Legislature(2003 - 2004)
04/09/2003 09:05 AM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 Committee. 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 cause." 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 aviation." 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.