One-time rate adjustment of up to 1 cent for Simplified Sellers Use Tax dies in 2019 session

Legislation that would allow a one-time rate adjustment of up to 1% to Alabama’s Simplified Sellers Use Tax received committee approval but never reached floor debate during the 2019 regular legislative session.

The legislation called for the Alabama Revenue Department to calculate an adjusted rate by finding the difference between what the combined state, average municipal and average county rates were on Jan. 1 of 2019 and the use tax’s current 8% flat rate. An additional rate of up to 1% would have meant the flat rate could have gone from 8% to 9%.

According to the bill’s fiscal note, the rate change would have generated up to $19.7 million annually in additional revenue for Alabama’s cities and counties. The state rate for the simplified sellers use tax and the general sales tax would have remained at 4%.

The revenue derived from the rate adjustment would have gone to the local governments with 60% going to the cities and 40% to the counties.

The House Ways and Means General Fund Committee amended HB418 by Rep. Rod Scott, D-Fairfield, to allow a quarter of the proceeds from the county portion of the adjustment to go to local school boards.

The Alabama Retail Association supported taking another step in an evolving system to make it easier for sales taxes to be remitted, while further closing the sales tax gap between local brick-and-mortar retailers and faraway, online-only retailers.

Another bill by Scott, which didn’t advance, would have made it possible for Alabama retailers to participate in the simplified sellers’ program if they shipped or delivered merchandise to customers in locations outside of the city or county where they have a physical location. HB418 did not include that provision.

Although the rate increase and expansion of the simplified seller program to in-state retailers who deliver did not pass, the simplified seller program has been revised for the third time in three years.

Act No. 2019-382 by Rep. Rod Scott, D-Fairfield, and Sen. Tim Melson, R-Florence, provides for updates to the amnesty and class action provisions for eligible sellers and clarifies transactions for which simplified sellers use tax cannot be collected and remitted.

Specifically, it:

  • provides amnesty for all periods prior to Oct.1, 2019, for all SSUT participants who entered the program prior to this date and remain in the program for at least three years.
  • expressly prohibits class actions against all eligible sellers for refunds of overpayment of SSUT.
  • clarifies that sales of automotive vehicles in the state are not covered by that act.

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