Proposed changes to the Kenai Peninsula Borough's sales tax code that are to be introduced tonight at the borough assembly meeting could pave the way to a simpler and fairer system for collecting taxes, say members of the assembly's Sales Tax Subcommittee.
After almost a year of work, the tax committee has prepared a package of some 15 amendments to various portions of the code. The goal, committee members said, was to simplify the code, better define the jurisdiction of the code and level the playing field for taxpayers and the businesses that collect sales taxes for the borough.
"I think we did substantially accomplish that goal," committee chair and assembly member Chris Moss said Monday.
The aim of the revisions was not to generate more revenue. Changes, he said, were mostly about determining the taxing jurisdiction -- where and how the sales tax applies.
The revisions might have been sent to the assembly sooner, Moss said.
"We were ready to present this before the election, but that might have made it an election issue when it really wasn't," he said.
The election put one new face on the assembly and unseated another longtime member. Moss said he does not anticipate any problem getting Ordinance 2002-39 introduced, and he is reasonably sure the measure will be adopted after a public hearing, currently scheduled for Nov. 19.
"It's a new assembly. Everyone will have to be brought up to speed," Moss said. "Hopefully, we took care of the controversial things. Either they were not brought forward or we did the research so assembly members will be able to understand the issues."
The proposed changes do not include an increase in the $500 sales tax cap, something the committee had discussed. Moss said an increase is simply not needed at this time.
An issue raised during committee meetings regarded the possible unfair advantage nonprofit (501c) child-care and adult day-care facilities enjoyed over their for-profit counterparts. One proposal would have cut the tax break to nonprofits. Instead, the proposed ordinance extends the sales tax exemption to all child-care and adult day-care facilities regardless of their federal tax-exempt status. The change is expected to lower borough sales tax revenues.
Another proposed tax change would exempt all state licensed medical and psychological service providers and the prescriptions they write. The exemption would extend automatically to each new medical practice recognized by the state of Alaska.
Other revisions include:
Exempting services performed under warranties and service agreements. Currently, service providers often are unable to collect sales taxes from customers getting work done under manufacturers' warranties, nor get the manufacturers to reimburse them for the sales taxes service providers must remit to the borough.
Allowing lodging and meals to be eligible for treatment as resale transactions and exempt them from the sales tax. The change would simplify some transactions under the code, the committee said.
Reducing the cost of an owner builder card and include services under an existing exemption. The revenue impact to the borough is expected to be minimal, according to the committee.
Defining the taxability of vending machine sales on a per-transaction basis. This is expected to have no revenue impact, but does clarify that machine transactions are considered single transactions.
Clarifying how installment sales and vehicle leases are to be treated under the code. It would have no revenue impact but anticipates such provisions as seasonal sales taxes by applying the sales tax in effect at the time of the sale, even though installments would be made over periods of varying tax levels.
Taxing recreational sales on a per-person, per-day basis. The impact is hard to estimate, the committee said, because of limitations of the sale tax system, but it is expected to mean "a substantial revenue boost" to all taxing jurisdictions with a lot of recreational sales.
Providing for the taxation of services based on the invoicing practice of the provider. The current code does not adequately address services such as contingent legal services, auto body repair, aircraft repair and the like, the committee said.
Making the retail outlet from which goods were sold the point of sale of those goods.
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