Dozens of Haines residents who buy firewood from Canadian company Dimok Timber, will have to look elsewhere for their fuel source this winter. The company, located near Haines Junction, has been asked by the Haines Borough to pay sales tax and obtain a business license. But the owners say they shouldn’t have to because all sales are taking place outside the borough, and the country, for that matter. The borough attorney weighed in earlier this month, supporting the borough’s decision. So, with both sides at an impasse, the company said it’s done with the Chilkat Valley.
Dimok has been doing business in Haines for a decade. Each year, it sells hundreds of cords of wood to residents who use it to heat their homes. Dimok owner Dorothy Clunies-Ross said customers continue to reach out to her about their displeasure, but, she said, there’s nothing more they can do.
“We’ve had a number of calls and emails and nobody is pleased,” Clunies-Ross said.
She said if the borough rescinded the request for the Yukoners to collect and pay borough tax, they would consider coming back.
“We don’t feel that we have any right to actually collect tax. We’re a Canadian company, we’re a Yukon company,” Clunies-Ross said. “It just doesn’t seem right that they should put this pressure on us, because we don’t feel that we can comply, legally. We’re not a U.S. corporation.”
Dimok said for 10 years it would meet its Haines customers on the Canadian side of the border to purchase firewood. The customer was responsible for importing the wood, and other paperwork. But Dimok representatives would physically drive the product to the desired location, escorted by the customer.
“We had a working relationship with customs, we were doing everything according to their rules,” Clunies-Ross said. “So, there was no problem with the wood itself.”
The beetle-killed spruce is dry and ready to burn, which is why so many in Haines liked it. Clunies-Ross said Haines customers made up about 10 percent of their overall business.
“We’re not going to go under because of this, but when you’re in business, you make your projections based on your customer base and so, this definitely has affected us,” Clunies-Ross said.
Dimok is now in the process of letting its Haines customers know that they won’t be providing firewood anymore.
But some customers aren’t taking this development sitting down. Earlier this week, Steve Virg-In, who is a customer and a personal friend of the owners, wrote letters to the governor’s office, the attorney general, and the commissioners of revenue and economic development for the State of Alaska. He said he doesn’t believe the borough has the right to demand local tax from a foreign corporation. He calls the act an overreach of authority.
He wrote a letter to the borough and in it, he said he feels their demand for the tax is “politically, personally or monetarily motivated.”
The borough is shooting themselves in the foot, he said, because they’re also losing a dry source of wood for the upcoming biomass project.
Haines manager Bill Seward said the borough is within its rights to ask the business to pay.
“So, our position has essentially remained the same and the interpretation of our attorney is that Dimok is subject to our tax given the way they currently do business in Haines,” Seward said. “Now, should they change their business model perhaps to incorporate a common carrier for delivery of their product, that would change.”
In a response to an appeal from Dimok last week, Seward, with the help of the borough’s attorney, wrote that “the borough’s sales tax is to be ‘broadly interpreted’ in favor of taxability.” He went on to say that even though the transactions happen outside the borough, the product is driven into the borough and delivered in Dimok trucks. Therefore, the company must collect sales tax from its customers and pay the borough accordingly, the letter said.
“That was our hang up, was that they bought the product from a Canadian company,” Seward said. “The same company isn’t using a common carrier, they’re delivering it themselves.”
Seward said he’s gotten plenty of calls and emails from upset residents, but he adds it would be “foolish to not embrace the legal advice of our attorney.”
He said borough staff became aware of the discrepancy in 2014, eight years after Dimok starting selling wood to Haines customers.
In an interview with KHNS last month, owner John Clunies-Ross said he had been threatened with fines and jail time if they didn’t start paying sales tax. He said he’s not interested in fighting with bureaucrats and so, the relationship between Dimok and Haines has been extinguished.
