The world of retail sales is evolving, and local officials want Sitka’s sales tax to evolve with it.
At its regular meeting Tuesday evening (1-14-20), the Sitka Assembly took a hard look at gift cards — how and when to tax them — and other less-than-clearcut sales, such as pizza boxes and coffee cups.
Chief administrative officer Jay Sweeney said when a question comes up about Sitka’s city code, often he must interpret it. Some questions, however, required assembly approval or direction.
He said there was a grey area when it came to food containers, or convenience items like napkins or condiments.
“It’s unclear, for example, if you’re buying a pizza, are you also paying for a box or is the box provided as a form of a convenience to the customer?” Sweeney posed the question.
Sweeney’s interpretation was that unless a customer is specifically charged for a food container, the items are provided as a convenience, not items for resale, and wouldn’t qualify for a tax exemption when purchased by the business.
Assembly member Steven Eisenbeisz asked Sweeney what would be easier for city staff? For the consumer, that was different.
“I don’t believe that there’s a large amount of money to be seen here,” Eisenbeisz said.
“I don’t think so,” Sweeney agreed.
“And if it increases burden on people trying to do business, that’s not necessarily the route i want to go for for pennies. I don’t believe that to be worthwhile,” Eisenbeisz continued.
And other assembly members shared that view. They voted unanimously to reject taxing food containers.
The assembly also unanimously approved Sweeney’s interpretation that the sale of gift cards was not taxable, as it could lead to double-taxation.
Rather than taxing the purchase of the gift card, the city will collect tax when they’re spent by the recipients. That’s been the city’s longstanding policy for local brick-and-mortar businesses, but gift cards for stores outside of Sitka were taxed. The new interpretation meant that gift cards across the board would not be taxed when initially purchased. Member Kevin Mosher said that Sweeney’s interpretation was pretty straightforward.
“Some of these other ones are a little more complicated but this one’s fairly simple,” he said. “Gift cards are basically just a different type of financial instrument, substituting cash for the card. You pay the tax when you pay for the item.”
A third motion to approve an interpretation on the definition of “resale” failed on the assembly floor for lack of a second.
Last December, the assembly passed a resolution to join the Alaska Joint Seller Sales Tax Commission, which is so that it can get in on the process of establishing a uniform way to collect sales tax from online retailers, like Amazon, throughout the state. But in order to remain members of the commission, the assembly must adopt the Alaska Remote Seller Sales Tax Code for e-commerce sales.
Member Richard Wein said that would create more problems at the local level.
“There are certain things that I think we need to do in Sitka in relation to taxation, which may not agree with the remote sellers, which would be perfectly satisfactory for Sitkans,” he said. “What we’re now being dragged into is a larger taxation scheme.”
In other business Tuesday night, the Sitka Assembly:
- Approved, on second reading, $142,000 for phase six of the Sitka Cross Trail. This money was raised by Sitka Trailworks to match federal funding, and is being funneled through the city to complete the project
- Approved, on first reading, $100,000 to pay for new doors at the Rocky Gutierrez Airport, 5-1 with assembly member Richard Wein opposed
- Discussed and approved a list of priorities to submit to the Alaska State Legislature
- Voted 6-0 to reappoint Chris Spivey to a three-year term on the Planning Commission and to reappoint Scott Wagner to a three-year term on the Local Emergency Planning Committee
- Unanimously approved a liquor license renewal for the Sitka Golf Course