Residents and businesses face adjustments as sales tax exemptions for food, utilities take effect Thursday

People heating homes with wood or propane may need to obtain exemption cards from city; some companies still determining what customers, items and services won’t be taxed

"Essential" foods that will qualify as tax-exempt in Juneau as of Thursday are seen on a shelf at Foodland IGA on June 19, 2025. (Mark Sabbatini / Juneau Independent)

By Mark Sabbatini

Juneau Independent

Most groceries will be 5% cheaper for Juneau shoppers starting Thursday, but beyond that the sales tax exemptions on "essential food" and "non-commercial" utilities approved by voters in last month’s municipal election are a bit more complex.

Some specifics for utilities in particular are stlll being worked out, since items such as propane and wood pellets can have uses besides heating for residential and commercial customers, according to city and business officials interviewed in recent days. The City and Borough of Juneau on Friday issued a public bulletin outlining the general terms.

Proposition 2, which passed with about 70% of voters in favor, exempts foods defined by the Food and Nutrition Act of 2008, which also determines what can be purchased with food stamps — with hot foods and alcohol among the items that don’t qualify. The utility exemption applies to "sale of electricity, heating fuel, water and wastewater service, refuse and recycling collection" involving a primary residence, including disposal at a landfill of items from the residence.

The primary action some residents will need to take is applying for an exemption card if they purchase items such as propane or pellets that are used to heat their homes, Deputy City Manager Robert Barr said in an interview Friday. The cards are an extension of the city’s existing Senior Sales Tax Exemption program for food, utilities and waste disposal that charges $20 a year — which will now simply become a utilities-based card all residents can apply for.

"For the implementation phase, for the first year, we're not planning on charging a fee," he said, adding the fee will apply in future years due to the cost of the cards and staff time to process them.

Barr said he expects relatively few residents to apply for the cards since most residences are heated with oil or electricity provided by companies that will be responsible for handling the exemptions when billing customers.

The city is working with companies providing electricity, heating, waste/recycling, and water/wastewater services such as septic systems to ensure they are keeping separate track of commercial customers who will continue to be taxed and residential customers who will be exempt, Barr said. He said not all providers may have all details finalized when the new tax exemptions go into effect Thursday since there may be questions about what items are tax-exempt under what circumstances.

"Every provider uses different systems to administer their systems," he said. "I would expect that our larger providers like AEL&P that have more staffing capacity are probably more likely to be able to implement quickly. Some of our small providers might take a little bit more time, but just speculation."

"I think there's going to be a handful of things that we run into that we'll have to think through as they come up," Barr added.

Employees at Don Abel Building Supply were still getting familiar with the new tax rules on Monday, since among other things they learned seeds for edible plants are among the items that qualify for the food tax exemption, said Tawyna Oliver, the store’s inventory specialist.

"Basically it's anything that's not prepared, hot, ready-to-go," she said, describing the guidelines her store got from the city for the food tax exemption. "So we're told all of our candy, our bottled drinks, anything that's consumable, really."

The store will apply the tax exemption for items such as pellets and propane for customers presenting a tax-exempt card, and stating the items are for heating or similar "essential utilities" services, Oliver said.

Juneau’s current 5% sales tax includes "temporary" taxes of 3% and 1% voters have renewed every five years for decades.

Exempting food and utilities is expected to cost the city more than $11 million in revenue a year, creating what local leaders say is a sizable gap in a budget of about $200 million for municipal government operations and capital projects. Supporters of the proposition say the measure will help residents struggling to afford Juneau's high living costs and local leaders have made poor spending choices in recent years that can be remedied to balance the city’s budget.

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