New online sales taxes cause confusion for municipalities

Feb 11, 2019


The City of Kenai is working with the borough to smooth out collection of sales tax from online retailer Amazon.
Credit City of Kenai

Municipalities are still trying to figure out the best way to handle new sales tax collection from online retailers. Amazon, most notably, filed with the borough this month to begin collecting and paying sales tax. But that has left a lot of questions, since the zip codes between borough and city residents can overlap.

In Kenai, the sales tax is three percent, same as the borough’s. Council member Tim Navarre said during a recent council discussion he doesn’t want anyone taxed unfairly.

“Soldotna has the same issue. There are areas outside the city of Soldotna that has a 99669 zip code. And I’d like our council to go on record of saying if people are going to collect (sales tax), I don’t want them collecting for the city of Kenai and then those people have to show that they don’t live in the city of Kenai.”

City Attorney Scott Bloom says the administration is working to find a way to more easily separate residences inside and outside of city limits.

“We’ve been trying our best to work with the borough. I anticipate them doing something pretty shortly, as far as introducing legislation at the borough level. One thing the city manager and I have discussed is we think there’s an address numbering system that delineates addresses in the city and outside the city. For example, my address is (five digits) and I’m outside the city. And we think that all city addresses only have three or four numbers designating them. This has all been developing very quickly. If the borough doesn’t come up with solutions that are satisfactory to us, we may have to do something on our own.”

He says customers who do think they’ve been taxed improperly can go to both the borough and Amazon, which the city has had to do.

“Our library placed an order, they were charged the sales tax. They’re a tax-exempt entity. They were able to work with Amazon to get the sales tax removed. Also...the Kenai Peninsula Borough, if citizens have concerns about the jurisdiction that they’re being taxed in, the borough is issuing letters to people on borough letterhead explaining their tax status and what tax jurisdiction they’re in.”

The Alaska Municipal League is also working on the problem of correctly applying sales tax for online retailers. A working group has been established and a rough idea of what the collection system could look like should be finished later this spring.