Web retailers began adding sales tax to purchases online this year. It’s supposed to reflect the local tax rate. Now, the City of Wrangell wants assurances from mega-retailers like Amazon that those sales tax dollars reach city coffers.
Wrangell has one of the highest sales taxes in Alaska: 7 percent. Last year it collected about $2.5 million locally.
But a recent U.S. Supreme Court decision means online retailers need to start remitting sales tax to this Southeastern community – no matter where in the world they might be.
Starting this year, mega-retailer Amazon began adding 7 percent to all purchases shipped to Wrangell. But that money doesn’t automatically appear in the city’s accounts.
The Wrangell Assembly recently amended its code to allow it to accept the sales tax revenue. Now Finance Director Lee Burgess says it’s waiting for Amazon to deliver. He’s reached out to Amazon’s corporate tax office but with limited success.
“Since we haven’t been able to speak directly to any tax experts at Amazon there hasn’t been a lot that’s come out of those conversations, but we have received some correspondence that they do intend to submit information on our sales tax returns,” Burgess said.
The city’s financial quarter wrapped at the end of March. That’s when businesses in town submit their receipts to remit the sales tax they’d collected over the past three months.
Burgess says big online retailers like Amazon need to do the same.
“So we’re kind of just waiting to see and then sort out any issues as we become aware of them when their submission deadline approaches,” Burgess said.
Wrangell’s sales tax code is complex. And there’s also worries that many customers have been wrongfully charged. For example, there’s a sales tax cap at $3,000. And there’s an exemption for things bought for resale. Burgess explains.
“If I’m buying a box full of candy bars I’m going to put in on a shelf and sell candy bars in Wrangell. The tax should be applied when I sell it to the final consumer, not when I buy it from an online company,” said Burgess.
Anyone overcharged should appeal to the company to get their refund. The city’s finance office can provide documentation on how the code works.
Online retailers are required by law to collect local sales tax. That’s because of last year’s Supreme Court decision in South Dakota v. Wayfair. The justices ruled that the home décor retailer had an economic interest in communities where its online customers lived, even if it didn’t maintain a physical presence there.
The court defined economic interest as 200 transactions or $100,000 in purchases. For big outlets like Amazon or Home Depot – that’s most of the country. But for small fry? Burgess says they needn’t worry.
“So if there’s an online vendor that only sells two or three things to people in Wrangell and doesn’t have a store here, doesn’t have a sales person here, presumably they would not be charging any sales tax,” said Burgess.
With the decentralized nature of e-commerce, the city can’t project how much sales tax revenue it stands to receive. But with online shopping increasingly popular in remote Alaska – it’s not peanuts.