Bill allows one-time rate adjustment for Simplified Sellers Use Tax

Legislation that would allow a one-time rate adjustment to Alabama’s Simplified Sellers Use Tax cleared a House budget committee Wednesday. It next goes to the full House.

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.

Under the legislation, the Alabama Revenue Department is 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 this year and the use tax’s current 8% flat rate. The new rate of up to 1% would be effective Oct. 1, 2020. which means the flat rate could go from 8% to 9%.

According to the bill’s fiscal note, the rate change could generate 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 remain at 4%.

The revenue derived from the rate adjustment will go to the local governments with 60% going to the cities and 40% to the counties.

The Alabama Retail Association supports this next 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.

Earlier legislation introduced this session, also by Scott, would have made it possible for Alabama retailers to participate in the simplified sellers’ program if they are shipping or delivering merchandise to customers in locations outside of the city or county where they have a physical location. Scott’s latest bill does not include that provision.

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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