How home rule jurisdictions in Alaska may impact SaaS
Alaska operates under a home rule system, which gives local municipalities significant authority to govern themselves — including creating and enforcing their own tax laws. This decentralized system means that SaaS businesses need to evaluate taxability on a city-by-city basis in Alaska.
Alaska is not the only state with home rule tax regulations. For example, in Illinois, the City of Chicago taxes SaaS through its Personal Property Lease Transaction Tax (PPLTT). But Illinois doesn’t tax SaaS at the state level. This means that SaaS providers with customers in Alaska and/or Illinois may need to manage compliance across multiple jurisdictions within the state.
How do you determine whether your software is taxable in Alaska?
One important part of determining taxability in Alaska is understanding nexus, which is a physical or economic presence in an area. More than 40 local jurisdictions in Alaska impose state sales taxes, and many have set economic thresholds for establishing nexus.
The Alaska Remote Seller Sales Tax Commission (ARSSTC) helps municipalities enforce sales tax collection from remote sellers and has set an economic nexus threshold of $100,000 in annual sales. So if a remote seller reaches this threshold in ARSSTC member jurisdictions (all of them combined), the seller must collect and remit local sales taxes on their sales in those jurisdictions.
(Before 2025, the ARSSTC had a second economic threshold of 200 individual sales in a year; however, as of January 1, 2025, the $100,000 sales threshold is the only remaining criterion for economic nexus.)
Many local governments in Alaska (such as Anchorage, Juneau, and Fairbanks) have opted in to the ARSSTC framework. However, some municipalities do not participate and may enforce their own rules.
Businesses must verify whether specific cities or boroughs are members of the ARSSTC. If a municipality does not participate, sellers may need to contact that area's local government to understand and fulfill their tax obligations.
What local governments tax SaaS in Alaska?
According to the Alaska Department of Commerce, Community, and Economic Development, 107 municipalities levy a general sales tax. The sales tax rates for these areas range from 1% to 7%. Examples of municipalities with their own sales tax include:
Juneau: The City and Borough of Juneau imposes a 5% sales tax on most goods and services. As of January 1, 2024, the sales tax cap on a single item or service is $14,300, meaning that only the first $14,300 of the selling price is subject to the 5% sales tax.
Sitka: The City and Borough of Sitka has a seasonal sales tax rate that changes throughout the year: 5% from October 1 to March 31, and 6% from April 1 to September 30. All sales, rentals, and services provided during these periods are taxed accordingly.
Ketchikan: The City and Borough of Ketchikan imposes a seasonal tax rate that varies depending on the time of year. In the City of Ketchikan, the tax rate is 5.5% from October 1 to March 31t and 8% from April 1 to September 30. There is also a cap of $1,000 per transaction, meaning only the first $1,000 of a sale is subject to sales tax.
Kodiak: The City of Kodiak taxes all sales, services, and rentals at a rate of 7%. The maximum taxable amount per transaction is $3,000, after which no additional sales tax will be imposed.
While each area's tax code may not explicitly address SaaS, their broad definitions of taxable services could include it. Businesses should consult local tax codes, contact the ARSSTC, or reach out to a tax professional for clarification to ensure that they maintain compliance.
How to stay compliant
SaaS providers in Alaska will need to have a detailed understanding of local sales tax laws, home rule jurisdictions, and the guidelines set by the ARSSTC to stay compliant. While the precise compliance procedures can vary by jurisdiction, companies typically need to follow these steps.
- Registration: Businesses that meet a nexus threshold will need to register with the appropriate local authorities or, for remote sellers, the ARSSTC. The ARSSTC can also help companies deal with the rules for operating in multiple jurisdictions.
- Calculate and collect: Once a tax obligation has been determined, companies will have to calculate and collect the correct local tax rate. This can involve searching for each city or municipality revenue authority and finding out what rate they apply to SaaS products or services.
- File Returns and remit: Providers will usually need to file sales tax returns according to the schedule set by each area's local government. The ARSSTC helps with this by offering a single point of filling for certain jurisdictions (though all areas of Alaska might not participate).
SaaS companies will want to stay up-to-date on tax law changes in Alaska’s home rule cities, as any revisions to their laws could cause compliance difficulties. Noncompliant companies may face fines, interest, audits, or the loss of their business license. In order to avoid these consequences in Alaska, a sales tax compliance tool like Numeral, along with resources provided by the state, can be useful.
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Resources
The Alaska state government provides resources that may be helpful for SaaS providers, including:
- The Alaska Department of Revenue’s Official Website
- The Alaska Remote Seller Sales Tax Commission
- Alaska’s Division of Community and Regional Affairs
Providers can contact the Alaska Department of Revenue directly by calling 907-465-2361. They can reach the Alaska Remote Seller Sales Tax Commission by dialing 907-790-5300 or sending an email to amstp@akml.org.
The bottom line
Alaska’s tax system presents unique challenges for SaaS providers, due to the state’s various home rule jurisdictions. While Alaska does not impose a sales tax on SaaS directly, local governments do have the authority to create policies that could cause SaaS to be taxable.
SaaS companies will need to be aware of what areas tax their products or services to stay compliant. Other aspects of compliance, including understanding nexus, registering with the state, calculating and collecting the correct tax rate, and submitting returns and remittances by the appropriate deadlines, are also essential. While attending to all of these tasks can be difficult, the process may be simplified by using services like Numeral or resources provided by the Alaska state government.
