Law requires legislative action for city occupational taxes

To impose an occupational tax, cities must get a local law through the Alabama Legislature, under Act No. 2020-14. The act by Rep. Chris Sells, R-Greenville, became effective immediately after it was signed March 3. It does not affect 26 occupational taxes in effect before Feb. 1 of this year, but it does stop a 1% occupation tax the Montgomery City Council approved Feb. 18.

During debate, Sells said he represents 3,000 constituents in Montgomery County. “I don’t want them to pay a tax for working,” he said. Sells argued occupational taxes are “taxation without representation,” while opponents, including the mayors of 10 of Alabama’s largest cities, said the law denies cities an avenue to raise revenue.

Similar legislation was proposed in the 2019 session.

Although not approved by either legislative chamber, another bill would have further regulated occupational taxes.

SB85 by Sen. Andrew Jones, R-Centre, would have excluded certain economic or industrial development sites from city occupational taxes and requires increases in any existing occupational taxes to be approved through local legislation brought before the Alabama Legislature. Under Jones’ bill, if a city annexed an AdvantageSite economic development site or an industrial development site that employs 50 or more or if either of those sites are in the police jurisdiction, no worker employed on those sites would be subject to an occupational tax.

The Senate Fiscal Responsibility and Economic Development Committee approved Jones’ bill, but the full Senate never  considered it.

This article is part of the Alabama Retail Report, a communication for Alabama Retail Association members. Not a member? Join us!

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