City Council unanimously passes sales tax free day in May
Despite the possibility of losing out on thousands in sales tax revenue May 5, 2012 has been declared Tax Free Day by the Petersburg City Council.
The resolution had been discussed, and delayed during the Monday, March 5 council meeting, and it was very close to being delayed again, but was later passed by the City Council.
The resolution's intent is to stimulate commerce by allowing consumers to purchase goods and services, while avoiding the 6 percent local sales tax.
Jody Tow, City Finance Director, voiced concern saying that the finance committee had not had a chance to look at the resolution since last year.
Mayor Al Dwyer asked if the resolution should be held again, until the Finance Committee would have a chance to take a look at it, kicking off a lengthy debate.
“Well, it's getting kind of close to May,” Councilor Sue Flint said, encouraging fellow council members to make a decision one way or another.
During the beginning of the discussion, there seemed to be some confusion regarding the intent of the ordinance. If it was intended to bolster sales in slow months, or help out retailers with additional sales during busier months.
“I thought the original intent was to promote economic activity during a time when it was slow,” said Councilor Rick Braun. “I'm just wondering how much money the city is going to lose.”
Based loosely on Wrangell's tax free day City Manager Steve Giesbrecht estimated the amount the city could lose in a day could between $25,000 to $30,000 in lost sales tax revenue. For its tax-free day, Wrangell allowed retailers to opt-out of the event, and not only does Wrangell have a higher sales tax (7 percent), but also Petersburg generates more sales tax revenue by comparison.
“We will know, once we go through one because when people fill out their tax forms, they'll have to fill out under the exemptions ‘Tax Free Day’,” Tow said. “We'll know exactly how much money that we're losing. Sometimes you just don't know until you try.”
According to Tow, the slowest time for Petersburg retailers is January through March.
“If the intent is to have it in the slowest time, we better have it soon,” said Flint.
“If the intent is to prevent internet sales - I think that's a good thing,” said Councilman Rick Braun. “If we can keep people buying locally instead of buying things in the internet … if it could be structured in such a way that we can get people to buy stuff in town, rather than shop online, then we are getting that money spread around without losing tax dollars.”
“It's just kind of an experiment I guess, what we are doing now,” Braun added.
Local business owner, Ron Loesch spoke to the council on behalf of the Chamber of Commerce and Retail Committee.
“This document outlines what the chamber and retail committee had in mind,” Loesch said referring to the original resolution from the Chamber of Commerce to the City. “One of the highlights is we hope to bring an increase of shoppers from outlying areas, and most shoppers will be in town multiple days. So you will get tax free sales on tax free day. You also have bed tax revenue if they stay at B&Bs, and you will get sales that wouldn't happen otherwise.”
“So, we hope to bring people from outside areas as a result of this. Wrangell has experienced the same thing. People come to town and they spend two or three days, or whatever it takes to get the ferry back,” he added.
“The big deal is people shopping in Juneau and Ketchikan. “I'm continually flabbergasted by local retailers telling me about lost sales opportunities from Juneau and Ketchikan. It's huge,” he said.
“A lot of discussion went into setting this up. We talked to the Wrangell retailers about their success,” Loesch said. “Number one, people were in town; number two, they had money. It's difficult to do a promotion when those two factors don't exist.”
The original ordinance had called for two tax free days in the same calendar year, however Monday night's meeting only approved one day.
According to Tow, the city's 2010/11 sales tax revenue was $2,638,867.