Bill to move remote sellers’ tax rate closer to amount brick-and-mortar stores collect dies in 2024 session

On April 16, the Alabama House carried over legislation that would bring taxes remote sellers collect from Alabama consumers closer to the amount Alabama’s retailers collect. The bill never resurfaced during the 2024 regular session.

HB258 by Rep. Chris England, D-Tuscaloosa, initially would have added 1.3% to the flat 8% rate for remote sellers, according to the bill’s fiscal note. The original flat 8% distribution would have remained the same, while local governments and school boards would receive all the revenue generated by the increase. The revenue generated from the increase would not have impacted the state’s education or general operating budgets.

The new 9.3% rate only would have taken effect Sept. 1, IF the Legislature had enacted and the governor signed into law HB257, a sales tax holiday for products related to boating, camping, fishing, hunting and other outdoor activities. The House approved HB257 April 16, but took no action on HB258,

Alabama’s economic nexus 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. 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 average combined state, city and county sales tax rate in Alabama is about 9.3%.

The Alabama Retail Association supported the new rate, which would have reflected the average sales tax rates in Alabama.

It is a fairness issue,” ARA President Rick Brown told the House Ways and Means Education Committee.  “For years, (remote) online transactions were tax free. The online retailers had an advantage over local folks who employ your people and are involved in your schools.”

There is still a disparity,” Brown said, noting that many jurisdictions have a 10% sales tax rate in the state as opposed to the 8% consumers pay to remote sellers. “We’d like to close that.”

England said the flat 8% simplified sellers use tax “encourages or incentivizes people not to visit their local stores, because they can pay less by not (shopping local). When you equalize that playing field, the hope would be to encourage people to go back into your brick-and-mortars,” he said.

Under England’s bill, the Alabama Revenue Department would have recalculated the simplified sellers use tax rate again by Sept. 1, 2029, and then every five years from that point forward.

Alabama’s simplified sellers use tax has been a source of revenue growth for both the state’s general operating and education budgets. Since 2016, remote sellers and marketplace facilitators have remitted more than $2.6 billion in taxes to Alabama. In the 2023 calendar year, the simplified sellers use tax accounted for about 20% ($788.5 million) of the almost $4 billion in total taxed sales in Alabama.

RELATED: Bill would have created new tax holiday for boating, camping, fishing and hunting items

MEDIA FOLLOWUP: Advocates to try again with online sales tax increase (Alabama Daily News, June 13, 2024)

>> More on Alabama’s Simplified Sellers Use Tax

Bill would have allowed adjustments to SSUT municipal population ratios based on annexations
Sen. David Sessions, R-Grand Bay, introduced legislation that would allow adjustments to be made to the population ratios used for the simplified sellers use tax for municipalities to reflect increases in population as a result of annexations. The Senate Finance and Taxation Education Committee never considered SB273.

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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