Friday, February 21, 2014
Severe Weather Supplies Tax Free This Weekend; Bills Expand August Tax Holiday
Alabama’s third annual severe weather sales tax holiday began at 12:01 a.m. today, just as portions of the state experienced severe thunderstorms and tornado watches. The sales tax holiday continues through midnight Sunday.
Thursday, Alabama Retail Association President Rick Brown appeared with Gov. Robert Bentley at a major home improvement retailer in Montgomery to promote the sales tax holiday.
The three-day event gives Alabama shoppers the opportunity to stock up tax free on common emergency supplies costing less than $60 that every home and business need on hand in the event of a natural disaster or general emergency. Brown reminded the media in attendance that the tax holiday also applies to generators costing $1,000 or less.
In addition to the state waiving its four percent sales tax, 179 cities and 47 counties also are dropping their sales taxes for the covered items this weekend, bringing the total savings to up to 10 percent, depending on where you shop.
Alabama retailers are required to participate in the state’s sales tax holidays and cannot charge any waived sales taxes on the items that are legally tax-exempt.
Meanwhile, lawmakers this week introduced legislation expanding the state’s annual back-to-school sales tax holiday to include certain uniforms and musical instruments as well as clarifying that the holiday applies to e-readers and tablets.
Under the legislation, the items that are exempt from state sales tax during the three-day August tax holiday would be expanded to include:
- up to $150 of the cost of band, cheerleading, dance team and other activities-based uniforms. Sports uniforms would continue to be taxed.
- the first $750 of the cost of musical instruments used for school bands, music classes or other school-affiliated music groups.
Under the current law, shoppers have the opportunity to purchase certain school supplies, computers, books and clothing free of the state’s four percent sales or use tax.
The proposed legislation spells out specifically that the computer provisions of the law applies to tablets, e-readers and other devices capable of downloading or viewing school instructional or classroom research documents.
Alabama’s ninth annual sales tax holiday for school-related items begins at 12:01 a.m. Friday, Aug. 1, and ends at midnight Sunday Aug. 3.
SB382 by Sen. Bryan Taylor, R-Prattville, was referred to the Senate Finance and Taxation General Fund Committee, while HB521 by Rep. Randy Davis, R-Daphne, was referred to the House Ways and Means Education Committee.
TAXES AND FEES
House OKs Bill Clarifying Sales Tax on Prepaid Wireless Service
The Alabama House on a vote of 100-0-1 Thursday approved HB373 by Rep. Bill Poole, R-Tuscaloosa, which modernizes sales tax law related to prepaid wireless services. Under existing law, prepaid calling cards and prepaid authorization numbers are deemed tangible property and thus subject to sales tax. A June 2013 decision by Alabama’s chief administrative law judge, Bill Thompson, however, pointed out there was no definition of prepaid telephone services in state law and ruled prepaid services loaded on countertop terminals were not subject to sales tax because that method of purchase was not anticipated by current law. The administrative law decision “put the sales tax in jeopardy,” Poole said.
This legislation makes it clear that even in the absence of a physical card, such as the countertop terminal example, sales tax is owed on prepaid wireless services. The bill also adds definitions that update the law to today’s technology to include other digital products and content that are paid for in advance and sold in predetermined amounts that the consumer can use until the amount is consumed. The bill now goes to the Senate Finance and Taxation Education Committee for consideration.
Senate Panel Votes to Raise Sales Tax Liability Threshold in 2016
The Senate Finance and Taxation Education Committee on Wednesday unanimously approved an amended version of the Small Business Tax Relief Act, HB151 by Rep. Barry Moore, R-Enterprise.
At least 4,000 small retailers could see one-time tax relief of up to $2,500 under the bill, which is part of the Alabama Retail Associations’ 2014 Legislative Agenda. The bill now goes to the full Senate for consideration.
The bill would raise the average monthly tax liability threshold at which a business must estimate and make monthly sales tax payments to the state. Currently, any Alabama retailer who averaged $1,000 or more in monthly state sales tax collections in the previous year must pay an estimated sales tax each month in advance of collecting any sales tax revenue. This legislation would raise that threshold by $1,500 to $2,500. The current $1,000 threshold in average monthly state sales taxes equates to roughly $25,000 in monthly sales. State sales tax in Alabama is 4 percent.
The committee changed the effective date of the bill to Aug. 1, 2016. The Senate version, SB46 by Sen. Bryan Taylor (pictured), R-Prattville, would be effective Oct. 1, 2015. Taylor presented the House legislation to the Senate Committee. The Senate, like the House, approved its version of the bill Jan. 16. If the Senate adopts the House version, the bill will have to go back to the House for approval in its amended form.
Retailers collecting on average less than $2,500 in state sales taxes each month, or $62,500 in monthly sales, would no longer have to estimate their sales tax obligation in advance each month under this legislation. Those between the current $1,000 and the proposed $2,500 in average monthly state sales tax collection thresholds effectively would be allowed to skip a month of estimated sales tax payments if the legislation becomes law. The affected retailers would still have to collect and remit the sales taxes, they just would do it after the fact, rather than before the fact.
Senate Panel May Vote Next Week on Ending Sales Tax on Food and Raising Sales Tax on Other Goods
The Senate Finance and Taxation Education Committee will vote next week on SB287 by Sen. Gerald Dial (pictured), R-Lineville, which would in a four-year span eliminate the sales tax on food while increasing the state sales tax to 5 percent on all items but food. The bill uses the same definition of food as is used in the federal Supplemental Nutrition Assistance Program (SNAP).
The committee conducted a public hearing on the bill Wednesday that generated agreement on the need to eliminate or reduce the sales tax on food as 46 states have done, but no agreement on how to do that without doing significant damage to the state’s budgets ($76.7 million annually) or raising taxes from other sources.
The proposal to phase out the state’s sales tax on groceries by 2017 while raising sales taxes on non-food items would increase revenue in the Education Trust Fund and General Fund by about $28 million annually, according to Legislative Fiscal Office estimates. The bill includes a provision that would require lawmakers in 2018 to adjust the state’s budgets to ensure the bill is revenue neutral. “No one wants to be involved in a tax increase,” Dial told the committee. The current state sales tax is four percent.
Dial’s bill would increase the state sales tax on all items besides food by a quarter of a percent each year while lowering the sales tax on food by 1 percent each year over the next four years. The bill also would phase-out the state sales tax on food sold in coin-operated vending machines that meets the SNAP definition. Those taxes would be reduced by 1 percent beginning Sept. 1, 2015. By Sept. 1, 2017, there would be no sales tax on food in Alabama. Similar legislation by Dial last year received committee approval but never made to the Senate floor for debate.
Kimble Forrister, executive director of Alabama Arise, a nonprofit representing Alabama’s poorest citizens, told Dial that in some parts of the state, like Montgomery, his bill would increase the sales tax rate to 11 percent, which would be “too big a bite out of people’s wallets.”
Alabama Arise instead supports the solution offered by Rep. John Knight, D-Montgomery, which would pay for the loss of the tax on groceries by eliminating the state’s income tax deduction for federal taxes. HB130 by Knight, which awaits action by the House Ways and Means Education Committee, also would exempt over-the-counter drugs from the state’s sales tax. “What you are proposing with the income tax is not going to happen with this Legislature,” Dial told Forrister. Committee Chairman Trip Pittman, R-Daphne, told Forrister eliminating the deduction would make citizens pay taxes on money not received.
TOBACCO
House OKs Overhaul of Tobacco Tax Enforcement
On a vote of 98-0 Thursday, the Alabama House approved HB404 by Rep. Mike Jones, R-Andalusia, which requires retailers to maintain 90 days of computer and machine-generated invoices for tobacco products the stores buy with the tobacco tax stated separately. After 90 days, the records must be maintained for three years from the date of purchase but they don’t have to be kept at the store itself, under this legislation. The legislation also:
- redefines wholesale dealers and jobbers and adds a definition for semijobbers.
- makes retailers of semijobbers who refuse to provide a duplicate invoice to the Revenue Department subject to a $1,000 to $5,000 department-imposed penalty that is multiplied by the sum of the violation added to any prior violations.
- removes archaic language regarding stamps on tobacco products.
- makes handwritten invoices from tobacco wholesalers invalid documents as proof of sale.
- sets out penalties, including confiscation of tobacco, for failure to maintain records.
- adds a definition for cigars, cheroots and stogies.
- creates a website listing of permitted and registered tobacco distributors.
Retailers would have until Oct. 1 of this year to gear up for this change should the bill become law. It now goes to the Senate Health Committee for consideration.
LABOR AND EMPLOYMENT
House OKs Bill Banning Cities and Counties from Mandating Leave Time for Private Employees
On a vote of 84-9-2 Tuesday, the Alabama House approved HB360 by Rep. Jack Williams, R-Birmingham, which prohibits cities and counties from passing laws that would require an employer to grant vacation or other leave time that isn’t required by state or federal law. The Senate Business and Labor Committee is expected to consider the bill at its Tuesday meeting. On Feb. 11, the Senate Governmental Affairs Committee unanimously approved the Senate companion, SB313 by Sen. Rusty Glover, R-Semmes. It awaits consideration by the full Senate.
ALCOHOL
Panel Votes to Increase Alcohol License Fees and Change Renewal Process
The House Economic Development and Tourism Committee on Wednesday approved bills by Rep. Lesley Vance, R-Phenix City, that would alter the alcohol licensing process and mean higher fees for businesses. The bills now go to the full House for consideration.
HB443 would switch the renewal period for alcohol license renewals from Oct. 1 to between June 1 and July 31, while increasing the fee for late filing from 50 percent to 75 percent of the license fee. The legislation also would allow the Alabama Alcoholic Beverage Control Board to charge a “reasonable fee” for electronic processing of licenses and fees.
HB444 would double the application filing fee for an alcoholic beverage license from $50 to $100. The fee, which is only assessed on new applicants, has not been increased since it was first instituted in early 1980s. This is the third year Vance has introduced similar bills.
Senate and House Versions of Bill to Align Alabama’s Cork-and-Go Law with Federal Law Ready for House Consideration
Companion bills that require restaurant patrons who don’t finish their wine to transport the recorked or resealed bottles out of the reach of the vehicle driver are each ready for House consideration. The Senate version is in line for final approval.
At its Wednesday meeting, the House Economic Development and Tourism Committee approved SB56 by Sen. Paul Sanford, R-Huntsville. Last week, the committee gave a favorable report to the House companion, HB81 by Rep. Terri Collins, R-Decatur.
The legislation amends a 2012 law, also sponsored by Sanford and Collins, which allows Alabama restaurant patrons to put the cork back in an unfinished bottle of wine and take it home. The 2012 law permits only one opened bottle of wine to be carried out of a properly licensed establishment, if the bottle has been recorked and resealed in a bag. Alabama and 31 other states must pass legislation that requires unfinished wine be locked away to reflect federal standards so the states can continue to receive federal transportation money.
Bill Allowing Wet Community Development Districts to Become Wet Cities Heads to Governor for Signature
HB89 by Rep. Jamie Ison, R-Mobile, is headed to the governor for his signature. On a vote of 17-3 Thursday, the Alabama Senate approved the bill that would allow the state’s community development districts to remain wet once the district becomes a municipality, even if the newly incorporated city does not have the 1,000 residents required by state law to be a wet municipality. Community development districts include qualifying golf and marina developments. The district also already has to have the authority to sell alcohol. The Alabama House approved the bill Jan. 30 on a vote of 67-12-5.
Rep. Alan Boothe, R-Troy, this week introduced HB459, which would define draft or keg beer as beer packaged and distributed in a keg by the manufacturer. Bottled beer labeled as draft beer would not fall under that definition. The bill awaits action by the House Economic Development and Tourism Committee.
BAD CHECKS
Bills Extending Bad Check Law to Electronic Versions Moving
Wednesday, the Senate Judiciary and House Financial Services committees moved identical versions of legislation that would make electronic drafts negotiable instruments. Both amended the bill so electronic drafts are considered negotiable solely as it relates to the state’s law governing negotiating a worthless instrument. Under existing law, a person commits the crime of negotiating a worthless negotiable instrument if he or she presents a check or promissory note as payment, knowing or intending that it will not be honored by the drawee. SB339 by Sen. Scott Beason, R-Gardendale, and HB450 by Rep. Mike Hill, R-Columbiana, extend that crime to electronic drafts made in bad faith. The bill also extends the same punishment and other related legal matters to bad electronic drafts.
>> Alabama’s current bad check law
STATE CONTRACTS
Bill That Allows State Agencies to Buy
From Retailers Outside Bid List Heads to the House
The House State Government Committee on Wednesday amended and approved SB59 by Sen. Arthur Orr, R-Decatur, which allows state agencies to purchase personal property from retailers or vendors not on the statewide contract or bid list. Now, the bill goes to the full House for consideration.
Currently, state agencies must purchase personal property such as office supplies and furniture from the statewide contract/bid list. To be able to purchase off the bid list, the purchase price must be at least 10 percent less than the statewide contract price, and it must be a market price readily available to the public at large, under the bill. The House committee amended the bill to also say the offer must conform to the terms and conditions of the statewide contract and the Division of Purchasing must certify that the offer satisfies the criteria before any purchase can be made. Property purchased outside the bid list under this legislation also must be brought from vendors within Alabama, under an amendment the Senate added Feb. 6 before approving the bill on a vote of 29-1. The Legislative Fiscal Office estimates this legislation could have saved the state between $5 million and $7 million in 2012.
Senate OKs Bill That Favors In-State Bids
On a vote of 28-0-1 Thursday, the Alabama Senate approved SB79 by Sen. Dick Brewbaker, R-Montgomery, which would require the state to award public contracts for projects under $100,000 to firms that are either based in or make products in Alabama if their bids are no more than 5 percent greater than the lowest responsible bidder. To qualify a company must not have defaulted on any previous state bids. The bill now goes to the House State Government Committee.
WORKERS’ COMPENSATION
Senate Panel OKs Doubling Workers’ Comp Burial Expenses
The Senate Judiciary Committee on Wednesday approved HB107 by Rep. Rod Scott, D-Fairfield, which would more than double the possible burial expenses a workers’ compensation claim can pay. The bill moves the allowed expense from $3,000 to up to $6,500, an increase of $3,500. The House approved the bill Feb. 6. It now goes to the Senate for final approval.
LEGAL
Revamp of Limited Liability Law Headed to Senate
The Senate Judiciary Committee on Wednesday amended and approved HB2, or the Uniform Alabama Limited Liability Company Law, by Rep. Paul DeMarco, R-Homewood, which would replace the current limited liability company law. The bill now heads to the Senate for consideration. The Alabama House approved the bill on a vote of 96-0 Feb. 13.
DeMarco said the state’s limited liability law, which governs 70 percent of all businesses in the state, hasn’t been updated since 1994. Part of the purpose of the legislation is to keep Alabama businesses from organizing in Delaware, which has advanced and flexible corporation laws, he said. The 140-page bill, drawn up by the Alabama Law Institute, focuses on the contractual nature of LLCs. Under the bill, the implied contractual covenant of good faith and fair dealing cannot be eliminated. The bill also acknowledges that LLCs don’t necessarily have to be for-profit businesses. Senate Judiciary has yet to consider the Senate companion, SB3 by Sen. Rodger M. Smitherman, D-Birmingham.
UNEMPLOYMENT
Change in Employing Unit Definition in Line for Final OK
The House Commerce and Small Business Committee on Wednesday approved SB48 by Sen. Clay Scofield, R-Guntersville, which clarifies that an employing unit for unemployment compensation purposes can be an employer who acquires at least 65 percent of another employing unit in Alabama. The Alabama Senate approved the bill Feb. 13 on a vote of 29-1. The House committee approval puts the bill in line for final approval by the full House.
Currently, an employer must acquire all of the assets of another employing unit to be considered an employing unit. This legislation makes it clear that if one business buys another, the unemployment compensation experience taxing rate of the purchaser is applied if the company owns 65 percent or more of the acquired company. On Jan. 22, the House Commerce and Small Business Committee approved the House companion, HB109 by Rep. Wes Long, R-Guntersville, putting that version in line for consideration by the full House.
NEXT LEGISLATIVE DAY
The 17th legislative day of the Alabama Legislature’s 2014 regular session is Tuesday, Feb. 25. The Alabama House of Representatives will meet at 1 p.m. The Senate convenes at 2 p.m.
FEDERAL
E-Fairness Set for House Hearing;
Sign Letter to U.S. House Judiciary Chairman
The U.S. House Judiciary Committee has scheduled a full committee hearing on e-fairness for Tuesday, March 4. The hearing officially sets the ball in motion for the House to come up with its own version of Marketplace Fairness Act legislation and bring that legislation to a vote.
The Alliance for Main Street Fairness and the Marketplace Fairness Coalition still need thousands of small-business owners to sign onto a letter to U.S. House Judiciary Chairman Bob Goodlatte supporting e-fairness.
The Alabama Retail Association urges its members to add your name to the nationwide push to get the Marketplace Fairness Act approved in 2014. Join the enormous groundswell of support for a level playing field for all retailers when it comes to sales tax collection. Your signature will help amplify the voice of retail.
