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April 22, 2002 The Petersburg Pilot says industry opposition to tax doesn't hold water

Posted: Monday, April 29, 2002

Overall, the travel and adventure businesses presented weak arguments to the city council Monday night on the pending ordinance to revoke the sales tax exemption of local operators. Many testified that this will be a tough year as bookings are down when compared with this time last year. Since the ordinance may not be implemented for more than a year or two, the current economy will in all likelihood change.

Should a charter operator elect to locate a business outside the city limits, they could avoid collecting sales tax but will in all likelihood give up the convenience of operating in town. Annexation or borough formation could make tax avoidance even more difficult.

Every business pays for licenses, permits and other state collected fees. This should not exclude them from collecting sales taxes on their sales.

Likewise, local businesses pay sales taxes as they buy goods and services from other merchants. Unless the product or service is to be resold, the city should rightfully collect tax on each sale. The final draft of the sales tax ordinance change should allow for tax exemptions that existing businesses enjoy. Package tours should not be double taxed when they provide lodging purchased from another vendor for resale.

Probably the most repeated comment heard Monday night was that a business would have to ''pay'' sales taxes. Businesses ''collect'' a sales tax which is added to the cost of the service or tour. We don't believe a six percent city sales tax will prevent a customer from booking a trip that customers are now enjoying tax-free. Most of us willingly pay a ludicrous 30 percent tax on each rental car we lease in the Seattle area. We doubt that a 6 percent sales tax will preclude a sale or make a business non-competitive.

Many travel and adventure businesses have been in operation for a decade or more. The sales tax exemption was justified as the industry matured and we agree with the 740 voters who in 1999, felt the industry should now collect sales taxes on their services. The voters clearly understood the advisory ballot proposition because they allowed exemptions for senior citizens, veterinary services and other specific businesses to continue.

The city council could make the sales tax collection more palatable to local tour operators by dedicating all or a portion of the tax to increased marketing efforts that are already being conducted by the chamber of commerce and visitor center. Larger markets in Juneau and Ketchikan easily outspend smaller communities when it comes to marketing efforts. Another idea could be to gradually implement the sales tax ordinance with graduated collections. Operators would collect 2 percent the first year; 4 percent in the second year and the full 6 percent in the third year.

Details need to be worked out as an ordinance is crafted that will eventually be sent back to the voters for approval. Petersburg has high-quality tour operators that should be willing and able to collect a tax which has the potential to make Petersburg a world class visitor destination and at the same time make this a better place to live and work.

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