Friday, May 1, 2015
The Alabama Legislature is threatening to remove the discount Alabama retailers receive for collecting and remitting Alabama sales taxes in a timely manner. For many Alabama retailers, this change would mean sending $4,800 more each year to the state in taxes.
Your association asked you in an e-mail Thursday to tell your representative to oppose HB553 by Rep. Ken Johnson, R-Moulton. If you haven’t already, contact your House member now! Find out how to contact your Alabama House member by entering your address and zip code here. Urge your friends in retail to contact their representative as well.
Alabama, like 27 other states, offers a discount to retailers for the service of collecting and remitting sales taxes. Alabama’s discount is 5 percent on the first $100 of sales taxes remitted and 2 percent on any amount beyond that for taxes are remitted on or before the 20th of each month. A 2001 executive order capped the monthly discounts at $400, no matter the number of locations a retailer operates.
John M. Wilson (pictured), owner of grocery stores in Luverne, Greenville and Evergreen and an Alabama Retail Association board member, told the House Ways and Means Education Committee on Wednesday that the administrative discount Alabama retailers receive for remitting sales taxes doesn’t cover the cost of training clerks to fill out tax exemption forms for WIC benefits and other tax-exempt programs or for hiring a bookkeeper to handle the sales taxes. Besides those administrative costs, retailers pay 2 percent or more in interchange fees on credit card transactions, which account for 66 percent of transactions made, said Alabama Retail Association President Rick Brown. Consequently, retailers are paying a 2 percent or higher fee on 66 percent of the sales taxes they collect. The $400 or less discount retailers receive a month for collecting sales taxes barely covers or does not even cover the interchange fees paid on sales taxes, much less the administrative costs for all of the taxes collected, Brown said.
The committee is expected to vote on the legislation Wednesday.
Rep. Patricia Todd, D-Birmingham, told the committee it was hypocritical for lawmakers to offer incentives for businesses to locate in the state, while taking away incentives from businesses already operating in the state.
Besides the sales tax discount, Johnson’s bill does away with discounts for gasoline, diesel and motor carrier fuel taxes, contractors’ gross receipts, tobacco stamps and lodging taxes. The discounts would cease to exist Oct. 1 if the bill passes.
Bill Offers Amazon, Other Internet Sellers a Tax Break
and an Uncapped 2% Collection Discount
At the same time the Alabama Legislature is trying to take away Alabama retailers’ allowance for collecting sales taxes, a proposal has surfaced to give certain mega online retailers a tax break if they will start collecting taxes from Alabama customers.
Sen. Trip Pittman, R-Daphne, this week introduced legislation that would allow remote sellers without a physical presence in our state to collect use taxes Alabama customers owe on items delivered to our state at a rate of just eight percent. The average sales tax rate in Alabama is 8.91 percent, the third highest average sales tax rate in the country.
The remote sellers participating in the program would receive a discount of two percent on all use taxes remitted with no cap on the amount they retain.
The goal of SB437 is to collect at least some of the sales taxes that currently aren’t being collected in the state by certain large, online retail merchants that don’t have stores in Alabama.
The “non-nexus sellers” would only be required to give a statewide total of sales made monthly to Alabama customers and would not have to report the location of the purchasers or amount of sales delivered to a specific locality. A quarter of the taxes collected would be shared among the state’s counties and a quarter would be shared with the state’s cities regardless of where the customers who purchased the items live.
The bill carries an effective date of Jan. 1, 2016. It has been assigned to the Senate Finance and Taxation General Fund Committee.
After the Senate Finance and Taxation Education Committee carried over his flat tax constitutional amendment Wednesday, Sen. Bill Hightower (pictured), R-Mobile, said he would work with all stakeholders to draft needed enabling legislation. Hightower said his goal is to develop a simple income tax system that is revenue neutral. “It will virtually eliminate deductions the state gives, but leave those the federal government gives,” he said.
SB409 would cut the individual income tax rate from five percent to 2.75 percent, allowing for charitable contribution deductions and those deductions required under federal law. During the committee meeting though, Hightower admitted the individual rate would have to be raised to 2.9 percent to be revenue neutral as he intended.
The proposed constitutional amendment also would cut the corporate tax rate from 6.5 percent to 4.59 percent and eliminate the deduction for net operating loss, capital credits and rehabilitation and preservation credits among others.
His constitutional amendment repeals the existing amendment allowing all Alabama taxpayers to deduct federal income taxes paid from their state return.
Objections raised during Wednesday’s public hearing included the taxing of defined benefit plans and the legislation’s disproportionate harm to lower income individuals.
The House Commerce and Small Business Committee on Wednesday approved SB322 by Sen. Paul Sanford, R-Huntsville, which relieves business taxpayers using the state’s ONE SPOT electronic tax filing system from liability for charging and collecting the incorrect tax rate if they are provided incorrect information from a governmental entity. The bill now goes to the full House for final approval.
Rep. Dimitri Polizos, R-Montgomery, gained enough support Tuesday for his occupational tax ban to be considered before the state’s budgets, only to have to carry the bill over when it looked like he wouldn’t have enough support to pass the bill. HB149 proposes a constitutional amendment to prevent counties and cities from imposing an occupational tax after Jan. 1, 2017. The House has debated the bill on two other occasions, but never reached the point of taking a vote on passage of the bill. According to the League of Municipalities, 26 Alabama cities already levy occupational taxes ranging from a half percent to 2 percent.
HB140 by Rep. Steve McMillan, R-Bay Minette, which makes it a Class C felony to possess or use an automated sales suppression device, is on the Alabama House’s agenda for consideration next week. The devices, also known as phantom ware or zappers, are used to delete records of sales transactions from cash register records, so that sales taxes are under-reported to the state, county and municipal tax collecting authorities. Individual violators also would be subject to fines up to $100,000, while corporate violators could be fined up to $500,000. Twenty states have restricted the sale or possession of automated sales suppression devices and more, like Alabama, are considering similar legislation. McMillan said the Alabama Department of Revenue has reported issues with these devices. The devices are more prevalent internationally than in the United States.
HB569 and HB570 by Rep. John Knight, D-Montgomery, offer different solutions for removing the sales tax on food. HB569 would remove food sales tax all at once, while HB570 would phase food out of the sales tax system over a four-year period by reducing the sales tax rate a percentage point each year. Both solutions would start Sept. 1, 2015. The definiton of food is the same as the federal Supplemental Nutrition Assistance Program. Neither bill affects local sales taxes. Local governments will still be able to collect local sales tax on food. Both bills have been assigned to the House Ways and Means Education Committee.
Thursday, a spate of tax-related bills were introduced, most which would produce extra revenue for the state:
- HB581 by Rep. Elaine Beech, D-Chatom, increases the maximum amount of business privilege taxes from $15,000 to $20,000 and changes the tax rate determination to taxable net worth. It exempts those with less than $10,000 in taxable net worth from the tax. It also changes the due date to April 15.
- HB593 by Rep. Ken Johnson, R-Moulton, deals with taxing vehicles exported to other states.
- HB587 by Rep. Terri Collins, R-Decatur, places a sales tax rather than an excise tax on lubricating oil.
- HB595 by Rep. David Faulkner, R-Birmingham, would add an annual license fee for amusement or entertainment machines regardless of the sales derived from the machines.
- HB572 by Rep. Patricia Todd, D-Birmingham, raises the cigarette tax from 42.5 cents per pack to 67.5 cents per pack.
- SB434 by Sen. Bill Holtzclaw, R-Madison, deals with the combined sales of gasoline and other goods.
The House Ways and Means General Fund Committee is slated to conduct a public hearing on HB572 on Tuesday and consider HB581, HB593, HB 595 and HB 572 on Wednesday.
Senate Sends Bill Broadening
Catfish Origin Notification to Governor
Thursday, the Alabama Senate voted 30-2 for HB186 by Rep. A.J. McCampbell, D-Livingston, which requires restaurants, grocery delis and other food service establishments to notify customers of the country of origin for the entire catfish species order, Siluriformes. The bill, being pushed by the state’s catfish producers, adds 35 additional families of catfish to those about which food establishments would have to communicate country of origin with their customers.
Tuesday, the Alabama House of Representatives approved HB489 by Rep. Richard J. Lindsey, D-Centre, which would allow the Collinsville Town Council in DeKalb County to authorize the sale of draft or keg beer or malt beverages.
Thursday, the House approved HB479 by Rep. Isaac Whorton, R-Valley, which would allow the Valley City Council to ask voters to approve Sunday alcohol sales after noon. Valley is in Chambers County. If the council approved it, the referendum would be held at the next regular or special election.
Both bills now are ready for consideration by the Senate Local Legislation Committee.
The Senate Tourism and Marketing Committee approved a substitute version of SB247 by Sen. Billy Beasley, D-Clayton, which would allow licensed liquor manufacturers or representatives to conduct liquor and wine tastings, at no charge to consumers, in stores with off-premise-only liquor licenses and state liquor stores. Under this legislation, one-quarter ounce of liquor with no more than two products or one ounce of wine with no more than four products could be served at any tasting. The tastings have to begin on or before 6 p.m. and last no more than two hours. Only one tasting per day would be permitted. The House companion, HB294 by Rep. Margie Wilcox, R-Mobile, still awaits action by the House Economic Development and Tourism Committee.
The House Judiciary Committee approved a substitute version of HB421 by Rep. Chris Pringle, R-Mobile, which would make it illegal for a person or business to possess, purchase, sell, offer to sell or use powdered alcohol, a new product expected to launch this summer. Powdered alcohol is defined as alcohol in powder form that can be directly used or reconstituted with water and food.
The substituted bill is identical to SB365 by Sen. Vivian Davis Figures, D-Mobile, which the Senate Judiciary Committee substituted and approved April 15.
The now companion bills are ready to be considered by their respective chambers.
The original legislation called for a fine of up to $500 for a person or business in possession of powdered alcohol. The substitute versions call for the fine allowed for a Class A misdemeanor, which is up to $6,000, for possession, selling or use on first offense. Under the substitutes, a business or person caught selling powdered alcohol would be charged with a Class C felony on second or subsequent offenses.
The original legislation stated that to be in violation those in possession or selling powdered alcohol would have to “knowingly and unlawfully” possess or sell the substance. The substitute drops “knowingly.”
Rep. Craig Ford, D-Gadsden, has a similar bill HB382.
House Committee OKs Substitute Prison Reform Bill
The House Judiciary Committee on Thursday morning approved a substitute version of SB67 by Sen. Cam Ward, R-Alabaster, which targets recidivism and greater investment in probation and parole services in an effort to keep Alabama’s overcrowded prisons out from under federal control. The prison reform legislation maintains the state’s current felony theft threshold of $500, which retailers need to protect their stores and property.
The bill is essentially the same as the version that passed the Senate on April 2.
Rep. Mike Jones, R-Andalusia, the committee chairman, said the substitute sticks to the goal to reduce the prison population by 4,500 within five years. Jones said the bill would likely be amended again on the House floor.
The House Military and Veterans Affairs Committee on Wednesday approved SB269, the Voluntary Veterans’ Preference Employment Policy Act, by Sen. Bill Holtzclaw, R-Madison, which would allow private employers to have a written, voluntary veterans’ preference employment policy. The policy would have to be applied uniformly to employment decisions, such as hiring, promotion or retention. The Alabama Senate has already passed the bill. The bill, which the Alabama Senate has already pass, now goes to the full House for final consideration.
The House Commerce and Small Business Committee on Wednesday approved HB506 by Rep. Napoleon Bracy, D-Prichard, which would reduce unemployment benefits for those receiving a pension or retirement benefits only if those benefits were 100 percent employer financed. The bill now goes to the full House.
Wednesday morning, the House Public Safety and Homeland Security Committee approved a substitute version of HB47 by Rep. Chris England, D-Tuscaloosa, which makes it a Class C misdemeanor to carry a pistol on your person or on private property without consent of the property owner.
NEXT LEGISLATIVE DAY
The Alabama Senate will convene at 1 p.m. Tuesday, May 5, for the 19th legislative day of the Alabama Legislature’s 2015 regular session. The Alabama House will convene at 2 p.m.