Chapter 3.08
SALES TAX

Sections

3.08.010    Levy of sales tax

3.08.020    Accrual and collection

3.08.025    Allocation of sales tax proceeds

3.08.030    Installment payments

3.08.040    General exemptions

3.08.045    Tax-free day

3.08.050    Exemption of sales for resale

3.08.055    Senior citizen exemption

3.08.060    Certificate of exemption

3.08.070    Revocation of certificate of exemption

3.08.080    Tax collectors—registration certificate

3.08.082    Failure to obtain registration certificate

3.08.090    Addition of tax

3.08.100    Assumption of tax prohibited

3.08.110    Tax schedule

3.08.120    Maximum taxable sale

3.08.130    Title to tax proceeds

3.08.140    Sales tax returns

3.08.150    Credit for taxes

3.08.160    Administrative costs and reimbursements

3.08.170    Penalty and interest—application of partial payments

3.08.180    Determination of exemptions

3.08.190    Failure to collect taxes

3.08.200    Preservation of records—collection of arrears tax

3.08.210    Estimated tax

3.08.220    Returns confidential

3.08.222    Corrections of errors on tax returns

3.08.224    Refund of overpayment

3.08.230    Recovery of taxes

3.08.240    Lien for tax, interest, and penalty

3.08.250    Foreclosure against real property

3.08.260    Collection by distraint and sale

3.08.270    Prohibited acts—penalties—remedies

3.08.280    Definitions

3.08.010 Levy of sales tax

(a) A sales tax of 12 percent of the rental charge, consisting of a levy of five percent in addition to the general sales tax levy of seven percent levied under subsection (b) of this section, is levied on all transient room rentals within the city. This sales tax will also be known as the “bed tax.”

(b) A sales tax of seven percent of the sales price or charge is levied on all sales, rentals, and services made within the city, other than rentals of transient rooms.

(c) For the purposes of the tax levied by this section, a sale of tangible personal property is made within the city if:

(1) The sale is made by a business located within the city and delivery occurs within the city;

(2) The sale is made by a business located within the city, the order is received or solicited within the city or payment is received within the city, and delivery is made to a purchaser within the Kodiak Island Borough; or

(3) The sale is made by a business located outside of the city as a result of solicitation inside of the city and payment or delivery occurs within the city.

(d) For the purposes of the tax levied by this section, services are made within the city if, regardless of the location of the business rendering the services:

(1) The services, or any essential or substantial part thereof, are rendered within the city; or

(2) The order for the services is solicited or received within the city or payment is received within the city, the services are rendered by a business maintaining an office, agent, or employee within the city, and the services benefit or directly relate to any person, property, or organization within the city.

(e) The sales tax on rentals is applicable for all real property located within the city and to rentals of personal property from a business within the city and from a business located outside the city under circumstances which authorize the imposition of a sales tax were the property to have been sold rather than rented.

(f) For the purposes of this section, any building or other place of business shall be considered to be within the city if any part thereof or any substantial part of a contiguous parking area or other supporting facility is within the city. [Ord. 1300 §1, 2012; Ord. 1297 §1, 2012; Ord. 1281 §1, 2011; Ord. 1155 §1, 2003; Ord. 1084 §1, 1999; Ord. 964 §1, 1993; Ord. 799 §§1—3, 1986; Ord. 676 §§2, 3, 1983; Ord. 557 §1, 1979; Ord. 497 §1, 1977]

3.08.020 Accrual and collection

Sales taxes imposed by this chapter are due and payable by the buyer at the time of payment for the purchase, service, or rental and are delinquent if not paid when due. Every person making sales or rentals or rendering services that are taxable under this chapter shall collect the taxes from the purchaser at the time of the sale, rental, or service or, with respect to credit transactions, at the time of collection of the sale price, rental, or service fee and shall transmit the money collected on a quarterly basis to the city. [Ord. 497 §1, 1977]

3.08.025 Allocation of sales tax proceeds

(a) One-seventh of the sales taxes collected under KCC 3.08.010(b) and one-eleventh of the sales taxes collected under KCC 3.08.010(a) shall be allocated to a separate fund or account to be appropriated and utilized solely for road improvements and capital equipment and for park construction and capital improvements; provided, however, that the total amount of sales taxes allocated to the foregoing fund with respect to any one fiscal year shall not exceed $500,000. This tax is to be allocated as follows:

(1) Ninety percent for road improvements and capital equipment; and

(2) Ten percent for park construction and capital improvements.

(b) One-seventh of the sales taxes collected under KCC 3.08.010(b) and one-twelfth of the sales taxes collected under KCC 3.08.010(a) shall be allocated to a separate fund or account to be appropriated and utilized solely for harbor capital improvements constructed by or on behalf of the city; provided, however, that the total amount of sales taxes allocated to the foregoing fund with respect to any one fiscal year shall not exceed $500,000. This tax is to be allocated for port infrastructure maintenance, repair, replacement, and capital equipment.

(c) Five-twelfths of the sales taxes collected under KCC 3.08.010(a) shall be allocated to a separate fund or account to be appropriated and utilized solely for increased development of the tourist industry, and is to be allocated as follows:

(1) Seventy percent or less to a council-approved tourism program;

(2) Twenty percent or more for tourism enhancement projects, such as beautification within the city, development of which shall be solely at the council’s discretion; and

(3) Ten percent for the administrative costs associated with such programs.

(d) The balance of sales taxes collected shall be deposited to the general fund of the city to be appropriated as determined by the council. [Ord. 1310 §1, 2013; Ord. 1300 §2, 2012; Ord. 1208 §1, 2006; Ord. 1155 §2, 2003; Ord. 964 §2, 1993; Ord. 800 §§1, 4, 7, 1986; election held October 7, 1986; passage ratified October 14, 1986; Ord. 757, 1985; Ord. 676 §4, 1983; Ord. 557 §2, 1979]

3.08.030 Installment payments

When the payments for a purchase, rental, or service are made on an installment basis, the entire sales tax shall be collected from the down payment, or, if a down payment is not made or is insufficient to pay the tax, then from the entire first installment payment or payments until the tax is paid. [Ord. 497 §1, 1977]

3.08.040 General exemptions

The following classes of sales, rentals, and services are exempt from the tax imposed by this chapter:

(a) Casual and isolated sales and rentals of personal property, and services not rendered in the regular course of business of the seller;

(b) Medical services performed by licensed medical doctors, dentists, osteopaths, optometrists, psychiatrists, psychologists, and chiropractors; sales of medicinal preparations and drugs prescribed by medical doctors; and hospital services;

(c) Sales, rentals, and services to religious and charitable organizations as defined in Sections 501(c)(1), (3), and (4) of the Internal Revenue Code, for the conduct of regular religious or charitable functions and activities, and not for the support or maintenance of the general membership or for communal living;

(d) Sales of food in school cafeterias and lunchrooms that are operated primarily for students;

(e) Sales and services by nonprofit schools and student organizations within schools for support of the school, organization, or extracurricular activities or events;

(f) Sales, rentals, and services to the United States, the state of Alaska, and any agencies or political subdivisions thereof;

(g) Dues or fees to clubs, labor unions, and fraternal organizations;

(h) Subscriptions to newspapers and periodicals;

(i) Sales of insurance and bonds of guaranty and fidelity;

(j) Funeral charges;

(k) Transportation charges of commercial airlines, air charters, and passenger ship companies; provided, however, that this exemption shall not extend to boat charter operations not affecting interstate commerce;

(l) Services rendered by banking or savings and loan institutions or credit unions;

(m) Services rendered by an employee to an employer in the normal course of employment;

(n) Sales, rentals, and services which the city is prohibited from taxing by the Constitution or laws of the United States or the state of Alaska;

(o) Retail sales in dining rooms or cafeterias of food furnished by nonprofit organizations under programs wholly or partially supported by government funds;

(p) Nursery and babysitting services;

(q) Long-distance transmission of telephone and telegraph messages;

(r) Sales of heating fuel exclusively for residential uses (not to include fuel used in or on watercraft);

(s) Sales of electrical service to exclusively residential units;

(t) Sales of propane gas exclusively for residential uses (e.g., cooking, water heating, heating, clothes drying);

(u) Sale of fuel used in stationary power plants that generate electrical energy exclusively for private residential consumption;

(v) Sales, rentals, and services to nonprofit associations or organizations operated primarily for the purpose of planning, promoting, and conducting organized group activities for participants who are 18 years of age or less;

(w) Charges for garbage/refuse collection for garbage/refuse generated exclusively by residential use;

(x) Sales of water and sewer utility services for residential use; and

(y) Sales by religious or charitable organizations, as defined in Sections 501(c)(1), (3), and (4) of the Internal Revenue Code, of pull tabs, raffle and lottery tickets, bingo cards, and other tokens of participation in games of chance and contests of skill. [Ord. 1047 §2, 1997; Ord. 983 §1, 1994; Ord. 977, 1993; Ord. 971 §1, 1993; Ord. 830 §§1, 2, 1988; Ord. 768 §1, 1985; Ord. 767 §2, 1985; Ord. 766 §1, 1985; Ord. 497 §1, 1977]

3.08.045 Tax-free day

(a) All sales, rentals, and services made on the first Saturday in March of each year, and that otherwise would be subject to the tax imposed by this chapter, are exempt from that tax at the option of the seller, except as this section provides otherwise.

(b) The exemption in subsection (a) of this section shall not apply to:

(1) Rentals for a period greater than one day; no sales tax on rentals for a period greater than one day shall be prorated or adjusted in any manner to include a sales tax exemption under subsection (a) of this section.

(2) Sales, rentals, and services made by the city.

(c) The seller shall report all sales, rentals, and services that are exempt from tax under this section as exempt sales on its sales tax return. [Ord. 1247, 2009]

3.08.050 Exemption of sales for resale

The following sales of property are exempt from the sales tax:

(a) Sales of property to wholesale dealers located in the city, who deal in property of the type sold, for the purpose of a subsequent sale by such dealer in the city;

(b) Sales to retail dealers located in the city, who deal in property of the type sold, for the purpose of a subsequent retail sale by such dealer in the city, which sale will be subject to the tax imposed by this chapter;

(c) Sales of tangible personal property to a person engaged in manufacturing within the city of products sold primarily within the city, which property is converted into or becomes an ingredient or component part of the manufactured product or a container therefor, or otherwise enters directly into the manufacturing process;

(d) Sales to a building or construction contractor or subcontractor, for use on a project within the city of building materials, supplies, and other tangible personal property to be incorporated or used as component parts of a completed structure, driveway, landscaping, and other portions of the project and services utilized directly in the construction, erection, landscaping, and similar work on the project. This exemption shall not apply to tools, equipment, fuel, clothing, food, and similar items of property utilized but not incorporated into a project. [Ord. 1084 §2, 1999; Ord. 497 §1, 1977]

3.08.055 Senior citizen exemption

(a) A person 65 years of age or older who has resided in the Kodiak Island Borough for a continuous period of 30 days or more may obtain a senior citizen sales tax exemption certificate by submitting a completed application to the finance director on a form provided by the city. The application must be signed by the applicant under oath and shall contain information relating to the applicant’s residence, marital status, rental or ownership of occupied dwelling, persons occupying the dwelling, and other information reasonably necessary to determine the applicant’s eligibility and monitor the use of the exemption certificate. The applicant shall also submit for inspection and copying a birth certificate, or other evidence determined by the finance director to be adequate, to establish the applicant’s age. The exemption certificate shall be issued without charge in the name of the applicant and shall be valid for a period of three years.

(b) An exemption certificate issued to a person who is prevented or impaired from personally making purchases or payments by a physical or mental infirmity may designate not more than two other persons who shall be authorized to utilize the certificate when making purchases and payments on behalf of and for the sole use and benefit of the certificate holder or the certificate holder’s spouse.

(c) (1) No person may utilize a senior citizen tax exemption certificate to purchase or acquire property or rentals that are to be consumed or utilized by a person or persons other than the certificate holder, the certificate holder’s spouse, a dependent of the certificate holder, or another person or persons who would be qualified to have a senior citizen exemption certificate issued to them under this section. As used in this section, “dependent” means a child of the certificate holder or the certificate holder’s spouse who resides with the certificate holder when not attending school and who receives more than one-half of his or her support from the certificate holder.

(2) Notwithstanding any other provisions of this chapter no person may utilize a senior citizen tax exemption certificate to purchase or rent an item or service which will be used or consumed in a commercial business or enterprise or for the production of income.

(d) Persons making sales or rentals to or for the benefit of a senior citizen which are exempt from tax under the provisions of this section shall confirm the identity of the person or persons presenting an exemption certificate, if not personally known to them, by requesting identification and shall maintain records of each such exempt sale with an appropriate reference to the senior citizen exemption certificate number. If the person making the sale or rental has reason to believe that it is not for use or consumption by a senior citizen or other qualified user, because of the volume, type of purchase, or other facts, that person shall promptly report the possible fraudulent use of the exemption certificate to the city finance director. The finance director shall investigate the sale or sales, and if the finance director determines that the exemption certificate is being abused, the matter shall be referred to the city manager, who shall conduct such further investigation as is determined necessary and present the facts to the council for authorization to initiate prosecution or revocation action, or both.

(e) Senior citizen exemption certificates shall be subject to revocation as provided in KCC 3.08.070. [Ord. 983 §2, 1994; Ord. 703, 1983; Ord. 568 §1, 1979]

3.08.060 Certificate of exemption

(a) A person entitled to the exemption under KCC 3.08.040(c) or (v) or 3.08.050 shall apply to the city for a certificate of tax exemption which will be issued, without charge, to qualified persons. The application shall be submitted on a form provided by the city clerk and shall contain the name, address, type of organization, the section under which the exemption is claimed, and such other information as is required by the city clerk. Duplicate certificates will be issued on request.

(b) A construction contractor or subcontractor requesting exemption under KCC 3.08.050(d) must apply to the city for a certificate of tax exemption which will be issued, without charge, to qualified licensed contractors or subcontractors. The exemption shall be valid for a period of one year, at the end of which an accounting of the use of the exemption shall be made to the finance director reflecting each building project and the correct location of the project by legal description and any other commonly recognized address from which services, materials, supplies, or other property are purchased or obtained.

(c) The certificates of exemption shall be valid for a period of one year and the expiration date shall be printed on the face of the certificate. Exemption certificates may be renewed annually, without charge, by completing an application form containing information required to assess the continued existence of the exemption. [Ord. 766 §2, 1985; Ord. 695 §11, 1983; Ord. 537 §1, 1978; Ord. 497 §1, 1977]

3.08.070 Revocation of certificate of exemption

(a) A certificate of tax exemption may be revoked by the city manager for any of the following acts or omissions:

(1) Falsification of any statement or information in the application for certificate of exemption;

(2) Utilization of the tax-exempt certificate for the purchase or acquisition of nonexempt property, rentals, or services;

(3) Knowingly or negligently permitting or authorizing the use of the certificate by a person other than an authorized agent or employee of the person or entity to whom the certificate was issued.

(b) Prior to revocation of a certificate, the holder of the certificate shall be provided with notice of the alleged violation not less than 10 days prior to the proposed effective date for revocation of the exemption certificate. The person or entity to whom the certificate was issued may request a hearing before the city manager regarding the alleged violation by filing a written request with the city clerk prior to the effective date for revocation. If requested, the hearing shall be held within 20 days after the date of receipt of the request, and the exemption certificate shall not be revoked prior to the date of hearing.

(c) A decision of the city manager revoking an exemption certificate may be appealed to the council by filing a written notice of appeal with the city clerk within 10 days after receipt of the decision. The hearing on the appeal shall be scheduled before the council at a regular or special meeting held within 30 days after receipt of the notice of appeal. The council may, in its discretion, hear the matter either on the record or de novo. If the appeal is heard de novo, no evidence may be presented before the council which was not presented before the city manager.

(d) If an exemption certificate is revoked, a new certificate may not be issued to the same person or entity for a period of two years from the date of revocation.

(e) The revocation provided by this section is in addition to any other penalties provided by law for the violations. [Ord. 497 §1, 1977]

3.08.080 Tax collectors—registration certificate

(a) All persons engaged in selling or renting property or rendering services subject to the tax imposed by this chapter shall file an application for a certificate of registration not later than the date of commencing business in the city or opening a place of business within the city. An application for a new business not previously registered to collect sales taxes shall be accompanied by a $100.00 deposit, or, in the case of a person who does not maintain a permanent place of business within the city or who is not a local resident residing within the Kodiak Island Borough, a $200.00 deposit which the registrant may recover by a deduction from the remittance submitted with the first quarterly return filed or, if that return is insufficient, the balance shall be refunded. If applicant has established credit with the city, the finance director may waive the required deposit.

(b) Upon receipt of a properly executed application, on a form provided by the city clerk, accompanied by the required deposit, the city clerk shall issue the applicant a certificate of registration, stating the address of the place of business to which it is applicable and authorizing such person to collect the sales tax. The certificate shall be prominently displayed at the place of business named on the certificate or, if there is no regular place of business, the certificate shall be attached to the stand, truck, or other merchandising or service device.

(c) The certificate of registration is nonassignable and nontransferable, and must be surrendered to the city clerk by the person or entity to whom it is issued upon cessation of business at the location named in the certificate. If the business is continued at the same location but there is a change in its business form, the certificate holder making such change shall surrender the old certificate to the clerk for cancellation and the successor organization shall apply for a new certificate of registration. Upon receipt of such application properly executed, a new certificate bearing a new number will be issued to such successor.

(d) When there is a change of address for the certificate holder’s place of business, a new certificate of registration is required, bearing the same registration number, showing the new address.

(e) An applicant for a new certificate required to reflect a change in business form or a change of address for an existing certificate holder is not required to post a deposit with the application. [Ord. 830 §3, 1988; Ord. 497 §1, 1977]

3.08.082 Failure to obtain registration certificate

It shall be unlawful for any person to engage in, or continue in, business within the city or to conduct activities within the city, other than casual or occasional sales, unless and until such person obtains a certificate of registration. In the event the finance director ascertains that any such person is engaging in, or continuing in, business within the city, other than casual or occasional sales without a certificate of registration, one or more of the following remedies may be sought:

(a) Conduct a special audit of such person’s records and make a demand upon such person to obtain a sales tax certificate, in which case such person who has engaged in business or activities within the city without a certificate shall pay a special fee to reimburse the city for the expense of the audit, which fee shall be the lesser of the sum of $1,000 or 10 percent of any tax found to be due. However, the fee may be waived at the discretion of the finance director for good cause shown. The finance director shall also assess any delinquencies, and applicable penalties and interest, if any, against such person, if such person engaged in sales or other transactions which were or are subject to the city sales tax.

(b) Report the facts to the city prosecutor for appropriate action. [Ord. 721 §1, 1984]

3.08.090 Addition of tax

(a) The tax collector shall add the tax imposed by this chapter to the price or charge, showing the tax as a separate and distinct item. The tax imposed on the sale of more than one separately priced item may be shown as a total tax on the aggregate price of all items purchased and delivered at one time.

(b) The owner or other person providing products or services through a coin-operated vending or amusement machine shall collect the tax levied by this chapter and may include that tax in the fee charged to operate the machine. The allocation of the payment required to operate the machine, between the purchase price and sales tax, shall be explained by notice or marking on the device.

(c) A business selling gasoline or diesel fuel delivered to the customer’s vehicle in bulk may include the sales tax as an extra charge in the metered price for the fuel if a notice is posted on the meter or pump, or otherwise prominently displayed, explaining the allocation of the total cost between the charge for the fuel and the sales tax.

(d) A business engaged in the sale of beverages for consumption on the premises may, in lieu of adding the tax as a separate item, include the tax imposed by this section in the price for the beverage. A notice shall be prominently displayed in the establishment dispensing the beverages explaining the allocation of the total price between the charge for the beverage and the sales tax collected.

(e) A business providing for-hire passenger vehicle transportation services may, in lieu of adding the tax as a separate item, include the tax imposed by this chapter in the charge for the transportation. A notice shall be prominently displayed in each for-hire passenger vehicle explaining the allocation of the total charge between transportation charges and the sales tax collected.

(f) When authorized by this section to be included in the price or charge for a product or service, the tax to be collected and remitted shall be determined by multiplying the gross receipts from the services or product by 0.07 and dividing that product by 1.07. Notices required by this section shall be provided by the city. [Ord. 1300 §3, 2012; Ord. 972 §1, 1993; Ord. 557 §3, 1979; Ord. 497 §1, 1977]

3.08.100 Assumption of tax prohibited

No person may advertise or state to the public, or to any buyer, tenant, or consumer of property or services, directly or indirectly that the tax imposed by this chapter or any part thereof will be assumed or absorbed by that person, or that it will not be added to the sales price or charge, or that it will be refunded; nor may any person assume, absorb, or fail to separately state the tax to the buyer, tenant, or consumer, unless otherwise specifically authorized by this chapter. [Ord. 497 §1, 1977]

3.08.110 Tax schedule

(a) The amount of the tax to be added to the rental charge for transient room rentals shall be determined in accordance with the following schedule:

Charge

Tax

Under $0.05

None

$0.05 through $0.12

$0.01

0.13 through 0.20

0.02

0.21 through 0.29

0.03

0.30 through 0.37

0.04

0.38 through 0.45

0.05

0.46 through 0.54

0.06

0.55 through 0.62

0.07

0.63 through 0.70

0.08

0.71 through 0.79

0.09

0.80 through 0.87

0.10

0.88 through 0.95

0.11

0.96 through 1.04

0.12

Over $1.05

Continue on same scale

(b) The amount of tax to be added to the purchase price, rental, or service charge, other than rentals of transient rooms, shall be determined in accordance with the following schedule:

Charge

Tax

Under $0.08

None

$0.08 through $0.21

$0.01

0.22 through 0.35

0.02

0.36 through 0.49

0.03

0.50 through 0.64

0.04

0.65 through 0.78

0.05

0.79 through 0.92

0.06

0.93 through 1.07

0.07

1.08 through 1.21

0.08

1.22 through 1.35

0.09

1.36 through 1.49

0.10

1.50 through 1.64

0.11

1.65 through 1.78

0.12

Over $1.78

Continue on same scale

[Ord. 1300 §4, 2012; Ord. 1297 §2, 2012; Ord. 964 §3, 1993; Ord. 695 §12, 1983; Ord. 676 §5, 1983; Ord. 557 §4, 1979; Ord. 497 §1, 1977]

3.08.120 Maximum taxable sale

(a) If the sales price of an item or items or the charge for rental of any property or performance of any service exceeds $750.00 for a single transaction, that portion of the price or charge in excess of $750.00 shall be exempt from the tax levied by this chapter.

(b) In determining the maximum tax payable with regard to a single transaction for the rendering of services on a substantially regular basis, which services are generally repetitive in nature and are to be performed over a period of time under a contract, each period for payment or partial payment under the contract shall be deemed a separate service transaction. The maximum tax payable shall be applicable to each deemed service transaction with tax payments to accrue and become payable at the time of filing the next quarterly return to be submitted following receipt of payment for the service.

(c) For purposes of computing the maximum tax, a rental of property for a period in excess of one month shall be deemed as a series of rentals with each rental transaction terminating as a rental payment is made. The maximum sales tax payable shall be applicable to each deemed rental with tax payments to accrue and become payable at the time of filing the next quarterly return to be submitted following receipt of the rental.

(d) For purposes of computing the maximum tax, a transaction which takes the form of a lease shall be deemed a rental or series of rentals unless a party to the transaction demonstrates that it constitutes a capital lease as defined in this chapter. A capital lease shall be treated as an installment purchase. The finance director shall have the final authority to determine whether or not a particular transaction constitutes a capital lease and may require the parties to such a transaction to submit such information or documentation as the finance director feels is reasonably necessary to make this determination. In making such a determination the finance director may rely upon the 1991 Comprehensive Governmental GAAP Guide by Larry P. Bailey (Miller Accounting Publications, Inc., a subsidiary of Harcourt Brace Jovanovich Publishers). [Ord. 1190 §1, 2005; Ord. 1171 §1, 2004; Ord. 983 §3, 1994; Ord. 497 §1, 1977]

3.08.130 Title to tax proceeds

The title to the taxes collected pursuant to this chapter shall vest in the city upon collection by the tax collector. [Ord. 497 §1, 1977]

3.08.140 Sales tax returns

(a) Each person who sells or rents property or renders services taxable under this chapter in any quarter ending March 31, June 30, September 30, and December 31 shall, on or before the last day of the month following the end of each quarter year, or April 30, July 31, October 31, and January 31, respectively, complete, sign, and file with the city a return for that quarter, upon forms furnished by the city, setting forth the following:

(1) The amount received from all sales, rentals, and services made or rendered within the city;

(2) The amount received from nontaxable sales, rentals, and services, with a brief explanation of the nontaxable status;

(3) The amount received from taxable sales, rentals, and services;

(4) The amount of tax attributable to the taxable sales, rentals, and services;

(5) The taxes collected;

(6) The number of transactions in which a portion of the price or charge is exempt from sales tax under KCC 3.08.120; and

(7) Such other information and supporting papers as the council may require in the reporting form.

(b) The taxes collected shall be remitted with the reporting form after deducting any administrative fees that may be allowed by KCC 3.08.160.

(c) If the day established in this section for filing any sales tax return is a Saturday, Sunday, or legal holiday, tax returns and remittances shall be considered filed on time if delivered by hand to city offices or postmarked on or before the close of business on the first business day following that Saturday, Sunday, or holiday.

(d) A person making sales or rentals or rendering services within the city shall make a return, even though none of the reported transactions are taxable, unless the person is a licensed medical doctor, dentist, osteopath, optometrist, chiropractor, hospital, religious or charitable organization or club, or a labor union.

(e) A person who fails to timely comply with the provisions of this chapter relating to the filing of quarterly reports and remittance of taxes collected for any one quarter during a calendar year shall, if required by written notice from the finance director, file the required reports and transmit collected sales taxes monthly until such time as the finance director determines that a willingness and ability to comply with the requirements of this chapter has been established. Monthly reports and remittances shall be due on the fifteenth day of each month following the month of collection. Any person may, upon notification to the finance director, file reports and transmit taxes monthly.

(f) A person doing business within the city for a period of time that is, or can be reasonably expected to be, less than six months in duration shall file sales tax returns and remit taxes on a monthly basis as provided in subsection (e) of this section.

(g) A final sales tax return shall be filed and the tax due remitted within 15 days after the date of selling or terminating a business. The purchaser of the business shall withhold a portion of the purchase money sufficient to pay any sales tax, penalties, and interest that may be due until seller displays a receipt from the city evidencing total payment of the tax, interest, and penalties due. If the purchaser fails to withhold the required sum from the payment due to the seller, the purchaser shall also be liable for the taxes, penalties, and interest owed by the seller to the city. [Ord. 1302 §1, 2013; Ord. 1105, 2000; Ord. 799 §4, 1986; Ord. 696, 1983; Ord. 685 §§1, 2, 1983; Ord. 497 §1, 1977]

3.08.150 Credit for taxes

A person who has collected and remitted a tax on a sale, which tax is subsequently determined not to be due because a refund is granted for returned merchandise, payment is refused on a check received in conjunction with a sale, or similar circumstances, may take a credit against future taxes. Proper documentation shall be made available by the tax collector, on request, to substantiate the credit taken. [Ord. 497 §1, 1977]

3.08.160 Administrative costs and reimbursements

To compensate sellers, renters, and persons rendering services for keeping the sales tax records and filing returns as required by this chapter and making prompt remittances, those persons shall be entitled to a fee equal to two percent of the amount of the tax collected, and that amount may be deducted when making remittances; provided, that the reports and remittances are received on or before the due date for such reports and remittances. A person filing a report or remitting taxes collected after the due date forfeits the right and claim to the fee provided by this section and shall remit the entire tax due. [Ord. 497 §1, 1977]

3.08.170 Penalty and interest—application of partial payments

(a) A person who fails to remit taxes collected on or before the due date shall pay, in addition to the tax due, a penalty of five percent of the tax that is then due and unpaid for each month or any fraction of a month during which any part of the tax remains unpaid until a total penalty of 20 percent has accrued, which penalty shall be added to all returns until the tax, penalty, and interest have been paid.

(b) Taxes that are not remitted to the city when due shall draw interest from the date of delinquency until paid at the rate of 15 percent per year. Interest shall not accrue on the late payment penalty assessed by subsection (a) of this section, but shall accrue on the civil penalty assessed by KCC 3.08.190.

(c) Partial payments shall be credited to the amount due for each calendar quarter, in chronological order, and within the amount due for each calendar quarter first to accrued penalty, second to accrued interest, and then to the tax obligation originally due. [Ord. 1217 §1, 2007; Ord. 799 §§5, 6, 1986; Ord. 497 §1, 1977]

3.08.180 Determination of exemptions

(a) Every sale of property or service and every rental made within the city, or rendered or received by a person within the city, unless explicitly exempted by ordinance, is presumed to be subject to the tax imposed by this chapter.

(b) A purchaser, tenant, or other person obtaining property or service who claims an exemption under a provision of this chapter for which a certificate of exemption is required shall display the certificate at the time of the purchase or rental and the certificate number shall be noted on the receipt, invoice, or other evidence of the transaction.

(c) A purchaser, tenant, or other person obtaining property or services who believes the tax has been charged in error may make a claim to the city for refund within 30 days after the date of sale.

(d) If the finance director denies a refund of the tax, the taxpayer may appeal to the city manager by filing a written notice of appeal, within 10 days after the finance director’s decision, setting forth all facts relating to the claimed exemption. The city manager shall provide an opportunity for a hearing within 30 days after the receipt of the notice of appeal. [Ord. 497 §1, 1977]

3.08.190 Failure to collect taxes

(a) A person required by this chapter to collect sales taxes levied, who fails to collect such taxes on taxable transactions, shall be assessed with a civil penalty of double the tax that should have been collected, as determined by an audit.

(b) If any of the following defenses are established, the civil penalty imposed by this section shall be waived:

(1) The securing, in good faith, of a certificate of exemption or a statement of eligibility for exemption from the person against whom the tax would have been levied;

(2) Proof of a belief, based upon advice of legal counsel or the city finance director, that the sale, rental, or rendering of service was not subject to the tax levied by this chapter, accompanied by proof of notification in writing to the city manager based on such belief prior to or immediately following the transaction;

(3) A reasonable attempt, in good faith, to collect the tax from the buyer.

(c) A purchaser, renter, or other person obtaining property or services who fails to pay the tax levied by this chapter on a taxable transaction shall be assessed with a civil penalty of double the taxes that should have been paid.

(d) The civil penalties imposed by this section shall be in addition to any other civil or criminal penalties imposed by this chapter. [Ord. 497 §1, 1977]

3.08.200 Preservation of records—collection of arrears tax

(a) Every person required by this chapter to collect and remit taxes shall keep and preserve suitable records of the gross sales, rentals, or service receipts, together with bills of sale and other pertinent records and documents which may be necessary to determine the amount of the tax due under this chapter and to substantiate the information provided in filed returns. The records required to be maintained shall be preserved for not less than three years after the remittance of the taxes and shall be subject to examination by the city finance director or any other authorized employee of the city while engaged in reviewing or auditing the records of any taxpayer required to make a return under the provisions of this chapter. The city shall give written notice of intent to conduct an audit under this section not less than five days prior to the audit.

(b) Collection of arrears tax by the city shall be limited to the period of three years prior to the date when the finance director or authorized agent began an audit of the taxpayer’s records, wrote to the person through use of regular mail concerning an apparent violation of this chapter, or took some other recorded action to require a certificate of registration or other compliance with this chapter. [Ord. 721 §2, 1984; Ord. 497 §1, 1977]

3.08.210 Estimated tax

If the city is unable to ascertain the correct tax to be paid by a seller because of the failure or refusal of the seller to file a return, keep accurate records, or allow their inspection, or because a return has been falsified, the city may prepare an estimate of the tax due based on any information that may be available. Notice of the estimated tax shall be personally delivered or sent to the seller by certified mail and shall become final for the purpose of establishing the tax liability unless the seller, within 30 days after the date of the personal delivery or mailing of the notice of the estimated tax, files an accurate return supported by records determined by the finance director to be satisfactory, establishing a lesser liability. In either event, however, penalty and interest under KCC 3.08.170 shall be calculated and imposed from the original due date. The fact that a notice of estimated tax sent by certified mail was unclaimed, refused, or claimed by a person other than the seller shall not affect its validity or extend the date upon which it becomes final unless the seller establishes that the seller did not ordinarily receive mail at or through the address to which the notice was addressed and did not otherwise receive the notice. [Ord. 1047 §3, 1997; Ord. 497 §1, 1977]

3.08.220 Returns confidential

(a) Except in connection with official investigations or proceedings of the city, whether judicial or administrative, involving taxes due under this chapter, or as otherwise authorized by subsection (b) of this section, no officer, employee, or agent of the city may divulge any information disclosed in a report or return filed under this chapter. The prohibition of this section shall not prohibit the preparation and use of statistical summaries of sales tax data that do not disclose the identity of any person filing reports required by this chapter.

(b) Notwithstanding the foregoing subsection (a) of this section, the following information shall be made available to the public upon request: the name and address of sellers who have registered to collect and remit city sales tax; whether or not an individual or business is registered to collect sales tax in the city; whether or not a business is current in filing sales tax returns and in remitting sales tax, the amount of sales tax due, and number of returns not filed; and the names, addresses, and exemption numbers of the nonprofit agencies which have received a nonprofit exemption number from the finance department. The city manager or his or her designee may from time to time publish the names of sellers delinquent in filing sales tax returns or remitting sales taxes and the amount thereof; provided, that the name of a seller who has signed a confession of judgment for delinquent sales taxes, penalties, and interest, and a stipulation to postpone execution against such judgment, and who is current in the payments to be made and all other obligations arising as a result of such stipulation as of the date on which the names are submitted to the publisher, will not be published. [Ord. 1068, 1998; Ord. 497 §1, 1977]

3.08.222 Corrections of errors on tax returns

If the taxpayer makes an error or errors in computing the tax on a return, the finance director or authorized agent shall correct such error or errors and immediately notify the person filing the return by ordinary mail that such correction has been made. Any additional tax due, together with applicable penalty and interest, in accordance with KCC 3.08.170, for which the taxpayer becomes liable shall be payable immediately by the taxpayer. If the taxpayer makes an error which results in overpayment of tax, the finance director shall allow credit against taxes due on future returns, or shall authorize a refund in accordance with KCC 3.08.224. [Ord. 721 §3, 1984]

3.08.224 Refund of overpayment

The finance director, or authorized agent, shall refund overpayment of taxes brought about by mathematical errors in the return or reports filed by the person remitting the tax; computational errors made by the remitter or city personnel with respect to said return or reports; duplicate payments by remitter; or any overpayments made by a person filing a tax return that may be determined as a result of an audit of such person’s records; provided, however, that in no event shall the remitter of sales taxes be entitled to a refund for overpayment of sales taxes where the overpaid taxes have actually been collected by said person. In the event the amount of overpayment is $100.00 or less a cash refund may be authorized at the discretion of the finance director. In no event shall there be a refund for overpayments that were made more than three years prior to the discovery of the overpayment by the person filing the returns or the finance director or authorized agent. [Ord. 721 §4, 1984]

3.08.230 Recovery of taxes

Taxes due but not paid may be recovered by the city in an action against the buyer, tenant, or recipient of services if that person has failed or refused to pay the tax on request by the seller or submitted a false certificate of exemption. Taxes collected but not transmitted and taxes not requested or demanded by the person charged with the duty of collecting of tax may be recovered by an action against the person selling or renting the property or services. [Ord. 497 §1, 1977]

3.08.240 Lien for tax, interest, and penalty

(a) The tax, interest, and penalty imposed under this chapter and the lien filing fee under subsection (b) of this section shall constitute a lien in favor of the city upon all real and personal property of every person required to collect and remit the tax. The lien arises at the time of delinquency and continues until liability for the tax is satisfied or the property of the delinquent person is sold at foreclosure sales. The lien has priority over all other liens and encumbrances except those for property taxes and special assessments; provided, however, that the lien is not valid as against a person in the position of a prior mortgagee, pledgee, or judgment creditor until notice of the lien is filed in the office of the recorder for the Kodiak recording district in the manner provided for federal tax liens in AS 43.10.090 through 43.10.150 and the lien is not valid against a purchaser who, prior to the recording of it, in good faith and without actual notice of the lien or the underlying tax liability, has acquired for fair market value an interest in property otherwise subject to the lien. Upon recordation a copy of the lien shall be sent to the last known address of every person named in the lien. Failure to comply with this requirement shall not, however, affect the validity of the lien or the city’s right or authority to foreclose upon it.

(b) Fees for the filing and releasing of liens authorized by this section shall be established by resolution or motion of the city council. [Ord. 951 §1, 1993; Ord. 830 §4, 1988; Ord. 497 §1, 1977]

3.08.250 Foreclosure against real property

A lien for the tax, interest, and penalties created by this chapter may be foreclosed, when authorized by the council, by commencement of an action in the superior court pursuant to the procedure set forth in AS 09.45.170 through 09.45.220. [Ord. 497 §1, 1977]

3.08.260 Collection by distraint and sale

(a) The city may collect taxes, with interest, penalties, and other additional amounts permitted by law, by distraint and sale of the property of the person liable to pay the taxes, interest, penalty or other additional amount, who neglects or refuses to pay them within 10 days after receipt of notice and demand for payment.

(b) In case of neglect or refusal to pay taxes or deficiencies as provided in this section, the city clerk may issue a warrant authorizing any police officer to levy upon, seize, and sell any property, except exempt property, belonging to the person for the payment of the amount due, with interest and penalty. When distraint is made as provided in this section, the police officer charged with the services shall make an inventory of the property served and leave a signed copy of that inventory with the owner or possessor of the property, or at the dwelling or usual place of business, if a person of suitable age and discretion can be found, or if the taxpayer is a corporation or other type of organization with an officer, manager, general agent, or agent for process, with a notation of the amount demanded and the time and place of sale.

(c) The police officer shall immediately publish a notice of the time and place of sale at public auction, together with a description of the property distrained, in a newspaper published in the city and post a copy of the notice at the post office nearest the place where the sale is to be made.

(d) The time of sale shall be not less than 15 or more than 60 days from the date of the notification to the owner or possessor of the property, and the place proposed for the sale shall not be more than five miles from the place of making the distraint. The sale may be continued from time to time at the discretion of the police officer, but not for more than 30 days after the date specified in the notice.

(e) The property distrained shall be restored to the owner or possessor if, before the sale, payment of the amount due is made to the police officer charged with the collection, together with the fees and other charges.

(f) The police officer conducting the sale under this section shall give to the purchaser a certificate of sale on payment in full of the purchase price. The certificate of sale:

(1) Is prima facie evidence of the right of the police officer to make the sale, and conclusive evidence of the regularity of the officer’s proceedings in making the sale;

(2) Transfers to the purchaser all right, title, and interest of the delinquent taxpayer in and to the property sold;

(3) Where the property consists of stock, is notice, when received, to the corporation to record the transfer on their books and records in the same manner as if the stock were transferred or assigned by the party holding the stock in lieu of an original or prior certificate, which is void, whether canceled or not; and

(4) Where the subject of the sale is security or other evidence of debt, is a good and valid receipt to the person holding it, as against a person holding or claiming to hold possession of the security or other evidence of debt.

(g) If property seized and sold is not sufficient to satisfy the claim of the city for which distraint or seizure is made, the police officer may, thereafter, and as often as is necessary, proceed to seize and sell in like manner any other property subject to the lien created by this chapter until the amount due from the taxpayer together with all expenses is fully paid.

(h) A person in possession or control of property subject to distraint, upon which a levy is made, shall, upon demand by the police officer making the levy, surrender the property to the police officer, unless the property is, at the time of the demand, subject to an attachment under judicial process. A person who fails or refuses to so surrender the property is personally liable to the city for a sum equal to the value of the property not so surrendered, but not exceeding the amount of the taxes or deficiencies, including penalties and interest for the collection of which levy is made, together with costs and interest from the date of the levy.

(i) All persons shall, on demand of a police officer about to distrain or having distrained on property or rights of property, exhibit all books containing evidence or statements relating to the property liable to distraint for the tax due.

(j) The provisions of this chapter are not exclusive but are in addition to all other existing remedies provided by law for the divorcement of a levy and collection of taxes of the city. [Ord. 497 §1, 1977]

3.08.270 Prohibited acts—penalties—remedies

(a) No person may:

(1) Fail or refuse to file a completed tax return required by this chapter or falsify any material statement in that return.

(2) Fail or refuse to collect taxes levied by this chapter or to remit those taxes to the city, as required.

(3) Conduct any business in the city relating to sales, rentals, or services subject to taxation under this chapter without first applying for and obtaining a certificate of registration to collect the taxes imposed on sales, rental, and services.

(4) Cause or permit a corporation of which the person is an officer or director, a limited liability company of which the person is a member or manager, or a partnership of which the person is a partner, to violate any provision of subsections (a)(1) through (3) of this section.

A person who is convicted of violating a provision of this subsection shall be subject to a fine of not more than $5,000 plus any surcharge required to be imposed by AS 29.25.074, imprisonment for not more than one year, or both such fine and imprisonment.

(b) No person may falsify any portion of an application for a certificate of exemption.

(c) The city may institute a civil action against a person who violates a provision of subsection (a) of this section. An action to enjoin a violation may be brought notwithstanding the availability of any other remedy. Injunctive relief may include an order prohibiting the violator from selling or renting property or rendering services subject to the tax imposed by this chapter until the person has accounted for and remitted to the city all of the tax that the person failed to collect and remit as required by this chapter, with applicable penalty and interest. On application for injunctive relief and a finding of a violation or a threatened violation, the superior court shall grant the injunction. In addition to injunctive and compensatory relief, a civil penalty not to exceed $1,000 may be imposed for each violation. Each day that a violation continues constitutes a separate violation. [Ord. 1197 §2, 2005; Ord. 753 §2, 1985; Ord. 497 §1, 1977]

3.08.280 Definitions

As used in this chapter the following definitions shall apply:

Bargain purchase option. A “bargain purchase option” exists with respect to leased property when the lessee can buy the property some time during the term of the lease at an amount substantially less than its estimated fair value at the time the option is exercised. If there is reasonable assurance at the inception of the lease that the purchase option will be exercised, the option shall be considered a bargain purchase option.

“Buyer” or “purchaser” means a person who acquires an interest in real or personal property, or the right to use real or personal property, or who acquires services for consideration.

“Capital lease” means a lease which is in substance a purchase and wherein substantially all of the risks and benefits of ownership are assumed by a lessee. A lease which meets any one or more of the following criteria shall be considered a capital lease:

(1) The lease transfers ownership of the leased property to the lessee by the end of the lease term.

(2) The lease contains a bargain purchase option.

(3) The lease term is equal to 75 percent or more of the estimated economic life of the leased property. However, if the beginning of the lease term falls within the last 25 percent of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease.

(4) The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs, to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at the inception of the lease over any related investment tax credit retained by the lessor and expected to be realized by the lessor. However, if the beginning of the lease term falls within the last 25 percent of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease.

“Charitable organization” means an organization having as its primary purpose relief of the poor and distressed or of the underprivileged.

“Hotel-motel” means a structure or portion of a structure which is occupied or intended for occupancy by transients for dwelling, lodging, or sleeping purposes and includes any hotel, motel, inn, or similar structure.

“Legal holiday” means a holiday on which the city finance offices are closed to business, which holidays are enumerated in the city’s personnel rules and regulations.

“Rental” means permitting the use or occupancy of real or personal property for consideration other than by means of a capital lease.

“Residential unit” means one or more rooms and a single kitchen in a dwelling designed as a unit for occupancy by not more than one family for living or sleeping purposes.

“Residential uses” means for use within a residential unit.

“Sale” means a transfer or exchange of any property of every kind and description, or the right to use or occupy such property, for consideration.

“Sales price” or “charge” means the consideration, whether money, credit, or other property or interest in property, without deduction for delivery costs, taxes, or any other expense. The receipt of property or an interest in property as consideration, the “sales price” or “charge” shall be based on the fair market value of the property or interest in property.

“Seller” means a person, whether acting as a principal, agent, or broker, who sells, leases, or rents real or personal property or provides services to another for consideration.

“Transient” means a person who occupies or rents and has available for the person’s own occupancy or occupancy by any other person a suite, room, or rooms in a hotel-motel for fewer than 30 consecutive days. An employee who occupies or has available for fewer than 30 days a suite, room, or rooms rented or leased for more than 30 consecutive days by an employer for use on a rotating basis by employees is not a transient. [Ord. 1105, 2000; Ord. 983 §§4—6, 1994; Ord. 799 §7, 1986; Ord. 767 §3, 1985; Ord. 676 §6, 1983; Ord. 497 §1, 1977]