The Haines Borough Administration building. (Emily Files)
At a meeting on Tuesday, the Haines Borough Assembly decided to hold public hearings on an ordinance that would exempt long-term rentals from the municipal sales tax.
Currently, there is a 4 percent borough-wide sales tax on rental payments, with an additional 1.5 percent tacked on for renters living in the townsite. The ordinance discussed on Tuesday would amend the tax to exempt rental payments made over a period of more than 9 months.
The ordinance has been championed by Assemblyman Sean Maidy. His thinking is that renters indirectly pay property tax through their rent already and that a sales tax on top of that is unfair.
Although supportive of the idea, assembly member Heather Lende raised doubts about whether the sales tax would achieve the desired results.
“The one concern I had was that there is no guarantee that the renters would benefit from the exemption of the sales tax,” Lende said.
Lende explained that because the borough does not regulate rental rates some landlords may keep their rates just as high as they are now with the sales tax. That means they could take the savings for themselves rather than pass it on to renters.
Assemblyman Sean Maidy responded that he has received complaints from landlords who say the borough does not properly enforce the collection of sales tax on rentals. It often falls on the landlord to keep track of those payments.
“They are ending up having to pay for what the borough isn’t, which would be someone tracking all the tax just specifically for rentals that has been collected and not collected, who owes it, when they’re going to pay it. Right now, it pretty much just falls on the landlord to pay it,” Maidy said.
Maidy hopes that ultimately the sales tax exemption would function as a rebate for renters, but right now he sees a different purpose.
“This is the first step in putting a definition on short-term rental versus long-term rental. This would hopefully begin to incentivize long-term rentals. And there are hopefully more steps to come,” Maidy said.
Sales taxes on rentals bring in as much as $70,000 a year for the borough, about 2 percent of total sales tax collections.
The ordinance will now go through two public hearings. The first will be held on July 24th and the second on August 14th.
