After years of good-faith efforts to ensure Mobile receives a portion of the sales tax generated by online sales, the City announced it is joining a lawsuit against the commissioner of the Alabama Department of Revenue.
The City of Tuscaloosa originally filed the suit challenging how the State distributes the Simplified Sellers Use Tax (SSUT). The 8% tax on online sales is collected by the State and distributed throughout the state, regardless of where the purchase is made. City leaders said that means online purchases often mean local taxes are forgone.
Mobile Mayor Spiro Cheriogotis said the way the SSUT is managed is costing his city millions of dollars every year.
"If we continue to allow local dollars to be redistributed across the state, cities like Mobile will not be able to maintain the services citizens expect and rely on every day," Cheriogotis said. "Mobilians' tax dollars should be reinvested in their own community to enhance public safety, support economic development and improve local infrastructure. Instead, we are losing $34 million a year to SSUT, and this problem is only going to get worse as online sales continue to grow."
SEE ALSO: 'This is a structural problem': Hoover losing $7-$10 million annually as city joins SSUT lawsuit
Cheriogotis argued the current system also imposes higher taxes on people in rural areas, where local sales taxes are much lower. For example, people in an unincorporated area of a county may only have a 4% sales tax on goods. However, if they purchase online, they could be subject to the 8% SSUT.
"Whether you live in a small town or a major city, every Alabama community deserves to be treated fairly," he added. "The current SSUT structure isn't fair to anyone, and left unchanged, this system will continue to decimate municipalities across the state. Mobile cannot sit on the sidelines while these critical decisions about our city's future are made in the courts."
Leaders in Tuscaloosa and Mobile say they hope to work with lawmakers to protect local tax dollars.
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