Alaska Supreme Court upholds tobacco tax

Alaska Supreme Court upholds MAT-SU tobacco tax

Sept. 3, 2008 PALMER – The MAT-SU Borough recently won in the Alaska Supreme Court a three-year-old case that upholds the tobacco tax.

The Aug. 29 ruling sets a precedent for other second class boroughs in Alaska, by defining their power to levy a tax on cigarettes and other tobacco.

"We're very pleased with the Alaska Supreme Court's decision," said Borough Manager John Duffy. "The tax on tobacco achieves one of the Borough's goals of reducing tobacco use especially among young adults and of reducing long-term health care costs," Duffy said.

A tax on tobacco in the Borough collects about $5 million a year. Fairbanks North Star Borough has enacted the same type of tax.

Borough Attorney Nicholas Spiropoulos represented the Borough in this case.

"The tobacco tax will continue to diversify revenues, help alleviate the real property tax burden and provide additional sources of funds for education," Spiropoulos said.

The Borough excise tax is on a person who: acquires tobacco within the Borough, brings tobacco into the Borough, and makes tobacco products in the Borough, or ships tobacco into the Borough.

When it was enacted, the tax assessed a nickel per cigarette. For other tobacco products the tax assessed forty-five percent of the wholesale price.

In Nov. 2005, Borough residents, Nola Bragg and Link Fannon, claimed the Borough had no authority to tax cigarettes and tobacco and that such taxation required voter approval. In Aug. 2006, a Superior Court judgment found that the tax falls within the general taxation powers of municipal government and does not require voter approval. Bragg and Fannon appealed.

In the Supreme Court ruling, the justices wrote that appellants Bragg and Fannon "ask us to resurrect that bygone common law rule. We decline."

The bygone common law required a narrow reading of local government powers.

For more information call Attorney Nicholas Spiropoulos at 745-9676.