Summary: This blog post provides an overview of Alaska’s new sales tax collection laws and what steps you can take to minimize your sales tax liability.
Wait a Minute, I Thought Alaska Didn’t Have Sales Tax?
Alaska is widely known for not having a state-level sales tax. In fact, they are the “A” in the N.O.M.A.D. acronym, which has been an easy way to remember the states that don’t have a state-level sales tax (that’s short for New Hampshire, Oregon, Montana, Alaska, and Delaware).
But just because Alaska doesn’t have a state level sales tax, doesn’t mean that there isn’t any sales tax at all. And since that probably sounds a little confusing, let’s break it down a bit further.
When we look at sales tax rates, we typically have to consider multiple taxing jurisdictions including the State, County, City, District and any other Special Taxation Districts. When you add the individual sales tax rates for each of the localities, you get the total sales tax rate due on a transaction. In other words…
Total Sales Tax Rate = State Rate + County Rate + City Rate + District Rate + Special Taxation District
Alaska is unique because it does not have a state sales tax, which means their State Rate is equal to 0%. Localities within Alaska, however, do have sales tax. And as many Alaskans can confirm, sales tax has been alive and well for many years.
A Physical Presence is No Longer Required for Alaska’s Local Sales Tax
The issue for remote sellers is that up until recently, you needed a physical presence within the state in order to have a sales tax collection responsibility. All of that changed in 2020 when the Alaska Remote Seller Sales Tax Commission formed and updated their rules.
The updated rules say that (among other things) any business that has either of the following is required to collect and remit sales tax for any of the cities that are part of the Alaska Remote Seller Sales Tax Commission:
- Made over $100,000 in sales in the previous calendar year
- Made 200 transactions in the previous calendar year
Part of what makes this entire situation tricky is that not all cities in Alaska are members of the commission. What this means is that you might need to collect and remit sales tax in some, but not all, local jurisdictions. If you meet Alaska’s economic nexus threshold outlined above, you will need to collect and remit sales tax in all of the localities that have adopted the unified code. You can find a full list of cities that have adopted the unified code on the Munirevs portal by clicking here.
In a recent notice from the ARSSTC, the department noted the following:
“In the months to come, we expect dozens of additional local governments to adopt the Code. Sellers will be notified on a rolling basis of their effective dates, and returns will become allowable as they adopt. The Commission expects that by the end of this fiscal year – June 30 – jurisdictions responsible for the majority of sales tax collected in Alaska will have adopted the Code and expect compliance.”
If you have any questions about how to register or submit returns and remittance in Alaska, look up rates and exemptions, or need guidance at all, then you can contact the ARSSTC at email@example.com or by phone at (907)790-5304.
What Should You Do If You Crossed Economic Nexus Thresholds in Alaska?
Step 2: Enable Tax Collection Settings in Applicable Cities. You will need to ensure you are collecting sales tax in your accounting, invoicing, e-commerce, or other order platforms. Make sure to take into account whether or not your products are taxable in Alaska.We can handle this as part of our Done-for-You Sales Tax Service. You can also look-up a sales tax rate using the free Alaska Sales Tax Lookup tool. Please note that some cities’ rates go up or down depending on the season. For this reason, we suggest that you use a live tax look-up tool.
Step 3: Submit Sales Tax Returns in Alaska. Once you are collecting sales tax, you will be obligated to submit sales tax returns. We can handle this for you as part of our Done-for-You Sales Tax Service.
Here Is Alaska’s Specific Code on When and How to Collect Sales Tax
Section .040 – Obligation to Collect Tax – Threshold Criteria
A. Any remote seller or marketplace facilitator must collect and remit sales tax in compliance with all applicable procedures and requirements of law, provided the remote seller or marketplace facilitator has met one of the following Threshold Criteria (“Threshold Criteria”) in the previous calendar year:
- The remote seller’s statewide gross sales, including the seller’s marketplace facilitator’s statewide gross sales, from the sale(s) of property, products or services delivered into the state meets or exceeds one hundred thousand dollars ($100,000); or
- The remote seller, including the seller’s marketplace facilitator, sold property, products, or services delivered into the state in two hundred (200) or more separate transactions.
B. For purposes of determining whether the Threshold Criteria are met, remote sellers or marketplace facilitators shall include all gross sales, from all sales of goods, property, products, or services rendered within the state of Alaska.
Section .230 – Sellers With a Physical Presence in the Taxing Jurisdiction
A. Sellers with a physical presence in a Taxing Jurisdiction and no remote or internet-based sales shall report, remit, and comply with standards, including audit authority, of the Taxing Jurisdiction.
B. Sellers with a physical presence in a Taxing Jurisdiction that also have remote or internet-based sales where the Point of Delivery is in a different Taxing Jurisdictions shall (i) report and remit the remote or internet sales to the Commission; and ii) report and remit the in-store sales to the Taxing Jurisdiction.
C. Sellers with a physical presence in a Taxing Jurisdiction that also have remote or internet-based sales where the Point of Delivery is in the same Taxing Jurisdictions shall report and remit those remote sales to the Taxing Jurisdiction.
D. Sellers and marketplace facilitators that do not have a physical presence in a Taxing Jurisdiction must report and remit all remote sales to the Commission.
E. For all purchases the tax rate added to the sale price shall be as provided in the Taxing Jurisdiction’s sales tax code, based on point of delivery.
F. A marketplace facilitator is considered the remote seller for each sale facilitated through its marketplace and shall collect, report, and remit sales tax to the Commission. A marketplace facilitator is not considered to be the remote seller for each sale or rental of lodging facilitated through its marketplace.