A public hearing will be held Tuesday, May 27, at City Hall on a proposed ordinance that could raise an estimated $200,000 a year in total from collecting more sales tax on work performed at The Marine Service Center, on big-ticket purchases in town, and from sales aboard cruise ships.
The ordinance would raise the taxable cap on a single purchase of goods or services in town. Under the current limit, sales taxes shut off when an invoice exceeds $3,000; the ordinance would raise that maximum to $5,000.
That would mean, for example, a $350 sales tax charge on a $5,000 purchase instead of the current limit of $210 on the first $3,000 of the invoice.
There are not that many large purchases in town, and the change would generate maybe $10,000 to $15,000 per year in additional tax revenues, Borough Manager Mason Villarma explained in an interview the day after the assembly on May 13 set the ordinance for a public hearing at its next meeting.
The bigger revenue generator from the ordinance would come from raising the cap on taxable work at The Marine Service Center from $3,000 to $50,000.
A $50,000 boat repair contract, for example, that currently runs up a $210 sales tax charge under the $3,000 cap, would see $3,500 at Wrangell’s 7% tax rate on the full $50,000.
The change could raise an estimated $150,000 to $200,000 a year for the borough, Villarma said.
Work at The Marine Service Center generally averages between $25,000 and $50,000 per job, he told the assembly at its May 13 meeting.
Taxing work up to a $50,000 cap “seems a bit much,” Assembly Member Phillip Mach said.
A third part of the ordinance would extend the reach of the municipal sales tax to include sales aboard cruise ships while they are tied up at the City Dock or within 3 nautical miles of borough land.
Villarma estimated the additional revenue from taxing sales aboard the ships at no more than $25,000 per year.
Juneau (in 2021) and Ketchikan (this year) have adopted similar changes to their municipal codes to extend the reach of their sales tax collections.
The Wrangell borough estimates its sales tax receipts in the current fiscal year at $3.6 million — the single largest source of revenue for the budget. Municipal code directs 20% of sales tax collections to the school district.
The assembly a year ago discussed the possibility of raising sales tax revenues without changing Wrangell’s 7% tax rate. The borough has been looking at ways to raise revenues, and also cut expenses, as it grapples with tight budgets.
Raising the taxable cap on purchases to $5,000 would put Wrangell at the same level as Haines; higher than the taxable limit of $1,200 in Petersburg; and far below the cap in Sitka and Juneau.
Extending the tax to cover cruise ship sales and raising tax collections on big jobs at The Marine Service Center are both targeted at the same thing, Villarma told the assembly: Collecting more from nonresidents.
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