City searches for revenue among tax exemptions

Dropping exemptions could draw $12 million into municipal coffers

Posted: Thursday, February 08, 2001

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The city wants to collect more sales taxes from residents and is looking for it among those who so far have been exempted.

But the Juneau Assembly Finance Committee started its Wednesday meeting by granting another exemption, this one on all aircraft fuel sales at the Juneau Airport. The impact on city coffers could be a loss of between $150,000 to $200,000, according to city Finance Director Craig Duncan.

Out of the $28 million or so or in sales taxes the city collects annually, the amount exempted for airport fuel sales "is spread out and small enough to work out within the budget," Duncan said.

New fuel-flow fees would be established for all users, with the airport keeping the revenue for operational costs. Only large airlines now pay that fee.

Total sales recorded in Juneau amount to $1.1 billion a year, Duncan said, with 47 percent of that amount exempt from sales tax. "That includes all exemptions: senior citizens, residential rentals, caps on goods for sale, construction materials, lobbyists and government exemptions," he said.

Canceled exemptions could bring about $235 million under the aegis of the sales tax, which in turn would add $11.5 million to $12 million to the approximately $28 million now coming into city coffers, Duncan said.

The committee did move toward a gain for the city Wednesday - the removal of a dollar cap on the rental of personal property. As it stands, sales tax applies to equipment rentals of up to $7,500 per month. But the committee - following a Mayor's Fiscal Task Force recommendation - is eliminating the cap. The move promises to net another $100,000 for the city.

The Finance Committee also considered taking the exemption away from residential renters in Juneau.

"I don't think we should go there," said assembly member Marc Wheeler, objecting that the tax would be levied on residents he said are least able to pay.

"It wouldn't bother me to rent and pay taxes," countered member Ken Koelsch.

But the measure was deferred indefinitely after the committee weighed in with their objections.

The committee also took a look at taxing the commissions of small in-home direct sales merchants for products such as Usana, Amway and Avon. Currently sales taxes on sales between seller and buyer are being collected from local merchants. But because of high noncompliance, Duncan recommended the tax be collected at the corporate or national level, as it is in other states. Commissions between the seller and local agent, also currently subject to the sales tax, would be exempt.

According to a survey of committee members directed by Chairwoman Cathy Munoz, "It was clear from this information that the ... committee was interested in moving ahead with several of the (Mayor's Fiscal) Task Force recommendations."

Based on survey results, the committee has directed city staff to draft ordinances to remove sales tax exemptions from casual and isolated sales, such as garage sales; newspaper carriers who collect at time of delivery; transportation of students to and from school; school-sanctioned group activities; and food and beverages sold in school cafeterias.

Exemptions up for consideration at the committee's Feb. 28 meeting are what Duncan called "big-dollar items." Among them is the exemption for senior citizens, which Duncan said costs the city between $700,000 and $800,000. A possible change in that exemption could mean it would apply only to Juneau residents, rather than to residents statewide as it now does, Wheeler said.

Another exemption up for consideration is for sales by certified nonprofit organizations, such as the Girl Scouts.

"It's a lot easier to give an exemption than to take it away," Wheeler said.

Fernand Chandonnet can be reached at fchandonnet@juneauempire.com.



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