Call it the Etsy tax. Or the Amazon tax — a tax on companies that provide a marketing and logistics platform for small businesses across America.
The Senate Rules Committee’s Senate Bill 113, the proposed tax on the profits of internet-based companies, was heard by the House Finance Committee on Friday. Its presenter, Sen. Bill Wielechowski, told a whopper.
This legislation would amend the state’s corporate income tax code to include out-of-state corporations that are conducting digital business with Alaskan consumers. Think Amazon and Etsy, two online companies that allow small businesses all over the world to have access to the American markets. Whatever portion of profit that Amazon might make from Alaska would be taxed by Alaska.
Alaskans depend heavily on Amazon and other digital platforms to get the goods they need — from medications to top soil, things that are hard to find in rural communities, especially.
But many Alaskans use Amazon Prime, which allows them free shipping. That means the sales to Alaska have a lower profit because people in Nome or Galena can buy top soil from out of state and have it flown in, with the shipping costs all but erasing any company profits. It’s possible that for many Alaska sales, the Lower 48 retailer barely breaks even. This tax could mean that companies start refusing to ship to Alaska.
The bill is projected to generate between $25 million and $65 million annually in new revenue for the State of Alaska — an amount that was once a rounding error in the budget.
SB 113 proposes shifting from the current “cost of performance” method to a “market-based sourcing” approach. This change would tax businesses based on the location of their customers rather than the location of the business itself.
For highly digitized businesses, defined as those deriving 50% or more of their sales in Alaska from intangible property or services delivered electronically, the bill suggests using a single sales factor formula. This method focuses solely on sales to determine tax liability, excluding property and payroll considerations.
In presenting his bill to House Finance Committee on Friday, Sen. Wielechowski said it was the same idea that Gov. Mike Dunleavy Administration had proposed in 2021, when he said he would back a bill that taxed out-of-state businesses doing business in Alaska, if the Legislature took the lead. He’s taking the lead.
“I can’t take credit for this bill. This was not my bill. This was proposed by the Dunleavy Administration a couple of years ago,” Wielchowski said. “And they proposed this idea to the fiscal policy working group.”
It’s false that the governor said he supported this concept. His former Revenue Commissioner Lucinda Mahoney had discussed such a tax at a forum once, but the governor never signed on.
In addition, the Department of Revenue has no understanding of how much this would bring in until FY 28. Wielechowski said the amount is as much as $65 million but it may be closer be $20 million. Few legislators appear to have a solid understanding that Amazon is a platform and that many of the sellers on the platform are very small companies with different taxes that apply to them, depending on their location.
The bill already passed the Senate on a vote of 15-4, with senators casting their votes:
Yeas: Jesse Bjorkman, Matt Claman, Mike Cronk, Forrest Dunbar, Cathy Giessel, Elvi Gray-Jackson, Lyman Hoffman, Scott Kawasaki, Jesse Kiehl, Kelly Merrick, Donny Olson, Bert Stedman, Gary Stevens, Loki Tobin, Bill Wielechowski, and Rob Yundt.
Nays: Shelley Hughes, James Kaufman, Robert Myers, and Mike Shower.
Wielechowski’s bill also increases taxes on oil and gas by changing the formula used to determine what portion of a business’ income is subject to Alaska’s corporate income tax. His changes target how oil and gas producers apportion their income to Alaska by changing the term “business income” to “apportionable income.”
Although the changes are possibly modest for the oil and gas sectors, there are other bills still in the queue by the Senate’s Democrat-led majority that would have a greater impact on Alaska’s producers and job creators, notably:
Senate Bill 112: Proposes reducing the maximum per-barrel oil production tax credits from $8 to $5. The reform aims to create a fairer and more sustainable tax structure for the state and is projected to raise approximately $400 million in new revenue per year. This bill is also sponsored by Sen. Wielechowski.
Senate Bill 92: Applies corporate income taxes to certain S-corporations in the oil and gas sector, specifically targeting companies that make over $5 million in taxable income. Called the Hilcorp tax because it targets one company, the measure is expected to generate as much as $175 million in revenue. It was originally sponsored by Sen. Rob Yundt of Wasilla, who later took his name off the bill. SB 92 awaits a hearing in Senate Finance Committee after passing Senate Resources Committee.
It’s unclear if food and medications purchased through Amazon would be considered part of the taxable base of businesses in the SB 113 tax, which if enacted, would take effect on Jan. 1, 2026.
SB 113 seems destined to pass the House, and it appears to have several Republicans supporting it, as they did in the Senate, as it is seen as an “easy” tax that will have no consequence.
However, there may be consequences unforeseen, such as the choice sellers can simply make to not do business with Alaska. Amazon sellers can choose not to sell to the 49th state due to high shipping costs. All they need to do is configure their shipping templates in the Seller Central tab to exclude Alaska by unchecking the state or setting prohibitively high shipping rates for Alaskans. This is sometimes done to avoid losses on heavy or bulky items, where shipping costs to remote areas can exceed profits.
If sellers, who will have the tax passed along to them, start reconsidering their interest in trading in Alaska, this may be one of the unintended consequences of Wielechowski’s Etsy Tax.
I have wondered if Amazon built a warehouse in Anchorage to ship things here, and then use our subsidized USMail to the bush.
I have lived in the bush and Amazon Prime was a blessing. It seems we have recently elected some Republicans that love the word tax! We ran many small oil companies out of AK with our unstable tax and now we want to go back on our word and drive one of the biggest out. Just don’t understand what these tax lovers don’t understand! Oh I get it I have to pay for their out of control spending on education!!
Maybe a good question is: what should happen when a representative lies on record to their constituents or to their colleagues while presenting a bill in order to influence how others vote? Is it possible for a representative to truly represent you while simultaneously lying to you?
Have we completely given up and accepted that Alaska’s representatives no longer find it morally repugnant to lie? Can a bill really be good for the public, the people our government is supposed to serve, if it requires dishonesty to get it passed?
Senator Bill Wielechowski is, or was, an attorney. I think he knows when he’s lying or intentionally misleading the public. If this turns out to be true, shouldn’t the public call out the lie and demand his resignation?
No truth needs a lie to tell it.
Rather making Alaska a place for companies to invest our legislators want to tax them all out of Alaska. When will legislators realize that taxes do two things increase government and steal potential wealth from the private citizen. This is absolutely harmful to the state and it’s citizens. Mark my words this goes through not only will companies go elsewhere the people will leave the state.
Trust me, they know! But they also have a mandate to continue growing, no matter the damage to the citizen or the economy. And where will they get the money to grow if you are saving, investing, and buying products to improve your life? After all, you did the work to earn the money, which is a storage vessel for excess labor. But what about their cut? After all, you get so much value out of their growth, deception, and corruption. Oh, and don’t forget the loss of economic sovereignty — yeah, that’s in there too.
So the next greatest idea is to bite the hand that feeds us? Sadness. Giving me more and more reason not to live here anymore 😢😒🤦♀️
Wielechowski is hardly the paragon of truth. At some point, some day, it will all catch up to him.
He never met a way to rob the public that he didn’t want toimpose, by hook or crook, as needed
Whatever logic supports tariffs on China to protect American businesses, doesn’t a tax on mail-order companies (if effective and constitutional) similarly protect Alaskan businesses with brick-and-mortar storefronts? I would be interested to hear Mike Prax’s perspective on this one.
Thanks for this Suzanne. Most don’t understand that Amazon is primarily an online marketplace. Their profits largely come from listing fees, and advertising fees they charge small business sellers. Individual sellers pay all the shipping for their products to ship “free” to Prime members. Since Amazon doesn’t currently pay any Corporate Income tax in Seattle where they’re based, SB113 will have an impact on their bottom line. Anyone familiar with big business and half a brain will see that this bill will certainly increase fees for sellers. Say goodbye to your “free” shipping on dog food, tires, furniture and anything else substantial. I wouldn’t be surprised if Amazon cranks up its Prime membership cost, or drops it all together for Alaskans as sellers will no doubt be impacted. In the end, Alaskans lose.
A bad idea.
The bill doesn’t address the state taxes that are already in place on these transactions. My company uses the Turo platform and pays 10% of gross sales to the state plus 3% of gross to the city and 3% of gross to the Borough. If this bill moves forward what ever percentage they charge the platform will be passed on to subscribers like me and customers like you. The 16% does not include taxes paid on supplies and fuel to provide products and services. The result double / triple taxation on the transaction in excess of 16%.
This is a bad idea until the SOA provides a fair and equitable tax structure to Alaskan businesses.
A bad idea.
The bill doesn’t address the state taxes that are already in place on these transactions. My company uses the Turo platform and pays 10% of gross sales to the state plus 3% of gross to the city and 3% of gross to the Borough. If this bill moves forward what ever percentage they charge the platform will be passed on to subscribers like me and customers like you. The 16% does not include taxes paid on supplies and fuel to provide products and services. The result double / triple taxation on the transaction in excess of 16%.
This is a bad idea until the SOA provides a fair and equitable tax structure to Alaskan businesses.
Are they trying to drive people and businesses out of this state?
Unfortunately, this tax will also have unforeseen negative affects on other businesses like Deliver2Alaska.com, who’s sole purpose is to try and save shipping costs for Alaskans (or sometimes even make it possible for Alaskans to purchase items that “Don’t Ship to Alaska”). Now instead of being able to ship packages for Alaskans at a savings with their online presence in Idaho, the customers will get taxed for saving on shipping costs. Can this world get any more insane ?? Apparently that goes without saying. Alaskans are destined to get “Hosed” from without and now “Hosed” from within.
Either way we Alaskans will lose to higher taxes everyhere.