Legislature fails to override internet tax veto, sets stage for battle with governor on fiscal plan this session
- Mark Sabbatini
- 5 hours ago
- 4 min read
Updated: 20 minutes ago
Several Republicans who supported bill last year switch sides in 35-25 tally Thursday, 10 short of votes necessary, hours before Dunleavy’s final State of the State address
By Mark Sabbatini
Juneau Independent
The Alaska Legislature on Thursday fell well short of overriding a veto of a bill requiring companies doing business online in Alaska pay in-state sales tax.
Several Republicans who previously supported the bill changed their votes hours before Gov. Mike Dunleavy is expected to propose a series of tax and other measures as part of a multi-year fiscal plan in his final State of the State address.
The 35-25 vote on Senate Bill 113 was 10 shy of the three-fourths majority necessary since it involved revenue legislation (compared to two-thirds for other bills). The bill passed the Legislature by a combined vote of 42-18 last May, but Dunleavy vetoed the bill in September stating he would not approve any tax measures unless they are part of a larger fiscal plan.
Supporters said they anticipated the bill would generate $25 million to $65 million a year, which was intended to support educational reading and vocational programs.
Disappointment, but not surprise, was expressed by House Speaker Bryce Edgmon, I-Dillingham, and Senate President Stevens, R-Kodiak, during a gathering with reporters after the vote.
"It's going to be hard for us to get through this session with accomplishing very much when we have this butting of heads between the administration and Legislature," Stevens said. "We were willing and are willing to continue to meet with the governor at any time to try to work this out, but it's going to be very difficult."
Dunleavy is expected to propose a statewide sales tax that adjusts upward during the tourism season, an oil tax hike, a cut in corporate taxes and other fiscal measures during his speech before a joint session of the Legislature at 7 p.m. Thursday.
Legislative leaders had planned to hold the override vote on Tuesday, the first day of this year’s session, but agreed to the delay at the governor’s request, according to Edgmon and Stevens. During that interim, aspects of the governor’s proposed fiscal plan became public, but Stevens said he doesn’t think that resulted in SB 113 failing to get the necessary vote for an override.
However, the fate of the internet tax legislation may have been affected by the collapse of a reported deal involving the governor supporting the proposal — or similar legislation — if consideration was given to three other bills, according to legislative leaders. The governor’s office flatly denied that assertion.
Stevens said there appeared to be an agreement with the governor that he would support the internet tax in exchange for the Legislature taking action on three bills involving sexual assault examination kits (HB 62/SB 69), timber management leases (HB 72/SB 75), and a net metering program (HB 164/SB 150). The deal called for legislators to agree all three bills would move to their next committee of referral by Feb. 6, but "the latest discussion with the governor was that we would have to pass all three before he would support" the tax legislation, Stevens said.
"We thought we had an understanding and then the goalpost moved," Stevens said.
A categorical denial any such deal existed was issued Thursday afternoon by Jordan Shilling, Dunleavy’s legislative director. Shilling said there was a more general discussion about the three bills that involved starting the session on a cooperative note that included asking legislators to take action on them.
Some lawmakers on Thursday noted the Dunleavy administration expressed support for the internet tax change in 2021, when then-Revenue Commissioner Lucinda Mahoney said the governor would back it as part of a broader fiscal plan.
All three members of Juneau’s all-Democratic delegation — Sen. Jesse Kiehl, and Reps. Sara Hannan and Andi Story — voted to override the veto. Hannan, during floor debate, said the bill simply means Alaska is getting its fair share of taxes already paid by companies doing business online, but which at present may be going to the states where those companies are physically based.
"It doesn't change the burden on the corporation," Hannan said during floor debate. "It is not a tax that would trickle down to Alaskan consumers because the corporate income tax is already being paid — but it's not being paid to Alaska. I want the money that is paid for by Alaskans to be tax benefited to Alaskans."
A total of 36 states are already part of a multi-state compact with provisions similar to SB 113, she said.
"I could see why Washington state would like us not to join the compact," Hannan said. "They have a very large internet-based business. Washington state is happy to accept tax revenue that should come to Alaska and keep it in their home state."
Among the Republicans who supported the bill last May and then voted to uphold the veto on Thursday was Sen. Robert Yundt of Wasilla. He cited concerns raised by another lawmaker who changed his vote — Rep. Will Stapp, R-Fairbanks — that regulations necessary to implement the bill haven’t yet been drafted by the Alaska Department of Revenue.
"I was a proud supporter of this bill and I am still a proud supporter of the concept," Yundt said. "I am very much looking forward to the changes, as mentioned earlier, from one of our representatives that he would like to make and I do want to see this back as soon as possible."
That argument was challenged by Senate Rules Chair Bill Wielechowski, D-Anchorage, who said state administrators would have had more than a year to draft regulations before the new tax took effect.
• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.
