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An Interesting Look: Alabama’s Latest Online Sales Tax News

Monika Miles

A couple of weeks ago we started a series that looks at the ramifications of various online sales tax legislation states across the country are proposing and signing into law. We started with Colorado as they’ve been at the forefront of the debate since 2010. Today we take a look at Alabama!

Alabama has been making waves in the state tax world because it passed legislation in 2015 that requires an out-of-state seller making retail sales within the state to register, collect, and remit sales tax on these sales by virtue of “economic nexus” if the seller has sales of more than $250,000 within Alabama, and engages in certain limited activities in the state. However, it does not require substantial physical presence as required in the 1992 Supreme Court decision (Quill). With the passage of these laws, Alabama drafted legislation that is unconstitutional and effectively challenging taxpayers to take the issue to court (or is challenging the federal government to finally enact some of the bills which have been circulating in Congress but have not passed). Whether that’s “simplified” or not is a question, but read on for a summary of the latest activities in the state.

A Summary of Alabama’s Online Sales Tax Legislation

Back in 2015, Alabama launched the Simplified Sellers Use Tax program, which helps online retailers collect sales tax from Alabama customers. Instead of worrying about the various city and county fees, the program collects a flat 8 percent that the state then splits with counties and municipalities. Although this bill was passed two years ago, it didn’t make a big difference for the state until Amazon enrolled in the program last fall.

Alabama’s Potential Upcoming Sales Tax Legislation

Although the Simplified Sellers Use Tax program is helping, the Alabama legislature is still trying to come up with ways to actually receive the taxes charged by in-state businesses. Current legislation, S.B. 86, is very similar to the law Colorado passed earlier this year in that it stipulates internet retailers need to report their sales to the state and notify consumers of use taxes they’re responsible for paying. The bill also proposes a few changes to the Simplified Sellers Use Tax program, such as the state distributing sales taxes collected to counties and municipalities monthly rather than quarterly.

S.B. 86 passed Alabama’s Senate unanimously and is currently in the House for consideration.

Ramifications of Alabama’s Online Sales Tax Legislation

What does this new legislation potentially mean for Alabama residents? As with Colorado, customers would be held accountable for the sales tax they owe on purchases made from out-of-state businesses. As Bloomberg BNA points out, “The reporting and notification requirements would create one more mechanism for the state to collect sales and use taxes that are already owed under current law, yet often go uncollected.”

Monika Miles

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

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