MONTGOMERY — The debate over Alabama's online sales tax law continued on Thursday ahead of the start of the legislative session next week.
The City of Tuscaloosa sued the State in July over how Alabama's online sales tax law is divided up between counties and municipalities. Mayor Walt Maddox estimated that Tuscaloosa will lose $14.6 million in the current fiscal year due to the structure of the online Simplified Sellers Use Tax, which was enacted by the legislature in 2015. Other cities, including Montgomery and Mountain Brook, and the Alabama Education Association have intervened as plaintiffs in the lawsuit. The Association of County Commissions of Alabama opposes the lawsuit.
The Simplified Sellers Use Tax (SSUT), an 8% tax on online purchases, is distributed by the State, with 50% going to state funds and the remaining 50% allocated to local governments (cities and counties). Within the state's share of the distribution, the General Fund receives 75% and the Education Trust Fund gets 25%. Within the local share, municipalities receive 60% of the revenue and counties receive 40%. Revenue allocated to each municipality and county is divided based on population.
Alabama's combined state and average local sales tax rate is 9.43%, according to the Tax Foundation.
The Association of County Commissions of Alabama said at a press conference in Montgomery on Thursday that they fully support the existing SSUT program.
"We don't have any plans to introduce legislation that would make any changes to SSUT," Sonny Brasfield, executive director of the Association of County Commissions of Alabama, said. "We believe it's clearly constitutional and to make changes to it puts this money at risk. Last session there was a bill introduced that would've made some changes in definitions that would've eliminated DoorDash or attempted to eliminate the ability for DoorDash to participate. We assume that will come back again. We have grave concerns about singling out one particular business and excluding them from SSUT. We don't think that makes constitutional sense."
State Rep. Chris England (D-Tuscaloosa) defended Tuscaloosa's lawsuit challenging SSUT.
"If the plaintiff in that case believes the state of Alabama is misapplying or misinterpreting or intentionally violating the law, the only place to remedy that situation is in a court. That's part of the argument that we are allowing people to participate in the SSUT program that the law was never intended to allow: grocery stores, DoorDash, and things like that, which are 100% local transactions that never leave the city," England said at a Contract Review meeting on Thursday. "When you order something online from a place that is completely located in your city, and it is delivered to your house in the city or the same jurisdiction, that is not an SSUT transaction. It's being treated as such, and because it's being treated as such, everybody is losing out, but more specifically, local school boards are being robbed."
General Fund Chair State Sen. Greg Albritton (R-Atmore) delayed all legal services contracts that came before the Contract Review committee on Thursday in protest of the SSUT lawsuit.
"When I have an opportunity to call attention to a matter that's unjust, that I believe is unwarranted, that I believe is causing more harm than good, I'm going to use that forum to make it known," Albritton said at the meeting.
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