State of Alaska Income Tax for 2011, 2012

One of the more unique things about the State of Alaska Income Tax System is that it’s one of only five states in the US that do not have a sales tax, one of seven state that doesn’t have an individual income tax, and it's one of two states that has neither tax.

Federal subsidies and petroleum revenues account for most of the funding for state government operation. Before 1977, when the Trans-Alaska pipeline was finished, Alaskan taxpayers actually paid the second highest tax burden in the country. However, when the 80’s rolled in, Alaska was profiting from plenty of oil tax revenue and they repealed personal income tax, deciding to send out some checks instead.

Today, Alaska’s state tax and local tax burden is the lowest in the country, and has been the lowest since 1990. They’ve reeled back their tax burden from 11% in 1977, to 6.3% in 2009. Alaskan tax payers pay $2,973 per capita in state and local taxes.

Even though Alaska has no State Income Tax, 89 municipalities do collect a local sales tax. The rates vary from 1% to 7.5% and are usually somewhere around 3-5%. In addition to that, there are other specific local taxes, including hotel, motel, bed and breakfast “bed taxes”, raw fish taxes, liquor and tobacco taxes, gaming taxes, fuel transfer taxes and tire taxes. Municipalities in Alaska are also entitled to a portion of the revenue from certain state taxes and license fees (from petroleum, telephone cooperative, and aviation motor fuel).

As far as property taxes go, Fairbanks has one of the highest in Alaska. This is due to the fact that no income or sales tax is assessed at the Fairbanks North Star Borough. Though a sales tax has been voted on many times at the FNSB, it has never been approved, and lawmakers have instead put a large tax on certain goods such as liquor and tobacco.

Even though you're not required to pay Alaska State Income Tax, you still have to file a federal income tax return.