HomeMy WebLinkAbout11082019 City Council Work Session Laydown - Potential Bed Tax In order to provide information to the City Council,the Finance department has generated three
scenarios regarding the potential effect on bed tax revenues in the event a credit is offered for
prompt payment(much like the Kenai Peninsula Borough's credit for prompt payment for sales
tax). In comparing the borough's sales tax collections to the city's bed tax collections for the
same period, it shows that the city's bed tax collections are just under 13.5% of the sales tax
funds collected by the borough. For the period of July 1, 2018 through June 30, 2019, sales tax
collected by the borough totaled $5,492,226 vs. the city's bed tax collection in the same period
of$733,988. If the credit offered for prompt payment of bed tax is in line with the borough's
credit, it is suggested that the credit not exceed $100 per quarter for prompt payment.
Additionally,much like the borough, each business must be in compliant to be eligible for a
prompt payment credit.
The following is a breakdown of the three quarters in 2019 for bed tax collected and the
reduction in revenue in the event a prompt payment credit was issued for(Scenario A) $1,000,
(Scenario B) $500, and(Scenario C) $100 per quarter:
Scenario A
Quartee Bed Tax Rec'd 5%Credit* Tax 0 Credit
1Qtr2019 27.554.89 1,377.74 26,177.15
2Qtr2019 195.270.68 7,641.91 187,628.77
3Qtr2019 349:184.19 9.992.38 339,191.81
572.009.76 19,012.03 552,997.73
*5°o Adjustment for prompt remittance
$1000 max per quarter,must be in compliance
Scenario B
Quarter Bed Tax Rec'd 5%Credit** Tax(-)Credit
1Qtr2019 27:554.89 1,374.84 26,180.05
2Qtr2019 195,270.68 5,644.70 189:625.98
3Qtr2019 349,184.19 8,077.42 341.106.77
572.009.76 15,096.96 556,912.80
**5%Adjustment for prompt remittance
$500 max per quarter,must be in compliance
Scenario C
carter Bed Tax Rec'd 5%Credit*** Tax 0 Credit
1Qtr2019 27,554.89 562.41 26,992.48
2Qtr2019 195.270.68 2.831.90 192-438.78
3Qtr2019 349,184.19 4,107.29 345,076.90
572.009.76 7,501.60 564.508.16
***5%Adjustment for prompt remittance
$100 max per quarter,must be in compliance