MEMORANDUM

TO: Pete Sprague, Assembly President

Members, Kenai Peninsula Borough Assembly

FROM: Dale Bagley, Mayor

DATE: May 6, 2004

SUBJECT: Ordinance 2004-17, exempting certain oil spill related services from the sales tax code

In March 2004 Cook Inlet Spill Prevention and Response, Inc. ("CISPRI") contacted the borough with a request that it be recognized as exempt from collecting sales taxes for training classes it provides and the charges it imposes for cleaning up oil spills. According to CISPRI, it has received an exemption from the borough for personal property taxes under the community purposes exemption and was advised verbally years ago that it was not subject to the sales tax requirements. More recently, however, the finance department determined that CISPRI was not exempt from the sales tax code as written. The legal department concurred with this interpretation. However, as a matter of policy it does not seem appropriate to charge sales taxes for services provided by a nonprofit corporation to prevent and respond to oil spills. This ordinance would not exempt from sales taxes purchases by organizations such as CISPRI. It would only exempt the sale of services as described above. Accordingly, this ordinance is presented for your consideration.