To protect local brick and mortar, Haines to consider remote seller tax

Full shelves at the Haines Home Hardware store. February 22, 2020. (Claire Stremple/KHNS)

The front counter at Haines Home Building Supply has a steady stream of customers on a weekday afternoon.

Employee Robert Adams spoke to a customer about his dog food options on a snowy Thursday. Their price, he said, is a just a little better than what you can find online.

“And we have it!” he said.

Store manager Glenda Gilbert said that having items on hand is what has kept the hardware and building supply store in business for the last half century and counting.

“My mom and dad started the business 51 years ago,” she said.

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The two-story building is crowded with neatly organized products from power tools to ladders. Gilbert keeps a two-week supply of goods in stock in case of shipping delays and the store is open 360 days a year, but even so, Gilbert said they lose business to online retailers.

“I feel like Amazon and internet sales are affecting our sales. But I’m hoping that, you know, through the chamber and other, you know, encouragement that local people will look at the local businesses first before they go on the internet,” said Gilbert.

Some online retailers have been voluntarily paying sales tax in Haines since last year. On Tuesday the assembly will vote to adopt the state’s Remote Sellers tax code and start collecting sales tax from almost all online sales. The aim is to level the playing field between online retailers and local brick and mortar stores.

That trickle of sales into internet outlets rather than local stores is part of why the Haines Borough has been proactive about adopting the Alaska Remote Sellers Sales Tax Code to enforce local sales tax collection on online purchases. The other part is the sales tax revenue.

Related: Alaska communities establish new plan to collect sales tax from online vendors

Currently, only a handful of online retailers pay taxes in Haines, but that handful accounted for about $70,000 in tax revenue last year. If the assembly adopts the code, all online retailers who do a certain amount of business in the state must pay local sales taxes. That’s because it puts the borough in compliance with a supreme court ruling—South Dakota v. Wayfair—that says so. As long as it doesn’t cause undue burden to the seller.

“You can’t have 106 different tax structures in a state and not cause undue burden to remote sellers,” said Nils Andreassen, the Executive Director of the Alaska Municipal League. He says undue burden is the rub for Alaska because there’s no statewide sales tax. Instead each community has its own tax code. Textbook undue burden.

“So the benefit to participating in the commission is that the Commission meets Wayfair’s guidelines. And the only way to see and be able to enforce compliance with your sales tax rates with your sales tax code is by joining the commission,” he said.

The commission wrote the new statewide tax code for remote sellers. It creates a one-stop shop for online sellers to register and pay taxes. Haines joined in November of last year. There are fees to participate, and some initial software investment costs, but the Haines Borough estimates they could double or even triple the amount of online sales tax they collect. The extra income is a boost for the community, but the real intent is to stop giving a 5.5% cost advantage to online retailers.

The assembly could choose not to adopt the code. Skagway has opted not to participate this year. Mayor Andrew Cremata says that’s a strategic decision—the municipality will see how places like Haines fare before joining.

Back at Haines Home, Gilbert says she hopes the new code will bring some sales back to the store. But she’s confident that Haines Home is still relevant in the age of online shopping.

“You know, in a snowstorm, we’re here, we’re open, and if you need a snow shovel, we’re here, you’re not going to be able to go out to the airport and pick up your snow shovel because the planes didn’t fly,” she said.

If the assembly adopts the remote sellers sales tax code on Tuesday, remote sellers will have 30 days to come into compliance and begin paying taxes to the borough. Haines could see new tax revenue as soon as April.