Simplified Sellers Use Tax and Economic Nexus Rule

Since Oct. 1, 2018, Alabama’s economic nexus rule, originally effective Jan. 1, 2016, has been applied prospectively to sales by remote sellers in our state, according to an Alabama Revenue Department news release.

The rule requires remote sellers with more than $250,000 in retail sales of tangible personal property into Alabama to collect sales or use tax on transactions with Alabama customers. It requires such retailers to register for the Alabama Simplified Sellers Use Tax Program (SSUT) and collect and remit sales/use tax to the state no later than Oct. 1, 2018.

The rule allows remote sellers to utilize a simplified, flat 8-percent use tax program established by Alabama in 2015.

In addition, Act No. 2018-539 requires marketplace platforms with $250,000 or more in Alabama sales, on or before Jan. 1, 2019, to:

  • collect tax on sales made by or on behalf of its third-party sellers OR
  • report sales made by third-party vendors through their marketplaces.

Marketplaces may register with the Revenue Department under the Simplified Seller Use Tax program prior to the 2019 deadline. Remote sellers who can demonstrate that a marketplace facilitator is collecting and remitting Alabama’s Simplified Sellers Use Tax or sales tax on their Alabama sales will be relieved of the requirements imposed by the economic nexus rule.

In light of the U.S. Supreme Court’s June 21, 2018, opinion in the South Dakota vs. Wayfair Inc. case, Alabama Revenue Department officials plan to develop long-term guidance through further rule making. The Wayfair decision struck down the requirement that a vendor must have “physical presence” in a state to be subject to state sales and use tax registration and collection requirements. Alabama’s proposed rule changes can be found here as they are developed into 2019.

2015 Simplified Sellers Use Tax Law

Since Oct. 1, 2015, retailers without stores in our state have been able to voluntarily collect and remit a use (sales) tax from Alabama customers.

As of Oct. 1, 2018, the SSUT program will serve as a simplified means for out-of-state sellers with sales in excess of the $250,000 threshold to comply with their obligation to collect and remit taxes for all Alabama jurisdictions. If they choose not to use the SSUT program, they can satisfy the collection and remittance requirement through the traditional sales and use tax regime (the state levy, plus the applicable local levies).

The remote sellers without a physical retail presence in Alabama that have signed up for the voluntary program can be found on the Alabama Department of Revenue website.

Under the Simplified Seller Use Tax Remittance Act (Act No. 2015-448), remote sellers without a retail presence in Alabama collect a flat 8-percent use tax from Alabama residents who buy their merchandise. The law’s legislative sponsors were Sen. Trip Pittman, R-Daphne, and Rep. Rod Scott, D-Fairfield.

Sellers keep 2 percent of the total collected if they remit monthly tax payments on time. Based Act No. 2018-539, starting Jan. 1, 2019, simplified sellers will receive the two percent discount only on the first $400,000 of taxes remitted. That makes the maximum discount $8,000.

Where the revenue goes through 2018:

  • 50 percent to the state. Of that, 75 percent goes to the General Fund; 25 percent to the Education Trust Fund.
  • 25 percent to counties, shared proportionally by population.
  • 25 percent to municipalities, shared proportionally by population.

Act No. 2018-539 also changed the distribution of the use tax. Starting Jan. 1, 2019, the distribution will be as follows:

  • 50 percent to the state. Of that, 75 percent goes to the General Fund; 25 percent to the Education Trust Fund.
  • 50 percent to the cities and counties. Of that, 60 percent goes to the cities and 40 percent to the counties. The local governments’ distribution is shared proportionally by population.

2016 Milestone

Amazon began participating in the program on Nov. 1, 2016.

2017

During the 2017 regular session, the Alabama Legislature again expanded the law. Effective July 1, 2017, based on Act No. 2017-82:

  • The Revenue Department makes monthly, rather than quarterly distributions to local governments.
  • The Revenue Department can disclose the names of remote sellers participating in the simplified seller program. Disclosure of those participating will let local governments know not to consider an audit of those companies as they are already remitting taxes, Revenue officials said.
  • A participant in the simplified seller program no longer must participate for at least six months before establishing a physical presence in the state. This allows those planning to establish a distribution center or a store in the state to immediately begin to collect through the simplified sellers program. Those establishing Alabama distribution centers can continue to participate in the simplified sellers program as long as they don’t have a retail presence in the state, Revenue officials said. Once the seller has a retail presence in the state, they are no longer eligible for the simplified seller program or its flat, 8 percent tax rate.

2018

Besides the provisions mentioned above, Act No. 2018-539, allows those already registered as simplified sellers that acquire an in-state business to remain in the program. The 2018 revision requires actual local and state sales taxes to be collected by businesses that already exist in Alabama, even if those businesses are purchased by a simplified seller.

Collections update provided by the Alabama Revenue Department:

2016 fiscal year: $4,365,240.73
2017 fiscal year: $56,175,711.56
2018 fiscal year: $80,122,062.40
2019 fiscal year through March 13, 2019 $62,878,200.39
Total collections:
(through March 13, 2019)
$203,541,215.08

Last updated: March 13, 2019