A couple of weeks ago we started a series that looks at the ramifications of various online sales tax legislation states across the country are proposing and signing into law. We started with Colorado as they’ve been at the forefront of the debate since 2010. Today we take a look at Alabama!
Alabama has been making waves in the state tax world because it passed legislation in 2015 that requires an out-of-state seller making retail sales within the state to register, and collect and remit sales tax on these sales by virtue of “economic nexus” if the seller has sales of more than $250,000 within Alabama, and engages in certain limited activities in the state. However, it does not require substantial physical presence as required in the 1992 Supreme Court decision (Quill). With the passage of these laws, Alabama drafted legislation that is unconstitutional and effectively challenging taxpayers to take the issue to court (or is challenging the federal government to finally enact some of the bills which have been circulating in Congress but have not passed). Whether that’s “simplified” or not is a question, but read on for a summary of the latest activities in the state.
A Summary of Alabama’s Online Sales Tax Legislation
Back in 2015, Alabama launched the Simplified Sellers Use Tax program, which helps online retailers collect sales tax from Alabama customers. Instead of worrying about the various city and county fees, the program collects a flat 8 percent that the state then splits with counties and municipalities. Although this bill was passed two years ago, it didn’t make a big difference for the state until Amazon enrolled in the program last fall.
Alabama’s Potential Upcoming Sales Tax Legislation
Although the Simplified Sellers Use Tax program is helping, the Alabama legislature is still trying to come up with ways to actually receive the taxes charged by in-state businesses. Current legislation, S.B. 86, is very similar to the law Colorado passed earlier this year in that it stipulates internet retailers need to report their sales to the state and notify consumers of use taxes they’re responsible for paying. The bill also proposes a few changes to the Simplified Sellers Use Tax program, such as the state distributing sales taxes collected to counties and municipalities monthly rather than quarterly.
S.B. 86 passed Alabama’s Senate unanimously and is currently in the House for consideration.
Ramifications of Alabama’s Online Sales Tax Legislation
What does this new legislation potentially mean for Alabama residents? As with Colorado, customers would be held accountable for the sales tax they owe on purchases made from out-of-state businesses. As Bloomberg BNA points out, “The reporting and notification requirements would create one more mechanism for the state to collect sales and use taxes that are already owed under current law, yet often go uncollected.”
Want to know more about how state legislatures are taking the online sales tax debate into their own hands. Stay tuned for the next post in our series! In the meantime, please contact us if you’d like to know more about how this topic, or other multi-state tax issues, may affect your business.
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects. To learn more, contact us today at www.MilesConsultingGroup.com.