MONTGOMERY — An online sales tax lawsuit pushed by multiple cities "threatens the fiscal viability of the state," according to General Fund Budget Committee chair State Sen. Greg Albritton (R-Atmore).
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.
Albritton called the ongoing lawsuit "dangerous" and a "poorly decided action" at a Contract Review committee meeting in Montgomery on Thursday.
At the meeting, Albritton put a 45-day hold on several legal services contracts for the Legislative Services Agency (LSA) and the Alabama Board of Pharmacy.
"It threatens the fiscal viability of the state that we in the Legislature have worked hard to achieve," Albritton said. "If there's difficulties or if there's circumstances that need to be changed, then outline those changes that's needed (and) bring them to us so that we can have a look and do the evaluations."
Albritton told 1819 News after the meeting, "I found out yesterday that there was going to be a 'ganging up,' that other municipalities and entities are jumping in as plaintiffs on this."
"The danger that this lawsuit poses is real. It needs attention," Albritton said. "These folks, LSA, just got in the line of fire. The lawyers are usurping legislative power without the responsibility."
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