Sales tax review committee reviews tax cap exemption

The sales tax ordinance review committee made no recommendations to change the boroughs $1200 sales tax cap during its Tuesday meeting.

The committee has been meeting during the past several months to, according to its mission statement, “to simplify the code and collection procedures, and to generate an equal or greater amount of revenue so the borough does not have to decrease services or increase property taxes.”

To do that, the committee is reviewing a list of exemptions contained in the ordinance. Changing the $1200 cap is one of the more controversial exemptions the committee must deal with. Anybody making a purchase or purchases totaling more than $1200 in a 24 hour period is exempt from paying sales tax.

Committee member Fran Jones said the current cap should remain as it is.

“I think we should just leave it alone,” Jones said. “We’ll be more competitive with these other small communities if we just stay where we’re at. I feel like if we raise it we’ll shoot ourselves in the foot.”

Negative public perception of the increase was also discussed. An increase to $1700 was voted down on a ballot two years ago.

In a letter to the committee, Karen Ellingstad wrote, “…because the over $1200 category is the biggest single source of tax exemptions it might be useful to keep this in mind when presenting a possible tax increase to the voters. I don’t think most people are aware how much tax revenue is lost due to this exemption.”

Jody Tow, borough finance director agreed.

“She’s right, the over $1200 comprises about 15 percent of total sales and that’s just what’s recorded. It’s probably a lot more than that.”

Tow also mentioned that an increase by several hundred dollars wouldn’t reflect a substantial increase in sales tax dollars.

“If the sales tax amount, the cap, went to $1,600 the total tax would be $96 which is an increase of $24,” said Tow.

Those most affected by the cap would be commercial fishermen and boat charter operators.

After further discussion, no committee member made a motion to recommend raising the cap.

“I want to point out, too, that the seniors are getting older so there’s going to be more exemptions,” Tow said. “Those are going to increase and the point of the sales tax committee is to keep sales tax level, so what are you proposing to do to even that out?”

The next and perhaps most controversial meeting will be about whether to change senior exemptions. Currently, any resident more than 65 years of age is exempt from paying sales tax.

That meeting will be held January 3 in the assembly chambers and is open to the public.

The committee can only make recommendations to the assembly. The assembly can pass those recommendations, which would then go on a ballot for voter approval.