By WIN GRUENING
Our Juneau Assembly’s vote to apply to the Local Boundary Commission for an expansion of borough land area (mostly on Admiralty Island) met with something less than universal approval.
To be fair, the Assembly was merely pursuing the commission’s own recommendation from the 1990s that described what our “model borough boundaries” should look like.
But testimony prior to the vote was universally in opposition and no Assembly member spoke in support. Presumably, the areas proposed for annexation may someday be a source of revenue but today they are primarily sparsely populated wilderness outposts with cabins and campsites only reachable by boat or airplane.
Property owners are naturally asking what benefits would accrue to them by paying taxes and if Juneau building codes and other government regulations would suddenly hijack their wilderness experience.
City leaders have responded that regional services provided by Juneau’s hospital, harbors, and the airport, for example, need to be supported by owners of property using them – even if the property isn’t located in Juneau proper.
I may be proven wrong, but, from the city’s standpoint, this seems like an uphill battle with little reward to show for it. The revenue gained appears marginal and the cost of appraising wilderness properties may eclipse whatever revenue is received.
Why not concentrate on other ways to raise revenue closer to home?
OVER 40 EXEMPTIONS TO SALES TAX
One area to examine is our borough sales tax code exemptions. Other than the highly publicized modification of the senior sales tax exemption several years ago, there has been no serious attempt recently to scrutinize the various sales tax exemption categories – currently numbering over 40.
Exemptions that made sense when drafted years ago may no longer be fair or equitable and may not be serving a legitimate public purpose. Exemptions not commonly offered by most other state and/or municipal entities should be targeted first – especially if significant revenue is involved.
Exemptions of sales where the amount of revenue is minor, or where collection costs outweigh any gain need not be modified. But to the extent we can selectively prune exemptions, this will benefit all residents as it lessens the need to consider raising our sales tax rate in the future.
Last year, Deputy Mayor Jerry Nankervis started the ball rolling by asking the City Finance Director, Bob Bartholomew, to study the exemption currently being applied to charitable organizations. He noted the exemption, as written, was overly generous in that it not only exempts sales to charitable organizations but also sales by charitable organizations – even if the buyer is not tax exempt.
The wording of the exemption in borough code reads – in part – this way:
CBJ 69.05.040 Sales, services and rentals to a buyer, or made by a seller, organized and administered solely by an organization that has a current 501(c)(3) or 501(c)(4) exemption ruling from the Internal Revenue Service…provided this exemption applies to sellers only if the income from the sale is exempt from federal income taxation.
As Nankervis correctly noted, this allows some non-profit entities to sell goods and services – sometimes competing directly with private businesses – without having to collect sales tax from the customer.
Examples of this are the Sealaska Heritage Institute gallery downtown and the Discovery Southeast gift shop at the Mendenhall Glacier Visitors Center. Both sell products to thousands of tourists visiting Juneau each year in direct competition with local businesses selling the same or similar items.
There are other examples of organizations that could be collecting sales taxes from willing buyers. After all, most visitors expect to pay sales tax when purchasing jewelry, art, books or souvenirs. It’s hard to believe the 5 percent sales tax would make a bit of difference to the buyer.
City staff is now surveying all non-profits in Juneau and notified them of the requirement to file an annual sales tax return. The data from those responses will be compiled by this month and allow initial rough estimates of exempt sales and possible revenue sources.
Stay tuned for a subsequent column following up on that report as well as additional information comparing this exemption to those found in other cities and states.
Win Gruening was born and raised in Juneau and retired as the senior vice president in charge of business banking for Key Bank in 2012. He is active in civic affairs at the local, state, and national level.