Local nonprofits don’t charge sales tax; concern expressed as Assembly proposes changing that

Mark Sabbatini
1 day ago
3 min read

Proposal limiting tax exemption to government and social service nonprofits put on hold as many organizations say they were unaware of it, worry about extra work it will create

By Mark Sabbatini

Juneau Independent

People buying Juneau Symphony tickets don’t pay the city’s 5% sales tax because the organization is a nonprofit. But Executive Director Charlotte Truitt says customers won’t be the only ones paying the price if the Juneau Assembly eliminates that tax exemption.

"We estimate that implementing this ordinance, it would require approximately $2,000 to modify our bookkeeping processes," she told the Assembly during its meeting Monday night. "And then after that we estimate our bookkeeping cost would continue to increase by approximately $500 every month."

The symphony would collect about $12,500 in sales tax revenue for the city during the coming year, based on current sales, compared to the organization’s total compliance cost of about $8,000, Truitt said.

"We're fortunate that we have a bookkeeper who works about 10 hours a month," she said. "But many of the 263 nonprofits in Juneau don't have that luxury. They rely on volunteer treasurers or bookkeepers who donate their time because they believe in a mission. They do not have retail point-of-sale systems. This ordinance asks those volunteers to take on an entirely new level of responsibility and liability. Implementing new accounting systems, modifying ticketing and bookkeeping procedures, filing returns, and maintaining compliance all require staff time and professional expertise."

The proposal by the Assembly to repeal the tax exemption for nonprofits — unless they are government or social service organizations — was put on hold until a Sept. 2 Finance Committee meeting after similar concerns were expressed by several other nonprofit officials and supporters.

Many said the proposed change was a surprise, although it has been among a series of tax modifications Assembly members have been considering during the past couple of months while trying to address a deficit in the city’s budget.

An analysis by the city finance director in May found the nonprofit exemption could bring in more than $3 million more a year — one of the most lucrative options — but changes suggested since then could reduce that amount if more organizations remain exempt.

Bob Urata, a doctor who’s served on numerous nonprofit boards in Juneau, suggested if the Assembly repeals the sales tax exemption there should be "a threshold of maybe a million dollars in annual earned revenues before the collection requirements apply."

"The issue isn't whether large nonprofits should contribute," he said. "The issue is whether the administrative burden is proportional to an organizational size and capacity."

Other people testifying during the meeting questioned how the city would track and audit nonprofits if they had to collect sales taxes, and what organizations would be categorized as "social service" and thus still exempt from the requirement.

Current city code states the local tax exemption does not apply to pull-tab games by tribes or other nonprofits, and sales by certain city-owned entities such as Eaglecrest Ski Area and Juneau International Airport.

The proposed change was on Monday’s meeting agenda as a possible item for final approval by the Assembly, but Deputy Mayor Greg Smith proposed returning the ordinance to the Finance Committee for further review this fall. The delay was approved unanimously.

"I've heard from people, some of whom work extremely close with many nonprofits, just having found out about this like a week ago," he said. "So it is impactful. Every conversation I have I learn more. I would like to bring it back to our committee worksession to see what people want to do."

• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.