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FAIRBANKS - A Superior Court judge has ruled the Fairbanks North Star Borough's new 5 percent alcohol tax is legal, quashing an effort to kill it.
The tax was approved by about 9,000 voters in October. It becomes effective July 1.
The ruling Friday was a response to a lawsuit filed by the Interior Cabaret, Hotel, Restaurant and Retailers Association. The group contends the tax unfairly and illegally targets the liquor industry.
"We are just one industry," said association president Jim O'Connor, who owns the Refinery Lounge in North Pole.
"Instead of having a general sales tax, they're going to be picking at different things," O'Connor said, referring to a recent proposal by borough Mayor Jim Whitaker to tax tobacco products.
The liquor industry association will consider appealing to the Alaska Supreme Court, O'Connor said.
In practice, the alcohol tax applies to beer, wine and liquor sold outside the city of Fairbanks, where there already is a 5 percent alcohol tax.
In the city of North Pole, where there is a 3 percent general sales tax, the borough will collect a 2 percent tax on alcohol.
Three Assembly members proposed the tax to make competition between alcohol sellers inside and outside city limits more fair and to boost the borough coffers through a source other than property taxes.
The alcohol tax is expected to generate between $1 million and $1.5 million annually.