Alaska Sales Tax: Everything You Need for your Business

Practical guide to local duties, taxable articles, registration and collection offered.

Overview

One reason for the move is that Alaska is only one of five states in the U.S. that does not have a statewide sales tax. But local sales taxes are collected by many cities and boroughs, producing a patchwork of rates, rules and who is responsible for collection. For any businesses with a presence in Alaska, or selling to customers in Alaska, being familiar with the structure of local sales and use tax systems, nexus rules and collection obligation requirements is critical for ensuring compliance and avoiding penalties.

Alaska Sales Tax Rates

local governments establish their own alaska sales tax rate, and rates for towns or cities can differ significantly. For several it is 1-2%, although some towns do charge slightly higher rates to fund their local services. Admin burdens are often high and commericial volumes low even for remote or small communities. Since there is no statewide rate, sellers will have to check the tax rates for each local jurisdiction in which they have nexus.

Which Transactions Are Taxable

Goods and services subject to taxes vary by tax jurisdiction. In general, tangible personal property is more uniformly taxable (although certain services, hotel rooms, rental cars or prepared food may also be taxed in some films). There are exceptions, too — basic groceries, prescription medicines or specific agricultural supplies could be exempt in some areas. Sellers should review each jurisdiction’s list of taxable items, in the jurisdictions where they are responsible for collecting tax, to determine if a product or service is locally taxable.

Registration and Collection Responsibilities

In most states, if a business has a physical presence — like a store, office or employees — in a town or borough, it generally must register with the local tax authority there and collect the applicable local sales tax on customers. Application requirements, forms and deadlines are provided by the various jurisdictions.

Nexus based - For remote sellers and service providers, the purpose of when you should register and collect depends on nexus. Nexus can be established through your inventory, employees or representatives in a state or local area. Alaska remote sales tax collection has to a greater degree centered on economic thresholds — sales volume or the number of transactions that necessitate filing. Keeping track of where its customers are and how much it's selling into any given jurisdiction is really important.

Filing and Remittance

Filing and remittance requirements vary between local governments. Filings can be monthly, quarterly or annual, depending on how much tax is collected and certain local rules. There are towns which must file electronically and some that will accept paper returns. Filing or paying late may result in interest, penalties and administrative enforcement so you should consider employing a calendar system along with reminders for each of the jurisdictions where you are registered.

Rate, Districts, and POS Nature

Depending on the delivery address or the point of sale, finding your rate is often a matter of identifying which side of city or borough boundaries you fall on. In-person sales check the location of the transaction, while remote sales usually require checking the customer’s shipping address. The composite rate applies where a single municipality contains more than one tax district or special taxing area. On-demand address validation, and an accurate tax rate look-up for that matter, are therefore pragmatic requirements for sellers to collect the right tax during checkout.

Exemptions, Resale Certificates, and Documentation

Some buyers (such as nonprofits, government entities, or resellers) may be exempt from local sales taxes. In such case, a seller should be sure it obtains and keeps valid exemption (or resale) certificates from the buyer. Records must be maintained in compliance with record-keeping requirements of each individual jurisdiction in order to verify non-collection during audits. Usually, you should hold copies of exemption certificates, sales records and filing confirmations for at least a few years.

Nexus Considerations for Remote Sellers

The sellers who ship into Alaska but do not have a physical presence will still need to follow economic nexus rules. If a seller’s sales into a jurisdiction are over certain thresholds – either by dollar amount or number of transactions, and the district opts in, then the seller must collect and remit local sales tax. Maintaining appropriate sales reports by location of sale allows prompt recognition for when a threshold is reached and registration becomes mandatory.

Administration and Audits

Municipal tax offices conduct their own audits and compliance checks. They generally review your sales records, exemption certificates, remittance histories and filing precision. Getting ready for audit involves keeping organized and easily accessible records, as well as documented policies about whether tax was collected or not on specific items. Where differences exist, active dialogue with the tax authority generally yields better results than silent resistance.

Practical Tips for Compliance

• Update your list of the tax authorities in which you are liable to pay taxes and their latest local tax scales.
• Please send us your exact shipping and billing address in oder to determine correct tax jurisdiction at the time of purchase.
• File timely, once nexus is triggered under local rules to avoid back penalties.
• Gather and hold exemption certificates with back up documents for exempt sales.
• Establish a filing calendar for each jurisdiction with due date reminders and files.
• Continuously monitor sales groups to barter a threshold for the acquisition of remaining cities.

Small Businesses and Simplified Procedures

A few states have simplified filing or low seller thresholds available to ease compliance. Small businesses should look into local filings designed for lower sales volume, or combined filing systems if available. Knowing these choices can save time and reduce overhead.

Conclusion

Sales tax in Alaska can be complicated because there is no statewide sales tax; instead, it falls to many local governments to set rates and regulations. Whether you have physical presence in Alaska, sell remotely to its residents or both, consider your nexus there, research which products and services are taxable locally (and any exemptions) and register with local authorities before establishing compliant recordkeeping processes and filing methods. Being proactive with alaska tax collection responsibilities are the best way to keep your business out of trouble, avoid fines and conflicts with Alaska’s multiple local taxing jurisdictions.