Payroll Decline measures the seasonality of your business.
The state monitors how much you pay in wages each quarter. Wages during quarters when you paid less are subtracted from wages during the preceding quarters when you paid more. The difference is how much your payroll has declined from one season to the next.
This difference is added up, then divided by the total wages. The resulting ratio measures your Payroll Decline.
This Ratio is then applied to a table to determine your tax rate.
Only Alaska uses the Payroll Decline method. It is a system peculiarly suited to Alaska's extremely seasonal conditions.