The assembly took a first step toward updating sections of municipal code that apply to businesses, unanimously approving the first reading of two ordinances that would change sales tax rules and require every business to carry a borough license.

In part, the changes aim to level the playing field between traditional storefronts and others that sell goods and services in town.

The ordinances will come up for a second reading, a public hearing and possible vote at the May 12 assembly meeting.

Under one ordinance, the tax code would see its first significant update in years. The ordinance refines the definitions of “services” and “retail sales” to ensure the borough does not miss out on any sales tax revenues from online sales and travel services.

It would expand the definition of where a taxable sale occurs to cover tour ships “within three nautical miles of the land of the City and Borough of Wrangell.”

The ordinance also would make clear that regardless of the location of any marketing or sales office, the cost of travel services would be subject to sales tax if the service “begins or occurs” within borough boundaries.

The sales tax ordinance also creates a clearer line between a casual hobby and an ongoing business that is required to collect sales tax.

For residents who sell crafts or goods, the ordinance would set a threshold: If you make less than $500 in sales in a quarter, you would not have to collect and remit the 7% sales tax. But if sales exceed the threshold, tax collections would be required the same as a storefront.

Current borough code allows no exemption from sales tax collection for small, occasional sellers who do less than $500 in business per quarter.

Borough Manager Mason Villarma explained that the goal is to address frequent complaints from established business owners who feel that some temporary vendors have an unfair advantage.

“One of the biggest complaints that we get here from businesses that do regular sales is that somebody else is … getting a 7% discount for not doing it the right way,” Villarma said.

Resident Kathy Watkins spoke during the meeting, expressing concern about how the new rules might affect hobbyists.

“I was hoping that you guys would take a look at the difference between a brick-and-mortar business and a hobby,” Watkins said. “There’s a difference in a mindset, and a difference in your goal.” She specifically asked if a person selling potholders, which she does, only a few times a year would be swept up in the new laws.

Villarma said the $500 exemption was created specifically to protect small sellers at events like the community market.

“If you have 50 days of potholder sales for the year, and as long as you don’t meet $500 per quarter, your sales tax is exempt,” he said. He added that religious institutions and nonprofits will remain totally exempt, such as fundraising bazaars held by churches and nonprofits.

In addition to the tax changes, the assembly moved forward with a plan to require all businesses to obtain a borough business license. While the two-year license will eventually carry a fee set by the assembly, the borough is offering them for free in 2026 for businesses current in their sales taxes.

According to Villarma, the system would help the finance department track sales tax compliance and ensure that online retailers and mobile vendors contribute to the economy.

“Limited exemptions are provided, including for minors engaging in occasional sales, nonprofit and religious organizations,” according to material presented to the assembly.

If approved, the borough would begin implementing the new licensing and sales tax provisions later this year. The borough license would be separate from a state business license.

The discussion also touched on the possibility of sales tax exemptions for senior citizens. Some communities in Alaska exempt seniors from sales taxes.

However, Villarma warned that such a move could be financially devastating for the borough. He pointed out that Wrangell’s median age is the second-oldest in Southeast.

“If that’s something the assembly or the community felt like they wanted, in the long run, you’re going to have drastic cuts to services,” he said. “You’re not going to have Parks and Rec or a center to do the community market because we won’t be able to afford it. It’s just simple math in the budget.”