Corporate tax update, passed by Alaska Senate, could generate millions for dividends, services

A change to Alaska’s corporate income tax structure is expected to add as much as $65 million per year to the state treasury by diverting money from other states.

The Alaska Senate voted 16-4 on Tuesday to approve Senate Bill 113, which clarifies that online sales to Alaskans amount to business activity within the state.

If passed by the House and approved by Gov. Mike Dunleavy, it would be the state’s first new revenue-generating law in years.

Sen. Bill Wielechowski, D-Anchorage and the sponsor of the bill, said that without the change, businesses can say that the location of an online sale is a server farm or warehouse outside of the state, making it ineligible for Alaska taxation.

Passing the bill is a step toward resolving a major budget deficit, he said, adding that the change won’t have an impact on Alaskans and isn’t a tax increase. Thirty-six other states have adopted similar tax rules.

“It’s about as close as you can get to a unicorn bill to raise money for the state of Alaska,” he said during a news conference on Tuesday.

“It’s a bill that doesn’t raise taxes on Alaskans, doesn’t raise taxes on Alaskan businesses. It’s not going to cost any more simply changing the structure of our corporate income tax. It will probably, quite frankly, shift money from other states to the state of Alaska, and so it’ll be a unicorn. It’s kind of a rarity. There’s probably not too many of these out there,” Wielechowski said.

Sen. Matt Claman, D-Anchorage, said the bill is necessary to modernize the state’s tax system.

“You can get pretty much anything online and it comes to your door, and many of these companies that are doing business here in Alaska pay a little or no corporate income tax due due to what has become, I think, an outdated structure for how we assess companies that are primarily located out of state,” he said.

Opposition came from four Republican members of the Senate minority, including Sen. Shelley Hughes, R-Palmer, who said she believes it is inappropriate to pass a new revenue measure without also considering changes to the state’s spending cap.

Senate Minority Leader Mike Shower, R-Wasilla, also voted against the bill, saying he doubts Wielechowski’s claims and believes costs will be passed to Alaskans.

“Somewhere, somebody’s paying more money if we’re raising taxes. The businesses are not charities,” he said.

SB 113 has been referred to the House Finance Committee for further hearings.