Chilkat Valley News - Serving Haines and Klukwan, Alaska since 1966

Amazon collecting borough sales tax


February 7, 2019

Observant Haines shoppers have seen a 5.5 percent price increase to certain Amazon purchases after the company started charging borough sales tax on products beginning Jan. 1, 2019.

Borough finance director Jila Stuart told the CVN this week that some residents have called the borough recently, complaining that they were being taxed on some of their Amazon purchases. Confused by the reports, borough staff contacted Amazon. “We called and said we have reports that people have had tax charged,” Stuart said. “(An Amazon representative) said ‘yes, we’re collecting Haines Borough tax and yes we’re going to remit it to you.”

Amazon’s voluntary decision to charge and remit sales tax in Alaska comes in the wake of last summer’s U.S. Supreme Court decision that eliminated a previous “physical presence requirement” in South Dakota for collecting sales tax, Alaska Municipal League (AML) executive director Nils Andreassen said. “It opened the door for municipalities or governments to be able to say the physical presence isn’t necessary to create a presence. It opened the door for governments to say online companies have a presence.”

AML is working with municipalities across the state to establish guidelines for administering online sales tax collection. They hope to launch a program by January 2020, Andreassen said. “You have 105 different taxing jurisdictions, none of which are the state,” Andreassen said. “The work AML is doing focuses on working with those municipalities to determine what a common definition, or set of definitions look like and how we can organize equitable collection and remittance.”

City and Borough of Juneau finance director Bob Bartholomew said Amazon has had a physical location in their borough for a decade. When Amazon restructured their organization last year, that small business merged with its online sales structure, Bartholomew said. Amazon’s tax remittance to Juneau has nothing to do with last year’s Supreme Court decision, which says under certain conditions you can tax online internet sales, Bartholomew said.

“What (is Haines) going to do if a citizen challenges (the tax) because there’s no law that says Amazon should do it. If they say ‘hey, our sales tax code doesn’t cover online sales,’ that’s your risk,” Bartholomew said. “We have other Internet companies trying to register with us and we’re telling them ‘no, do not because we don’t have a legal liability to collect online sales tax.”

AML issued a memo to municipalities this week titled “Update-confusion about Amazon sales tax collection in Alaska” in which it recommended municipalities check in with their attorneys to ensure local tax code is consistent with online sales. “In cases where physical sales are codified, municipalities will need to change their tax codes to include online sales,” the memo reads.

In a message to borough staff on Tuesday, Stuart said the collection of Amazon sales tax is consistent with borough code. Stuart told the CVN they are checking with their attorney to make sure.

In Petersburg, borough finance director Jody Tow said they are working with their attorney to update language in code to include online sales. “At our first glance we could argue that we might not need to change anything,” Tow said. “But better to be safe than sorry. There are a lot of factors. If they can’t (comply with) all of our exemptions, then we’ll have to tell them no, they can’t collect sales tax in Petersburg.”

Despite the confusion, local retailers are encouraged by the news. “That’s good news,” Alaska Sport Shop owner Doug Olerud said. “I think it’s one of those things that help level the playing field.”

Mike Ward, who owns several retail stores and a grocery, also said it will level the playing field. “It’s about time,” Ward said. “They’ve had a totally unfair competitive advantage.”

It’s unclear which products Amazon is taxing. Andreassen said that third-party sellers on Amazon won’t charge the sales tax. “One business division of Amazon has determined it should be collecting sales tax consistent with where it exists for Amazon products only, not third-party sales.”

Andreassen has not been in contact with Amazon and is unsure which division is collecting the taxes. A cursory CVN review shows that Amazon didn’t charge the tax on its popular $49.99 Echo Dot smart speaker, but did charge 41 cents in tax for a $7.37 paperback copy of E.B. White’s “Charlotte’s Web.” The book was sold by Services, while the smart speaker was sold by Amazon Digital Services.

Amazon did not respond to questions by press time.

Haines Chamber of Commerce director Tracey Harmon spoke with Bartholomew and Andreassen last week at a legislative fly-in where they discussed implementing a universal online sales tax administration system. Juneau contributed $12,000 to the effort that is estimated to cost $120,000, Harmon said.

“I think we can work with (the Haines Economic Development Corporation) and make it part of our By Haines Campaign, but the best representation we have right now is (Mayor) Jan Hill and (borough manager) Debra Schnabel being connected to AML’s working group on this issue, and in the meantime we need to gather public input from our community to see how we want this to play out,” Harmon said.  

Amazon will remit the tax in May at the end of this year’s first quarter, but the total will be confidential. “I’m guessing it will be significant,” Stuart said.


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