The Kenai Peninsula Borough Assembly will vote to amend 16 provisions of the borough sales tax code at Tuesday's assembly meeting. Borough Finance Director Jeff Sinz said Tuesday at the Soldotna Chamber of Commerce luncheon the changes proposed in Borough Ordinance 2002-39 were "primarily administrative in nature" but echoed the borough sales tax committee when he outlined the goal of the revisions.
"The primary objective was to create a simpler, more equitable and more progressive sales tax system," Sinz said during his presentation on the changes.
Sinz was one of six people on the committee appointed by the assembly in November 2001 to examine the current sales tax codes, identify areas of perceived inequity, analyze potential revisions and recommend necessary changes that would take effect Jan. 1.
The committee's work was put on hold in April pending a November vote on a state sales tax, and the ordinance was presented in the Nov. 8 assembly meeting after the state tax bill failed. The last time the borough tax laws were reviewed was in 1994.
Sinz said there had been five public hearings regarding the matter, but he said they were not well attended.
Other members of the committee are assembly President Pete Sprague, assembly members Paul Fischer and Chris Moss, Borough Attorney Colette Thompson and Troy Tankersley, borough sales tax supervisor.
Sinz pointed out that there were some points of revision that did more than simply adjust administrative meaning, and he addressed concerns over these proposed amendments that were raised, both before and during the luncheon. In particular, he responded to the planned change to recreational taxes on package rates.
"We perceive it as an equity issue," he said. "We believe the rate of taxation should be the same for a small family as for a large corporate package. Currently, it is not."
Under the new revisions, Chapter 5.18.430 D will contain language that taxes recreational sales on a "per person-per day basis."
"We recognize that is just one element," Sinz said. "Of that issue, there may be others that businesses may know about. We encourage them to show up and voice their opinion."
Another amendment that raised contention among luncheon attendees was the proposed Chapter 5.18.200 C, which would limit tax-exempt seller status of Internal Revenue Service-designated nonprofit corporations when competing with for-profit entities. The change would require that all tax-exempt sellers be approved by the borough.
"The intent is to focus on activities that are private and for profit in nature and attempt to compete with for profits under the 501c umbrella," Sinz said. "There is going to have to be a policy established that looks at how nonprofits sell and compete with for-profits."
As an example, he pointed to the Alaska SeaLife Center in Seward.
"The SeaLife Center is a not-for-profit, and there are for-profit companies directly across the street that don't share the same benefit, but compete in the same market," he said.
Sinz said the companies likely would be identified once and not looked at again by the borough "as long as there was no significant change in your business practice."
He was asked if nonprofits would have to register every fund-raiser, and his answer was "no."
Borough auditor Terry Eubank worked with the sales tax committee and said businesses should be reminded that the tax changes were not intended to be burdens.
"Sales tax is a consumer tax to be paid by the customer, not the business," Eubank said. "Even if we deem that a not-for-profit has a product or service that is taxable, it is a tax that should be passed on to the consumer. The only thing that gets a little muddy is enforcement. Businesses are the only ones we can hold accountable."
Sprague was present at the luncheon and said although he recognized there was some refinement needed, he was hopeful the ordinance would go forward.
"Perhaps the language with the nonprofits needs to be revisited," he said. "And maybe the effective date needs to go back to April 1. Just giving three weeks to bring these changes into effect is not enough time."
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