Legislature(2015 - 2016)SENATE FINANCE 532
03/25/2015 09:00 AM Senate FINANCE
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SENATE BILL NO. 33 "An Act relating to remittance of tire fees; and providing for an effective date." 9:05:36 AM ANNA KIM, TAX DIVISION, DEPARTMENT OF REVENUE, discussed SB 33. She explained that the bill changed the due date of the tire fee return and payment from 30 days (following the calendar quarter) to the last day of the calendar quarter in which the tires were sold or studs were installed. The rationale for the bill was to mitigate taxpayer confusion that was a result of quarterly tax due-dates that fell prior to the last day of the month, and had resulted in late fees and penalties. Ms. Kim went over the legislation, explaining that Section 1 changed the due date of the tire fees. Currently for the months of July, October and January the fees were due on the 30th of the month; the bill would set the due date on the last day of each month. She explained that Section 2 aligned the payment dates used to determine the timely pay credit (compensation to taxpayers for timely collection and remittance) with the new dates in Section 1. She specified that the timely pay credit was equal to 5 percent of collected taxes, not to exceed $900 per quarter. Section 3 applied to the due date, which would be changed to the first calendar quarter after the effective date of the act. Section 4 indicated that the act would take effect immediately. 9:08:10 AM Ms. Kim stated that the attached fiscal note was zero, and furthered that there were no new positions proposed. She clarified that there would be an approximate $5,000 reduction from a change in revenue due to an estimated $2,500 increase in the timely pay credit and an estimated $2,500 less in penalties collected. Vice-Chair Micciche noted that he had a constituent that commented on the bill, and asked Ms. Kim to verify if there was an increase in the per-tire fee associated with the legislation. Ms. Kim responded in the negative. Co-Chair MacKinnon asked if the bill addressed a quarterly fee. Ms. Kim answered in the affirmative. Co-Chair MacKinnon observed that the state was collecting about $1.3 million in tire fees, and that the penalties and interest had gone down over time. Ms. Kim agreed. Co-Chair MacKinnon wondered if the administration still believed there was a reason some taxpayers were not aware of the current fee timetable. Ms. Kim discussed education and outreach with taxpayers that resulted in a reduction in penalties and interest over time. She thought the legislation was a simple administrative change to bring more efficiency to the system. Co-Chair MacKinnon shared that in 2012 the penalties in interest for the tire fee was $20,026, in 2013 it was $18,435, in 2014 it was $3,477; and reflected a significant drop in penalties to taxpayers. She commended the administration for its work. 9:10:42 AM Co-Chair MacKinnon asked for clarification as to what would happen if the last day of the month fell on a Saturday or Sunday. BRANDON S. SPANOS, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE (via teleconference), cited Title 43.05, which allowed for the payment due date to be extended to the next business day if it fell on a weekend or holiday. He added that the significantly lower penalty and interest fees from 2014 had been due to the department tax auditors being completely engaged in developing a new revenue management system and having no time to complete audits. Co-Chair MacKinnon wondered if the bill was necessary. Mr. Spanos explained that there was still an occasional taxpayer that expressed confusion with the current due dates. He expressed the need for alignment with other quarterly tax filings. 9:12:48 AM Senator Hoffman asked about the justification for the tire fee, and wondered if other states employed the same fees. Mr. Spanos was not aware of the fees other states employed. He explained that the tire fee (for studded tires specifically) was created to assist in revenue for the deterioration of roads. He added that the fee for studded tires was twice that of regular tires. Senator Hoffman asked if there was a differentiation between the fees of studded and regular tires. Mr. Spanos explained that the $2.50 new tire fee applied to all new tires sold, with an additional $5 fee for studded tires. Senator Hoffman commented that the most significant damage to roads in Alaska was due to studded tires, and the expense ran into the tens and possibly hundreds of millions of dollars. He wondered how tire fees in Alaska compared to other states. Mr. Spanos agreed to get back to the committee with the information. Ms. Kim interjected that the classification of studded tires in the current statute was defined by "heavy studs" that weighed 1.1 grams or more. She concurred that the department would provide information about how Alaska compared to other states. Vice-Chair Micciche asked what year Alaska started collecting tire fees. Ms. Kim thought that the original bill to collect the fees was passed in 2003. 9:16:07 AM Co-Chair MacKinnon OPENED and CLOSED public testimony. SB 33 was HEARD and HELD in committee for further consideration.