Monday, the City of Hoover joined a growing coalition of Alabama cities in a lawsuit challenging the Alabama Department of Revenue's administration of the Simplified Sellers Use Tax (SSUT). The move follows a unanimous vote of the Hoover City Council at their November council meeting.
Hoover and Mobile are the latest cities to join the suit, along with Tuscaloosa, Mountain Brook and Montgomery, seeking to challenge what the cities describe as an inequitable distribution formula that diverts tax dollars away from the communities that produce them into other parts of the state.
"Hoover residents generate millions of dollars in online sales tax revenue every year, yet much of that money is being redistributed across the state instead of coming back home to support our own community," Mayor Derzis said. "We are conservatively losing between $7 million and $10 million annually under this system. That is money that should be funding our police and fire departments, maintaining our roads and parks, and supporting the services our residents rely on every day."
The 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 receives 25%. Within the local share, municipalities receive 60% of the revenue and counties receive 40%. The revenue going to each municipality and county is divided based on population.
Late last week, General Fund Budget Committee chair State Sen. Greg Albritton (R-Atmore) told 1819 News, "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 at the Contract Review committee meeting in Montgomery on Thursday as he put a 45-day hold on several legal services contracts for the Legislative Services Agency (LSA) and the Alabama Board of Pharmacy.
"Hoover has one of the most robust retail markets in Alabama. We are a regional economic driver," Derzis said. "When our residents shop online, those tax dollars should stay in Hoover. We're not asking for special treatment - just fairness. Our taxpayers deserve to have their dollars reinvested in the community where they live, work, and spend."
Mayor Nick Derzis campaigned on this issue, publicly committing in July to fight for Hoover taxpayers and tackle revenue losses caused by the current SSUT structure in the state.
"The fact that Alabama cities of all sizes are stepping forward shows this is not an isolated issue," Derzis said. "This is a structural problem that undermines local government across the state. By joining this lawsuit, Hoover is standing with communities that want a fair, transparent, and accountable system."
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