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City Council Leans Toward Removing Sales Tax Exemptions for Churches, Nonprofits

City Council members eat dinner during a work session on taxes. Photo: Matthew F. Smith, KNOM.

The Nome City Council faces a lean fiscal future, and with efforts to more dutifully collect sales tax already underway, the council is now leaning toward stripping churches and other nonprofits of their sales tax exemptions.

The council’s work session on Monday, Aug. 25 looked at two ways to collect more sales tax to boost city coffers: either charging sales tax on a long list of heretofore untaxed services—like banking, used car sales over $1,500, medical services, and more—or eliminating sales tax exemptions for city churches, regional nonprofit Kawerak, and more than 40 organizations.

Assessing sales tax for transactions that would be difficult to track proved unpalatable to the council, which instead found favor with the idea of eliminating sales tax exemptions for dozens of currently-exempt organizations in town.

The City Council may remove sales tax exemptions from organizations listed as "other." Image: City of Nome. (Click to download PDF)

The City Council may remove sales tax exemptions from organizations listed under “other.” Image: City of Nome. (Click to download PDF)

Council member Matt Culley said the only way to remove the exemptions fairly would be to strip them across the board.

“My personal opinion, when it goes this way, is take them all, so we’re not biased,” Culley said. “We’re not picking and choosing what we think is great. Get rid of them [all]. And if the city gets healthy again, then you can go back and look at them.”

The city already relies on sales tax for the bulk of its revenue. City finance director Julie Lew said removing the sales tax exemptions could bring in as much as $800,000 a year.

Collecting sales tax from organizations that don’t currently pay it wasn’t the only option on the table. The council also looked at closing loopholes in city code that leaves property like dredges (and, potentially, airplanes) untaxed if they’re in town only part of the year. Closing that loophole could mean additional fees for port users, or assessing a “pro rata” property tax based on how long a vessel is in town.

But it was all just talk at the work session; it will take weeks, or even months, before the council finalizes any plans to adjust how it collects sales tax.

Following the work session, the council breezed through business in a regular session, approving the third and final phase of planning for the town’s new museum, library, and cultural center, the Richard Foster Building.

The council’s approval means $620,000 was released for additional work this year, but project manager Kendall Ghee with engineering firm Dowl HKM said there’s still a portion of the project’s $19 million price tag that has yet to be secured.

“The city [has] still about $300,000 left to fund their portion of the project,” Ghee said. Kawerak is partnering with the city to construct the building to house its Beringia Museum. Ghee said the nonprofit “has about $1.2 to $1.5 million which they need to get all of their stuff down.”

The unfunded gap won’t stop the project, Ghee said.

“We have the money for the building. You know, $300,000, there’s things that can be deferred, and that will be deferred. We have contingencies, so, we’re doing well.”

Ghee said site work and utilities are currently being built into the new facility, with materials now being brought to Nome for the building’s foundation and steel frame. He said that work should be in place before winter shutdown, with construction slated to resume in the spring.

1 Comment

  1. […] City Council Leans Toward Removing Sales Tax Exemptions for Churches … 25 looked at two ways to collect more sales tax to boost city coffers: either charging sales tax on a long list of heretofore untaxed services—like banking, used car sales over $ 1,500, medical services, and more—or eliminating sales tax exemptions … Read more on Knom (blog) […]