In the Haines Assembly’s quest to generate more borough revenue, nonprofits are in the spotlight. Right now, nonprofits are not required to collect sales tax on products they sell. The assembly finance committee explored changing that at a meeting this week.
“Our current policy is nonprofits don’t pay any sales tax when they go to the store and they don’t collect sales tax when they sell things,” said Assemblyman Tom Morphet. “And the questions for the finance committee is do we want to change that, or do we want to keep it the same?”
The borough is currently relying on its healthy fund balances to cover budget deficits. Morphet says he wants to find strategies for the borough to rely less on its savings.
During the discussion, the question of fairness kept coming up. Why should consumers not have to pay sales tax on goods sold by nonprofits when they do on for-profit products?
“There’s a nonprofit that has a fundraiser every night, and that’s great for those organizations,” Morphet said. “But we’re taking bites out of business sometimes with these nonprofits. And we’re asking at least when that happens that they pay into the common coffer the same amount as a business would.”
Business owner Sean Gaffney said it’s something the Chamber of Commerce has talked about.
“Paying that tax on goods that you sell is a reasonable thing and it prevents there being a competitive imbalance between for-profit and nonprofit,” Gaffney said. “Absent that type of structure, you’d really be tilting the scales in one way on that equation.”
But interim borough manager Brad Ryan said if nonprofits were required to collect sales tax, the logistical and administrative burden might be prohibitive. He said it would be simpler to have nonprofits pay sales tax on purchases they make in the borough. Ryan used the example of the Hospice of Haines.
“I sell something as a nonprofit, Haines Hospice, I straight up wouldn’t sell anything anymore,” Ryan said. “It’ a donation, everything’s a donation. That’s what I would do if I was Hospice, I wouldn’t sell anymore. And that’s the same thing if it’s a fundraiser, you charge $12 to eat pizza and watch a movie, a lot of people come in and say ‘here’s $20.’ Now what do you do?”
Assembly member Margaret Friedenauer also questioned the focus on nonprofits’ collection of sales tax . She said if the idea is that nonprofits should contribute more to the borough’s bank account, the assembly should revisit exemptions that shield nonprofits from paying sales or property tax themselves.
“We’re not asking the nonprofit to pay sales tax but we’re asking any consumer who supports a nonprofit to pay sales tax, is that the difference?” Friedenauer said. “I just don’t see the benefit of that much detail in a tax structure for that minor of a thing.”
The borough’s sales tax is 5.5 percent in the townsite service area. Outside of town, it’s 4 percent. Sales tax makes up more than a quarter of borough revenue – a projected $3 million in the next fiscal year.
The committee didn’t come to a clear answer. Morphet and Ron Jackson said they would work with the borough finance director to flesh out a proposal and then invite nonprofits to voice their opinions on it.