At least three of the Big 10 cities are withdrawing from a lawsuit against the State of Alabama.
The Cities of Tuscaloosa, Montgomery and Hoover announced on Wednesday that they were voluntarily dropping the suit.
Other cities are expected to follow their lead.
Mayors from multiple cities said that, despite concerns about the state’s online Simplified Sellers Use Tax (SSUT), dropping the lawsuit gives city officials a chance to negotiate a deal with legislators in the remainder of the legislative session.
State Rep. Rex Reynolds (R-Huntsville), House chairman of the General Fund budget committee, said the lawsuit being dropped was an “opportunity to have dialogue” with the cities.
“I think at this point, really, what I can say is that now that the suit has been dropped, I expect immediate and much dialogue related to what we may or may not be able to do in the future,” Reynolds told 1819 News on Wednesday. “We were just really in a position that we couldn’t be talking about it while the lawsuit was filed. Now, this will give us the opportunity to have dialogue.”
By dismissing its legal challenge without prejudice, the City of Tuscaloosa will preserve its ability to sue should those discussions fail to produce a comprehensive resolution that ensures tax dollars generated in the city stay in the city. In August, the City of Tuscaloosa filed a lawsuit challenging the state’s handling of SSUT and was subsequently joined by municipalities and school systems from across the state.
“Each day, we work hard making our schools strong and our neighborhoods safer,” said Tuscaloosa Mayor Walt Maddox. “For nearly a decade, we have been working to find common-sense solutions to the outdated SSUT system. This decision reflects our commitment to protect the State’s general fund and modernize our sales tax code to destination sourcing.”
Montgomery was another city that withdrew from the lawsuit.
“Our position has always been clear: the current SSUT framework is outdated and unfair,” Montgomery Mayor Steven Reed said. “We believe the Legislature has an opportunity this session to modernize the system and ensure that communities like Montgomery receive their fair share. We’re committed to working with lawmakers to create a solution that reflects today’s marketplace and protects local revenue.”
Association of County Commissions of Alabama (ACCA) executive director Sonny Brasfield told 1819 News in a statement, “We are pleased the plaintiffs see the folly of challenging Alabama’s efficient internet tax collection process. All 67 counties and 201 cities intervened in the case to protect SSUT, and we believe such a significant level of opposition sent a strong message to the plaintiffs and the court.”
“Dismantling SSUT is not an option and would be a horrible financial decision for the state, counties and the very cities that filed the lawsuit,” Brasfield said. “As the session moves toward the halfway point, we are open to constructive dialogue and look forward to hearing any positive ideas the plaintiffs bring to the table.”
Hoover Mayor Nick Derzis said filing the lawsuit was “necessary to underscore the urgency of reform.”
“The status quo is untenable,” Derzis said. “Hoover is losing roughly $10 million each year under this structure. Those are Hoover tax dollars, and our residents expect those dollars to support their police officers, firefighters, infrastructure improvements for our parks, streets, and stormwater, and other essential city services - not to be redistributed elsewhere. Filing the lawsuit made it clear that we are serious about fixing this problem."
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