HomeMy WebLinkAbout02242020 City Council Laydown - Remote Sales Tax �,u ppok t (8 7;1 2 52, H4 3 ,iipl lrr
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Jan,13,2020 Gail Cole
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Some out-of-state retailers and marketplace facilitators may soon be required to collect and remit
specified local sales taxes in I he i 'iv'"i nni i,�.
More than 100 borough or municipal governments in Alaska,levy local sales tax even though there
is no statewide sales tax.Many of these governments are interested in requiring businesses with
no physical presence in the locality or state Iremote sellers)to collect and remit applicable local
sales taxes.In this regard,they're following the lead of most other states.
All but two of the 45 states with a statewide sales tax require(or soon will)remote sellers to collect
and remit sales tax.They won the right to do so when the Supreme Court of the United States
overruled a longstanding physical presence rule in its decision on Smith Dakota v,Wayfair,Inc.
(June 21,2018),Prior to the Wayfair ruling,states couldn't require a business to collect sales tax
unless the business had a physical connection to the state.
Now the w nj( pm I is looking to require businesses with no physical presence in a
jurisdiction to collect and remit thatjUrisdicflon's sales tax.On January 6,2020,the Alaska
Remote Seiiers Sales Tax Commission finalized the uniform/dki,ko Rcii iow dcr s.,ve,' 'iax
which establishes.a frarnework for the common rules ofthe road for adrninistering sales taxes on
remote commerce.
The code doesn't affect tax rates or exemptions:Participating communities will still be able to
increase or decrease rates and establish or eliminate exemptions as before.
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Complying with sales tax laws in mtliltiple jurisdictions thi-<)ughoLutAlaskacould prove
burdensome for remote sellers that handle sales tax compliance manually.To solve for this,the
commission is working to create a centralized administration system with theAlaska municipal
League,as well as sales tax compliance software.
In other words,the Alaska Remote Sellers Sales Tax Commission is both complicating compliance
for remote sellers and providing the means to simplify it.
The software will enable remote retailers to more easily report and remitth,e required tax online.it
will help retailers determine the proper rate of tax and taxability rules via a tax exemption and rate
database,includingan interactive map of tax rates and jurisdiction boundaries.Thus,any retailer
using the software will be able to quickly determine the proper rate due on all transactions.
Instantaneously.
Businesses that use the software won't be held liable in the event the software incorrectly
calculates the tax due.
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The cZectim,requirement applies both to direct retailers and marketplace facilitators;
marketplaces are responsible for collecting and remitting the tax due on sakes made through the
marketplace(third-party sales).
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200 or more separate transactions of property,products,or services delivered into the state
Sales made through a marketplace should be included when remote sellers or marketptace
facilitators are calculating the threshold.
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Usawssers with a physical presence in Alaska currently don't have to collect and remit tax on
sales made to anotherjurisdiction unless they have a physical presence in that location.For
businesses that don't qualify for safe harbor,that wil[change in boroughs and cities that adopt
the Remote Seller SaiesTax Code.
In state businesses will continue to report and remit sales tax to local governments in all
jurisdictions where they have a physical presence.When the point of delivery is in a different
taxing jurisdiction(i.e.,when they don't have a physical presence in the taxing jurisdiction),the
Alaska.based seller will register and rernit sales tax through the Alaska Remote Sellers Sales Tax
Commisslon,
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Local governments.are currently,reviewing the uniform code,once adopted,they'll inform remote
retailers and marketplace facilitators that they must commence collection within 30 days,Initially,
the collection obligation will apply to remote retailers and marketplaces that met or exceeded the
$100,000 sales/200 transactions threshold during the previous calendar year.
Remote businesses that chditt meet or exceed the threshold in,2019 will be required to apply to
the commission for a certificate of sales tax registration on the latter of;
* 30 calendar days of the effective date of the code;or
* 30 calendar days of meeting or exceeding the threshold
To update software or take care of other technical issues hindering their ability to collect and
remit sales tax,remote businesses that meet the threshold may apply for an extension of up to 90
days.
The commission expects the software to be complete by January 31,2020 Eager-beaver
municipalities that ad!cpt the uniform code by mid-February could require collection as early as
March and obtain their first remote sales tax revenue in April,assurning the new collection
requirement isn't challenged.
To learn more about how software can reduce the burden of sales tax calculation,coltection,and
remittance in Alaska,visit
Sites tax rates,rules,and regulations change frequently.Although we Nape you'll find this
inforrnation helpful,this blog is for informational purposes only and aloes hot provide legal or
tax advice.
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Goil Cr)Le
Call Cole has been researching,writing,and reporting tax news for Avalira since 2012.She's
on a mission to uncover unusnW tax facts and make complex laws and legislation more
digestible for accounting and business professionals—or anyone interested in learning
about tax compliance.
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