Why is Alaska considering introducing a statewide sales tax?

Alaska is reconsidering a statewide sales and use tax due to fiscal pressures and the need to diversify state revenue sources beyond oil and gas income. The proposal also aims to streamline and centralize the administration of existing local sales taxes currently managed by numerous municipalities.

What sales tax rates are proposed under Alaska’s new bill?

The proposed Alaska bill introduces a seasonal tax structure, with a 4% rate applied from April through September during peak tourism months and a reduced 2% rate from October through March when visitor activity declines.

What goods and services would Alaska’s proposed sales tax cover?

The tax base would be broad, including utilities such as electricity, water, and gas, digital products like software, and services ranging from construction and professional labor to lodging, entertainment, telecommunications, and computer system access.

Is Alaska’s proposed statewide sales tax permanent?

No, the proposal is designed as a temporary measure. It would take effect on January 1, 2027, and expire on January 1, 2034, aligning with expected improvements in oil and gas revenues.

Why is Montana discussing a statewide sales tax again?

Montana is revisiting the idea as policymakers and experts examine long-term fiscal sustainability, growing tourism, and increasing concerns over property taxes, even though no official legislative proposal has yet been drafted.

Has Montana previously rejected statewide sales tax proposals?

Yes, Montana voters rejected statewide sales tax proposals in both 1971 and 1993. While political resistance remains strong, recent legislative discussions indicate renewed interest in evaluating such a tax option.

Alaska and Montana Reconsider Statewide Sales Tax

Alaska and Montana, two of the five so-called NOMAD states that did not implement a statewide sales tax, are reconsidering their long-standing positions amid fiscal pressures and the need for revenue diversification. While Alaska's Governor Mike Dunleavy has already proposed a bill to impose a statewide sales and use tax, in Montana, no official documents have been drafted. Still, voices in favor of implementation are becoming louder.

Reopening the Statewide Sales Tax Debate

Under the proposed Bill, Alaska would not only add a new state tax layer, but also centralize the administration of local sales taxes currently managed by more than 100 municipalities. As proposed, the tax rate would be 4% from April through September, the peak visitor period, and 2% from October through March, when tourism slows. This approach mimics the existing practice in at least nine Alaskan local jurisdictions that already adjust sales tax seasonally.

The proposed tax base is broad, covering electricity, water, gas, and digital products such as software, as well as services ranging from construction and professional labor to entertainment, lodging, telecommunications, and access to computer systems. Notably, the Bill is drafted as a temporary measure, taking effect on January 1, 2027, and expiring on January 1, 2034. The set timeline aligns with projected improvements in oil and gas revenues from new developments and legislative changes anticipated after fiscal year 2034.

In Montana, on the other hand, the idea of adopting a statewide sales tax is once again being discussed, not because such a tax currently exists on any level, but because of the ongoing debates about the state's fiscal future.

Thus, the University of Montana’s Bureau of Business and Economic Research organized several seminars in which experts examined whether Montana should reconsider a general sales tax as tourism grows and property taxes become more controversial. Some of the key matters discussed are how a sales tax might affect the economy, how much revenue it could generate, and whether it could be structured to target visitors rather than residents.

Conclusion

The realities of Alaska's and Montana's current sales tax situations vary significantly. On one side, more than 100 local jurisdictions in Alaska impose sales and use taxes in some form. In contrast, Montana has repeatedly rejected statewide sales tax proposals in the past, notably in 1971 and 1993, and political resistance remains strong. Nonetheless, interest has grown in recent Montana legislative sessions with several bills introduced related to sales tax issues, but broad public support still appears limited.

Source: Bloomberg, Alaska Legislature - Senate Bill 227, Montana Taxpayers Association