Putting an extra spring in shoppers’ steps on Leap Day — or perhaps some other day early next year — with a “holiday” exempting most retail purchases from the city’s 5% sales tax is being proposed by Juneau Assembly member Wade Bryson. But most of his fellow Assembly members aren’t yet jumping to support the idea.
The “sales tax holiday” was introduced by Bryson during the Assembly’s Finance Committee meeting on Wednesday night. It gives businesses the option of waiving sales taxes, except for certain items such as fuel and goods delivered on a different day, for up to two days a year determined by the Assembly.
Such holidays exist in Ketchikan and other Southeast Alaska communities, as well as cities nationwide, so “we absolutely would not be breaking any new ground,” Bryson said.
“As a business person I know that promotion is a good way to get people spending money,” he said. “I’ve had this idea because I know that it’s not just Ketchikan; cities all over Southeast Alaska and all over the country have sales tax holidays from time to time.”
The Ketchikan Borough Assembly approved a sales tax holiday for Oct. 1 of last year, intended to coincide with Permanent Fund dividend distributions, as well as one for March 25 of this year. Similarly, Skagway approved such holidays on Oct. 1 of last year and March 31 of this year. Sitka approved one for Nov. 24–25 of this year, “with the exception of any sale of alcoholic beverages, fuel, marijuana and tobacco products, and any sale that’s part of a continuing obligation of the buyer to pay the seller over time.”
Bryson, citing cities outside Alaska, noted Nashville has such holidays just before the school year starts. He picked Feb. 29 of next year as a preferred date locally since it’s both distinctive and traditionally a slow period of the year for retail sales, but noted his proposal leaves the decision for the actual date or dates up to the full Assembly.
The proposal introduced by Bryson was drafted by City Attorney Robert Palmer, who said it is modeled on Ketchikan’s sales tax holiday. Not exempt from sales taxes under the proposal are rentals for more than one day, public utility services such as cable television that are otherwise taxable, gas and home heating fuel, and goods and services that are delivered or provided on a different day than the holiday.
“Some of those items have associated taxes from other entities would be really challenging to stop collecting,” Palmer said. “And then if you also think of the point of sale for gasoline it’s going to be really challenging to say you have to stop collecting tax at a pump if you’re paying by card.”
Bryson estimated it would cost the city slightly more than $100,000 in lost tax revenue if sales on that day were typical for that time of year.
Among the concerns discussed by Assembly members was if some businesses — especially large merchants such as Fred Meyer and Costco — would be the primary beneficiaries simply by collecting a large amount of additional untaxed revenue during a holiday. Similarly, there were questions about whether shoppers — especially those with discretionary income for large purchases — might take similar advantage at the expense of the city.
“I can see how it could be a kind of exciting day,” said Assembly member Michelle Bonnet Hale. “But, for example, if somebody was planning on buying a car and picked that day to buy a car they’d save a ton of money, is that right?”
Bryson said that’s one of the biggest objections people have expressed to him about the proposal, but some appliance stores in Southeast took advantage of the situation by bringing in extra inventory. Furthermore, he argued it might help some people in immediate need to buy a vehicle or appliance right away if the cost is 5% less, but there are likely to be few such purchasers.
“How often do people delay buying a car if they’re going to actually buy a car from the dealership?” he asked. “Or when was the last time a person bought an appliance when their old appliance was still functioning? Most people wait until their appliance goes down.”
Also, responding to a question from Hale about what happens if “everybody went out and bought 20 cars on that day,” Bryson reiterated the Assembly could simply refuse to approve future sales tax holidays.
A vote to advance the proposal to the full Assembly for formal introduction to speed the timeline for its possible approval, with the intention of then returning it to the Finance Committee for further study, was rejected by a 7-2 vote, with only Bryson and Hale voting in favor. A second vote to keep the proposal in the Finance Committee for further review — with the alternative being not to give it further consideration — was approved unanimously.
Assembly member Alicia Hughes-Skandijs, before the first vote, said she was not ready to advance the proposal in the official process after only a short period to learn about its provisions.
“I have tons of questions for staff and I’m sure they’ll continue to bubble up,” she said. Also, “there’s a lot of modeling, to the extent that they could model, that I’d like to see from the finance office and I’d like to examine other fiscal policy on this. I’ve seen some that makes me not wild about this idea.”
Hale, responding to Hughes-Skandijs, said allowing the proposal to be introduced by the full Assembly would still allow a full review of its impacts.
“I think that by introducing it and then bringing it back to the committee we would have the ability to discuss it further and have those questions answered,” she said. “The thing that I liked the most about this is the gesture of support that it is for our businesses and for the residents of our community — and even those that don’t have discretionary income for discretionary spending; they go to the grocery store. So I think that there is a lot of positive that could come from this.”
Mayor Beth Weldon said among her concerns, which she hopes staff can answer, is the complexities that might be involved in businesses keeping track of items that are not taxed and those that are, due to the exemptions that exist.
Also expressing concern was Assembly member Greg Smith, who said that due to people likely waiting for the holiday to make purchases “I think we would lose significantly more revenue than just an average day.”
“I feel like maybe our energy should be focused on actual sales tax reform or equity,” he said.
The Assembly has recently considered some broader sales tax exemptions, including exempting non-prepared foods from the tax and possibly offsetting the loss of revenue with a higher summer season tax. However, those proposals have failed to gain traction and Bryson said that’s one of the motivators for his one- or two-day sales tax holiday.
“We can give a win to the entire community for a significantly smaller amount compared to the numbers that we’re talking about here” with a broader tax exemption, he said.
• Contact Mark Sabbatini at firstname.lastname@example.org or (907) 957-2306.