local sales tax
Sales taxes may be assessed at multiple levels of government. In Alaska’s Kenai Peninsula, for example, the borough (county) government levies a 3% tax on all retail sales. But each of the six cities within the borough may add their own local sales tax, so the actual rate varies between 3% and 7.5%.
Alaska allows citizens to amend local laws through referendum. In 2008, Kenai Peninsula Borough voters approved Proposition 1, which exempts “nonprepared food” (groceries) from the borough sales tax during the nine-month period lasting September 1 to May 31. Normally this exemption would also apply to four of the six Kenai Peninsula cities, because their taxing power is directly tied to the borough. These are known as “general law cities” in Alaska. But prior to the referendum, the borough’s assembly adopted an ordinance permitting general law cities to maintain their own year-round sales tax on groceries.
In 2010, a Kenai Peninsula resident, James Price, moved to place a second referendum on the local ballot, this one repealing the ordinance restoring the general law cities’ year-round taxation power. The borough said the referendum could not proceed because it conflicted with the state constitution. A state superior court judge sided with the borough, but on August 8 of this year, the Alaska Supreme Court disagreed and reversed.
Justice Craig Stowers, writing for a unanimous court, rejected the borough’s view that Price’s proposed referendum violated a constitutional prohibition on using a referendum to approve or reject “local or special legislation”. The borough said the proposed repeal would only affect general law cities, yet everyone in the borough would be permitted to vote. Nonetheless, Stowers said, the sales tax question “is of borough-wide interest” and “affects all borough residents” who shop in the general law cities. Therefore it was not a “special or local” initiative as defined by state law.
Stowers also dismissed the borough’s claim the proposed referendum is “unenforceable” because it improperly transfers legislative powers from the elected borough assembly to the voters. The borough said only the assembly could “determine whether cities may tax sources not taxed by the borough.” Stowers said this flew in the face of both Alaska law and the state’s constitution, which “expressly empowers voters to nullify the exercise of legislative power by rejecting legislative acts.” The assembly, he said, could not restrict the voters’ rights to amend sales tax policy through referendum.
S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog Bonham’s Cases.
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