Opinion ID: 1357446
Heading Depth: 2
Heading Rank: 2

Heading: THE CITY OF HOMER BED TAX IS A SALES TAX WITHIN THE MEANING OF AS 29.53.415(a) AND AS 29.53.440.

Text: Homer Ordinance 79-19, Sec. 2, provides: The tax shall be applicable to all transient room rentals and/or other commercial sleeping accommodations unless the rental is specifically exempted from taxation by law, said tax to be equal to 5% of the room rental for the first seven days of occupancy. The superior court concluded that the bed tax imposed by the city is a sales tax and therefore subject to the statutory requirements and limitations on sales taxes. The city argues that because the tax is not a general tax and because it is based upon actual occupancy, the tax is not a sales tax. The statutory authority for the imposition of a sales tax by a borough provides the following sources of sales taxes: Sec. 29.53.415. Sales and use tax. (a) A borough may levy and collect a sales tax not exceeding three per cent on sales or rents, and on services made within the borough. The sales tax may apply to any or all of these sources... . (emphasis added). [3] Therefore, the legislature considered a tax on rents to be a sales tax. The statutory authority for the imposition of sales taxes by a city also considers rents to be a source of sales taxes: Sec. 29.53.440. Power of levy. Cities within a borough which levies and collects sales or use taxes for areawide borough functions may levy sales or use taxes upon all sources taxed by the borough in the manner provided for boroughs. (emphasis added). Although traditionally the furnishing of lodging was not considered to be a sale of tangible property and not within the common law definition of a sales tax, the legislature in Alaska has specifically included rental transactions within its sales tax provisions. The statutory inclusion of a transaction prevails over the principles of common law. International Bus. Machines Corporation v. Brown, 167 Conn. 123, 355 A.2d 236, 241 (1974). Indeed, the city does not contend that the borough's two percent levy and the city's one percent levy already assessed on room rentals are not sales taxes. Similarly the city's five percent tax on the rental of hotel/motel rooms is a sales tax within the meaning of the sales tax statutes. Other incidents of this tax, including its computation, collection and payment, indicate that it is a sales tax. Although the term sales tax is not defined beyond the listing of its sources in AS 29.53.415(a), the traditional sales tax is computed by applying a constant rate to the value of the commodity or service transferred or exchanged. 68 Am.Jur.2d, Sales and Use Taxes § 1 (1973). Therefore, the computation of the bed tax (a constant rate of five percent applied to the rental price of seven days) is that traditionally used in sales taxes. That the value is limited to the rent for seven days does not alter the nature of the computation. Further, as the borough points out, the system used in collecting the tax (from the consumer to the operator to the city, with penalties for failure to collect or remit) is analogous to the payment and collection of the borough's two percent and the city's one percent sales taxes. The city's arguments, that the hotel/motel room tax is not a general tax and that it is based only upon the actual occupancy of the room, provide further persuasion for its classification as a sales tax. The city incorrectly assumes that a sales or use tax places general taxation on any sources of sales, rents or services within the borough. We have previously noted that the term sales tax carries no such connotation of generality, and that selective sales taxes by boroughs are not unusual. Liberati v. Bristol Bay Borough, 584 P.2d 1115, 1123 (Alaska 1978). One of the hallmarks of a sales tax is that it taxes the actual transaction involved; i.e., it is not until the sale, rental, or provision of services takes place that the tax is imposed. This distinguishes a sales tax from a license or privilege tax, which is a sum exacted for the privilege of carrying on an occupation in general, rather than any particular exercise of this privilege. See generally 2A C. Antieau, Municipal Corporation Law § 21.80, at 21-134 (1982). In conclusion, the Homer bed tax, based upon the actual rental of a room, and imposed, computed and collected according to traditional sales tax methods, falls within the statutory provisions regarding sales taxes, and is, therefore, subject to their requirements and limitations.