The Alabama House of Representatives will deliberate today on two bills: one to raise the state's online sales tax from 8% to 9.3% and the other to provide a one-day tax holiday on certain recreational supplies.
House Bill 258 (HB258), sponsored by State Rep. Chris England (D-Tuscaloosa), would match the tax collected by online retailers, also called the Simplified Sellers Use Tax (SSUT), to the current cumulative sales tax rate in Alabama.
HB258 is reliant on the passage of House Bill 257 by State Rep. Joe Lovvorn (R-Auburn), which creates the one-day sales tax holiday.
Currently, state tax imposes a 4% sales tax for retailers. County and municipal taxes bring the state's average sales tax rate to 9.3%.
The online tax rate would be recalculated every five years, but the initial increase would be 1.33%. The fiscal note attached to the bill calculates a total of $121 million in extra state revenue. Sixty-five percent of the revenue would go to municipalities, with a preference for areas with a population of 50,000 or more, 15% would go to counties, and 20% would go to the Alabama State Department of Education.
During the public hearing, the Alabama League of Municipalities and the Alabama Retail Association spoke in favor of the bill. Initially, England's bill did not allocate any money to schools. However, England amended the bill at the urging of public school interests who spoke during a public hearing two weeks ago.
HB257 and HB258 are on the House's special-order calendar for Tuesday, after a series of bills on another calendar to handle appropriations from the Education Trust Fund.
Reaction to the bill has been mixed. England and House Education Budget Chairman Danny Garret (R-Trussville) say the legislation will drive more people to local retailers. Opponents have opposed any tax increases in general, pointing to increased costs across the board, paired with rampant inflation.
HB258 received some pushback in committee. However, the bill ultimately passed with only two "no" votes.
One of those votes came from State Rep. Jamie Kiel (R-Russellville), who told 1819 News he believed the bill could encourage local governments to increase their sales taxes, a trend he said could continue in perpetuity.
"Last year, Republicans cut the grocery tax, giving hard-working Alabamians a break where needed most. This year, a Democrat is proposing raising the internet sales tax on the same folks that got their taxes cut last year," Kiel said.
"Raising the online sales tax to match the sales tax rates of local cities could cause an endless cycle of raising taxes. If cities and counties are concerned about their local businesses being competitive, they should lower their local sales tax rate to create better free market competition."
Other members of the House who spoke with 1819 News said the bill would have plenty of votes against it. Most expect the bill to pass in the Republican supermajority House, but that remains uncertain.
Several members of the Senate told 1819 News that the bill would face an uphill battle should it pass the House.
To connect with the author of this story or to comment, email craig.monger@1819news.com.
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