collectedAML to provide staff support Software management, remittance and reporting, complianceBoard and member support and communicationsAML fees based on direct costs to implementRole of MembersEnsure updates to tax rates and codes, exemptionsReview monthly or quarterly filings for accuracyWork with AML on compliance and audit
11. AMLEnsuring SuccessWhy this makes sense for local governmentsMaintain taxing authorityMaintain rate and exemptionsDelegated administration to AML saves $Opt-in = you take advantage of WayfairOpt-out = residents don’t pay sales taxLevels the playing field for local businessIncreased revenue for education, public safety, roads and public worksIncreases ability to respond to State cost-shifting$29,440,484
12. AMLEnsuring SuccessWhy this makes sense for AlaskaLevels the playing field – increases local purchase potentialThese aren’t new taxesKeeps tax rates stableProtects residents outside boundaries Maintains current local exemptionsLocal revenues improve communitiesOn par with other statesStrengthens local governmentsLocal taxpayers, local budgetsFairness2,600-3,400 retailers
13. Next StepsPass the Draft Resolution, committing to AgreementParticipate in Commission meetings; approve Bylaws and Remote Seller Sales Tax CodeBring the Code to your Council/AssemblySend AML your current rate, exemptions and boundariesExpect collection to begin within 30 days
14. Online Sales TaxA Win-Win for Local Governments and Businesses
15. Celebrating SignatoriesHaines BoroughKenaiPalmerSewardHomerSeldoviaJuneauWasillaSoldotnaWrangellKenai Peninsula BoroughKetchikan Gateway BoroughKodiakToksook BayAdak