So, you need to know about sales tax in The Last Frontier. Look no further!
This state is unique because there is no state-wide sales tax, but certain local jurisdictions do hold remote sellers accountable for collecting sales tax, if the business has economic nexus. This guide will tell you everything you need to know, plus direct you to the right places for handling any sales tax responsibility you may have.
What’s taxable in Alaska?
Services
Services include professional services provided by lawyers, architects, landscapers, etc. The definition can be pretty wide, and many exemptions can apply. Your best bet would be to check with Alaska Department of Revenue to confirm your service is even taxable.
Tangible products
Tangible products, as you might guess, are physical items. Alaska taxes most tangible products, but there can be exemptions! To be absolutely clear about which products are subject to sales tax, and which are exempt, check Alaska Department of Revenue.
Digital products
Digital products are goods that are delivered or accessed electronically, usually through the internet. Media streaming services and eBooks usually fall into this category, too, but rules can vary. Check Alaska Department of Revenue website to be sure.
Software-as-a-Service products
Better known as SaaS, these products are cloud-based software products, accessed online by customers. The definition of SaaS sometimes falls in the gray area of “digital service.” Alaska does tax SaaS products, but check the website to confirm that the definition firmly applies to your service.
Alaska’s sales tax for digital products
Alaska doesn't have a statewide sales tax, but local areas can require remote businesses with economic nexus to collect sales tax. Since over 100 local jurisdictions have their own local sales tax, things can get pretty tricky.
You can review Alaska’s Remote Seller Sales Tax Code (PDF) (ARSSTC) for detailed information. Once a local area adopts this code, online businesses with economic nexus get 30 days to start collecting sales tax from customers in those participating areas.
If you have a physical presence, like an office, store, or employee in Alaska, and you’re in a jurisdiction that adopted the code, you must collect and remit sales tax.
However, if your physical presence isn't in an area that adopted the code, you're not required to collect sales tax unless you sell into these jurisdictions and thus become a "remote seller."
Whether you have economic nexus depends on the amount of remote sales you make in the state and where your customers are based. We’ll go into more detail about each of these throughout the rest of the guide!
Do you have economic nexus in Alaska?
Alaska has an annual sales registration threshold of $100,000 in annual sales or 200 sales made to Alaskan customers.
What does this mean exactly?
Well, the threshold amount refers to your total sales in the state, during any 12-month period. This can be a calculation of sales in the last twelve months, or a prediction of sales in the next twelve months — any rolling year-long period, past or future.
If your total sales in Alaska remains below $100,000 in annual gross receipts from sales, or 200 or more sales annually, then you don’t need to worry about sales tax at all. Phew!
But once your Alaska sales do surpass those thresholds, then you must register for sales tax and comply with all of the local-level jurisdictions that have adopted the economic nexus code.
Alaska’s economic nexus law is different from other economic nexus laws, because local jurisdictions decide whether to adopt the law. And once a local jurisdiction has adopted the law, businesses have 30 days to begin collecting sales tax from Alaska buyers located in that jurisdiction. Here’s a list of the local jurisdictions that use the economic nexus law.
How to register for sales tax in Alaska
Okay, so you have nexus! Now what?
The next crucial step in complying with Alaska sales tax is to register for a sales tax permit. It’s actually illegal to collect tax without a permit. So to get all your ducks in a row, start with tax registration first.
Remote sellers must register in Alaska Remote Seller Sales Tax Commission.
When registering for sales tax, you should have at least the following information at hand:
- Your personal contact info
- Your business contact info
- Social security number (SSN) or Employer Identification Number (EIN)
- Business entity (sole-proprietor, LLC, S-Corp, etc.)
- Bank account info (account number and routing number) where you’ll deposit the collected sales tax
How to collect sales tax in Alaska
Now it’s time to tackle the intricate stuff! Tax rates can vary based on the location of your business and the location of your customer, plus the levels of sales tax that apply in those specific locations.
The state-wide sales tax in Alaska is 0%.
There are additional levels of sales tax at local jurisdictions, too.
Alaska has a destination-based sales tax system 1, so you have to pay attention to the varying tax rates across the state. Charge the tax rate of the buyer’s address, as that’s the destination of your product or service.
Try out the Quaderno sales tax calculator to see what taxes look like zip code by zip code in the US.
1 Important to note for remote sellers: While this is generally true for Alaska, some state have peculiar rules about tax rates for remote sellers. Contact the state’s Department of Revenue to be sure.
Sales tax on shipping charges in Alaska
Alaska doesn’t apply sales tax to any shipping costs, as long as the shipping costs are clearly listed and separated from the price of the item(s) you’re selling. Be sure to always mark the cost of the product and the cost of the shipping on two different lines of the bill.
When to file taxes in Alaska
When you register for sales tax, Alaska will assign you a certain filing frequency. You’ll be asked to file and pay sales tax either monthly, quarterly, or annually.
Usually the frequency they choose is based on the amount of sales tax you collect from buyers in Alaska. High-revenue businesses file more frequently than lower volume businesses, for example.
Alaska sales tax returns are usually due on the last day of the month following the reporting period. If the due date falls on a weekend or holiday, then your sales tax filing is generally due the next business day.
How to file taxes in Alaska
When tax time rolls around in Alaska, whether it’s monthly or annually, you must do three things:
- Calculate how much sales tax you owe
- File a sales tax return
- Make a payment
Other Alaska tax info
Penalties
If you miss a filing or payment deadline, certain penalties can apply. Such a pain! Check the state’s website for up-to-date penalty fees.
Discounts
On a brighter note, you could be eligible for sales tax discounts in Alaska! Usually these discounts are designed to save you a bit of money, as a reward for complying with the sales tax system. Check the state’s website for up-to-date discount policies.
Sales Tax Holidays
One final tricky aspect about Alaska sales tax are the sales tax holidays. During these days of the year, you aren’t required to charge sales tax, and buyers will expect to not be charged. Check the state’s website for current sales tax holidays.
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.