City of Ketchikan changes to different seasonal sales tax rates

The Ketchikan City Council on Aug. 18 voted to adopt a seasonal sales tax rate structure. The current 4% rate within the city limits will increase to 5.5% from April 1 through Sept. 30, and will drop to 3% from Oct. 1 through March 31 each year.

The change will take effect April 1, 2023.

The city sales tax rate currently is 4% year-round, and is added to the Ketchikan Gateway Borough tax rate of 2.5% on each sale.

According to a memo written by City Finance Director Michelle Johansen, the annual increase in revenue expected with the changes is about $1.95 million, due to heavier spending during the spring and summer months.

Council Member Lallette Kistler expressed concern that the seasonally changing tax structure would be too complicated for some business owners, such as landlords and construction contractors.

She argued that it might be “very complicated” for those service businesses to change the tax rate, such as when a construction contract is started in September, then carried over into October.

She also was concerned that some service businesses might see a lag in customers during the higher tax season, causing a problem with retaining employees. She also asserted there will inevitably be an increase in tax calculation mistakes with the new structure.

Council Member Judy Zenge said that she'd heard from business owners who agreed that the new sales tax structure would be complicated, and said that they'd actually prefer a higher sales tax year-round instead.

Council Member Janalee Gage said that she had lived in other communities that had a seasonally changing sales tax rate for more than a couple of decades, and businesses adapted well.

“Everyone needs to step up to the plate and figure it out,” Gage said. “It’s across the board. It cannot be special treatment here, special treatment there and over here.”

Zenge added that she also had heard from business owners who told her, in reaction to the seasonal tax motion, “finally, you guys are getting it.” She added, “By and large, people are excited we’re finally doing something that they actually understand, and they like it”