5.2.3 New Revenues to Fill the Fiscal Gap— Seasonal Sales Tax
Part of the appeal of a seasonal sales tax is that it would shift the cost of paying for public services to non-resident visitors.
Of course visitors do pay state taxes on fuel, alcohol, and tobacco as well as local sales taxes and hotel taxes in many Alaska communities. They also pay a share of local property taxes since businesses pass those taxes on to their customers.
The interesting question is what share of a seasonal sales tax would be shifted to non-resident visitors and what share would be paid by Alaska residents.Based on information from the Alaska Visitor Industry on the number of visitors and their expenditures, we estimate that roughly 7 percent of annual sales are made by non-residents. If all those sales occured during that 5 month summer season during which a seasonal sales tax were imposed, about 15 percent of the tax would be paid by non-residents.
The exact percentage of course depends upon a number of factors, including what items are included in the tax, whether services are taxed, etc. Visitors of course do not make the same purchases as residents.
A seasonal sales tax in effect for the 5 months of the tourist season would generate slightly less than half the amount that a sales tax in effect for the entire year would produce. Thus in order to generate a target amount of revenue, the seasonal sales tax rate would need to be twice that of an annual sales tax.
A seasonal sales tax raises a number of other issues such as: how would resident purchasing patterns be disrupted (shifting of purchases into the winter months), what would be the cost to businesses of administering the tax, could residents receive a credit for seasonal sales taxes paid,.etc.