Alaska sales and use tax compliance

Find out interesting insights with Jon Naseath, CFO/Founder Cantu Capital Inc.

Moderated by Sherry, Financial Technology Advisor at Hyperbots

Don’t want to watch a video? Read the interview transcript below.

Sherry: Hello, and welcome to all our viewers on CFO insights. I am Sherry, a financial technology consultant at Hyperbots, and I am very excited to have Jon Naseath here with me, he is an accomplished executive with expertise in AI, machine learning, and computer vision driving impactful technology solutions in education, healthcare, and business. Thank you so much for joining us today, John. We’ll be discussing a niche topic, which is Alaska’s State sales and use tax rates. To get us started with the interview, could you provide an overview of Alaska’s State sales and use tax rates? And how do these rates differ across goods and services?  

Jon Naseath: I will first just want to start out by saying that, you know, a lot of states have different complexities. Over the past two weeks, we’ve spoken about a few different states. We started with California, which is where I was born and raised, and have worked through most of my career—a lot of complexities there. We then spoke about Arizona, where my wife’s family is all from, and my family was mostly from California mostly, and now we’re talking about Alaska, my son has been living in Alaska for the last two years, and it’s a beautiful state.  Ironically, each of these states has its own unique complexities for sales tax. So with Alaska, what’s unique is, that everyone thinks about Alaska as not having income tax and not having sales tax because they have so much oil revenue and different things as the primary reason but separate from the State, the local jurisdictions are permitted to impose their own local sales tax, and they often do. For example, Juneau has a 5% sales tax, which applies broadly across most of the goods and services. Wasilla, for example, imposes a 2.5% tax. So the local taxes create a patchwork of systems across the State that require businesses to know the exact rate based on the local jurisdiction.  The services are usually taxed at a local level, creating additional variability.  

Sherry: Could you discuss some of the jurisdictions in Alaska with notably high or low sales tax rates? And how does this affect businesses?  

Jon Naseath: Sure. Well, it’s important to note that Alaska is just huge, and as far as the geography, it covers more than most states, obviously. Some examples are Wrangell and Cordova, where their combined local rates reach up to 7%. So it’s quite high—or actually, compared to California, that’s quite average—but it’s high for Alaska. And then other remote areas or unincorporated regions, don’t have sales tax at all. So it just really depends on where you are and how you do your business.  These variances require business operations across the locations to adjust their rates frequently. Companies serving in high-tax areas may consider pricing strategies to support their businesses and avoid extra costs if possible. It could impact some of their business decisions.  

Sherry: How often do Alaska’s local sales tax rates change? And how do businesses keep up with these updates?  

Jon Naseath: Most changes are going to happen on an annual basis with the new budgets. Oftentimes they are announced at the beginning of the year. But really, the local jurisdictions have the freedom to adjust the sales tax as they see fit. In some cities, seasonal adjustments are made—for example, increasing rates during or having rates specific for the tourist seasons could come into play in different parts of Alaska. Businesses typically monitor rate changes through local government announcements, or they may rely on automated systems to pull the rate data from tax databases. There really isn’t a centralized state system because there isn’t a state tax, so it becomes pretty challenging to stay up to date for the local city taxes that are required. Especially for a small business, it can become quite burdensome.  

Sherry: What are some of the primary resources available to businesses to stay informed about sales and use tax changes in Alaska?  

Jon Naseath: Yeah, again, since there’s no state tax, it really is about how you pull together the different municipal and city tax requirements. There’s the Alaska Municipal League, which is a resource that tracks the tax changes across the different areas.There’s also local city websites, local jurisdiction websites that you’d have to go to. And then third-party tax tools—an example is Avalara—and different sales tax handbooks. Really just trying to figure out how to get the information that you need for your local taxes.  

Sherry:: What challenges do companies face when managing compliance with Alaska’s unique sales and use tax rules? And could you share some examples of the same?  

Jon Naseath: Well, one of the main ones is just the local jurisdictional complexity. Each locality has its own rate. Businesses have to apply the rate based on wherever their customer’s location is. So just getting that lined up right is complex. A company that’s selling in both Juneau at 5% and Wasilla at 2.5% has to adjust their invoices accordingly.  Also, the seasonal variability—some towns adjust based on whether you’re in the peak season and have a lot of tourists coming through. And also figuring out what items need to be taxed. Not all goods and services are consistently taxed across the locations. It just gets pretty complex when you consider timing, location, product, and all the different things that go into individual taxable items.  

Sherry: How can artificial intelligence help businesses manage sales and use tax compliance more efficiently, especially in Alaska’s decentralized tax environment?  

Jon Naseath: Well, there aren’t many tools that are doing it, but figuring out an AI tool that can help automate rate updates and get the local information that’s required—figuring out where the sales are happening. AI tools can help with geolocation to figure out where the sales occurred, and then monitor the changes. So as things happen with the timing of seasonality, as we mentioned, AI can help with that. I’m personally not aware of any other tools besides Hyperbots that can handle all these things and just manage all the changes in Alaska tax.I’ve been in businesses where we just didn’t do business in Alaska because of this. As we were growing, it wasn’t worth the complexity, or we just decided, “We’ll wait till Alaska comes knocking on our door.” Later, they came knocking, so we had to figure it all out. To clarify, that’s what the prior management had decided, and when I came in, we cleaned it all up. It was quite painful to figure out.  

Sherry: How can AI support companies during audits for sales and use tax compliance in Alaska?  

Jon Naseath: Well, the favorite thing about audits, especially with tax audits, is they love asking for information, and you have to go dig into your stuff. AI can help with that. It can access your information, find the right files, and find the right data that you need. It can perform document retrieval, error detection, and look through files. I’ve been in a situation where the state auditor came knocking for a tax audit. We were able to show our information, demonstrate how we had prepared it all, and convince them it wasn’t worth their time to do a full audit.  

Sherry: And what do you see as the future role of AI in handling Alaska’s sales and use tax compliance?  

Jon Naseath: Sales and use tax is really one of those processes where, if you have it under control, it’s a non-issue. If not, it can be very painful and require a ton of resources. An AI tool can help manage those resources, ensure compliance, perform predictive analysis, and manage risks.It can provide real-time dashboards to monitor compliance in different jurisdictions and proactive compliance alerts if something changes locally.  

Sherry: It’s always a pleasure learning from you, Jon. Thank you so much for indulging us in these conversations and being as insightful as you always are.  

Jon Naseath: My pleasure. I do need to call out again, I’m not a tax specialist. Talk to your own tax auditors and specialists. It’s exciting to see a company like Hyperbots tackling unique areas with AI.  

Sherry: Thank you so much, Jon.