Legislature(2003 - 2004)

04/09/2003 09:05 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     CS FOR SENATE BILL NO. 106(TRA)                                                                                            
     "An Act relating to studded tires; and providing for an                                                                    
     effective date."                                                                                                           
This  was the third  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair  Green moved to  adopt CS HB 106,  Version 23-GS1127\V,  as                                                            
the working draft.                                                                                                              
There being  no objection, the committee  substitute was  adopted as                                                            
the working draft.                                                                                                              
Co-Chair Wilken explained  that the Version "V" committee substitute                                                            
incorporates the word "new"  into the language on page 1, line 8, of                                                            
Section 2, as follows.                                                                                                          
     Sec. 43.98/025. Tire fees. (a) A fee of $2.50 a tire is                                                                    
     imposed on the retail sale of new tires for motor vehicles                                                                 
     designated for use on a highway.                                                                                           
Co-chair Wilken  noted that additional  language is incorporated  on                                                            
page 2, lines 14 through 19, as follows.                                                                                        
     (g)  The fees  imposed  in this  section  do not  apply to  the                                                            
     following  tires and  [or] services if  the purchaser  provides                                                            
     the seller  with a certificate  of use on a form prescribed  by                                                            
     the Department:                                                                                                            
        (1) tires or services sold to federal, state, or local                                                                  
        government agencies for official use; or                                                                                
        (2) tires for resale.                                                                                                   
Senator  Bunde asked for  further clarification  regarding  the tire                                                            
for resale process, as  he understands this language to apply to the                                                            
sale of used  tires rather than to  a store purchasing tires  from a                                                            
distributor for resale.                                                                                                         
Co-Chair  Wilken detailed  a situation wherein  an individual  would                                                            
purchase  tires for their  vehicle from a  service station  that the                                                            
service station  had purchased from, for example,  a Sears store. He                                                            
stated that the intent  of this language is to clarify that the tire                                                            
tax would  be charged  exclusively  to the customer  at the  service                                                            
station  rather than  to the service  station  purchasing the  tires                                                            
from the Sears store.                                                                                                           
LANDA BAILY,  Special Assistant to  the Commissioner, Department  of                                                            
Revenue, concurred.                                                                                                             
Co-Chair  Wilken  and Ms.  Baily  established  for  Senator  Bunde's                                                            
benefit that  the tax would  be implemented  at the point of  retail                                                            
sale rather  than at the  wholesale level  to avoid an inflation  of                                                            
the original purchase price.                                                                                                    
Senator Hoffman commented  that the original intent of this bill, as                                                            
introduced  by  Governor  Frank Murkowski,  was  to  levy  a tax  on                                                            
studded  tires to  offset  "the extensive  damage"  they inflict  to                                                            
"paved highways."  He asked for verification  that studded  tires do                                                            
create damage.                                                                                                                  
JOHN   MACKINNON,  Deputy   Commissioner   of   Highways  &   Public                                                            
Facilities,  Department  of  Transportation  and  Public  Facilities                                                            
responded  that  the  Department  "conservatively"   estimates  that                                                            
studded  tires  are responsible  for  approximately  $5  million  of                                                            
damage to roadways  annually due to  "excessive wear that  the studs                                                            
Senator Hoffman  voiced that were this the logic for  implementing a                                                            
tax on studded  tires then  it should be noted  that of the  seventy                                                            
communities  in District S  that he represents,  less than  ten have                                                            
paved highways.  He voiced the understanding that  the intent of the                                                            
tax would be  to recoup "the tremendous"  expense incurred  annually                                                            
to  repair  studded  tire damage  to  the  State's  paved  roadways.                                                            
Therefore, he contended,  while the bill is well intended, it should                                                            
not be a broad  tax unless the intent is for "general  maintenance."                                                            
Mr. Mackinnon  agreed that  the original intent  of the bill  was to                                                            
specifically  offset road damage caused  by studded tires;  however,                                                            
he continued,  "it has evolved" to  include general maintenance  for                                                            
the State's paved roads.                                                                                                        
Senator  Hoffman  declared  that  while  it may  have  evolved,  the                                                            
original intent of the  bill was valid. He supported "the concept of                                                            
the people  who  benefit from  a service"  should pay  the costs  of                                                            
providing that  service and, in addition, "the people  who cause the                                                            
damage  should pay",  and he  noted that  the Legislature  has  been                                                            
addressing these situations  through cost-saving measure discussions                                                            
and legislation.  He contended that State road maintenance  in rural                                                            
areas of the  State is oftentimes  "non-existent," and he  furthered                                                            
that  some  rural areas  do  not even  require  their  residents  to                                                            
acquire a driver's  license. He stated that "this  tax is very, very                                                            
broad  and  that  residents  in rural  Alaska  end  up  paying  for"                                                            
services they  might not receive from the Department,  or "where the                                                            
State has little  presence and if  they do have presence,  it is for                                                            
Mr. Mackinnon  acknowledged Senator Hoffman's comments;  however, he                                                            
pointed out that although  road maintenance might not be provided in                                                            
some  rural areas,  Department  personnel or  Department  contracted                                                            
personnel maintain rural airfields.                                                                                             
Senator Hoffman  concurred  but stressed that  studded tires  do not                                                            
incur any damage  to State roads or to the airports  in those areas.                                                            
Mr. MacKinnon agreed.                                                                                                           
Co-Chair  Wilken asked  the amount  of  money the  State spends  for                                                            
rural airport maintenance.                                                                                                      
Mr. MacKinnon  replied that  he did not have  that information,  but                                                            
could provide it.                                                                                                               
Senator Bunde  asserted that this version of the bill  applies a tax                                                            
on all tires, and "is an  opportunity for all Alaskans to contribute                                                            
money to the general  fund to assist in paying for  all the benefits                                                            
they receive."                                                                                                                  
Co-Chair Green  moved to report CS SB 106 (FIN) from  Committee with                                                            
individual recommendations and accompanying fiscal note.                                                                        
There being  no objection, CS SB 106  (FIN) REPORTED from  Committee                                                            
with  a new  $72,200 fiscal  note,  dated April  8,  2003, from  the                                                            
Department of Revenue.                                                                                                          

Document Name Date/Time Subjects