Wednesday, September 26, 2018

Steve Flowers: Inside the Statehouse - Supreme Court rules states can collect online sales tax

  The State of Alabama’s fiscal year begins next week on October 1. Our state’s finances are not the best in the world. However, they got a boost from the U.S. Supreme Court earlier this year. The high tribunal ruled that states can collect sales tax on internet sales.

  This was one of the most inequitable scenarios I have ever seen. If you went to the corner hardware store or Lowe’s or Walmart to buy a hammer and paint, you paid sales tax. However, if you bought these same items online, you did not. That is not fair to the store or the state. What is even more unfair is if your wife went down to the local dress shop and tried on an expensive dress she liked, and then she came home and bought it online instead of in the store. How fair is that to the store, the clerk at the store, or the state?

  Finally, and thankfully, the Supreme Court clarified this inequality that had persisted for decades and since the inception of the internet.

  Alabama had already gotten ahead of the curve in regards to collecting online sales tax. Through the wise stewardship of House Ways and Means Chairman Steve Clouse (R-Ozark) we had joined 19 other states in passing legislation that urged companies to voluntarily pay the online sales tax.

  The legislation passed in 2015 was titled the Simplified Sellers Use Tax. It allowed companies the permission to collect sales tax to be remitted to the state voluntarily in exchange for locking in a fixed rate of 8 percent no matter where in the state an online item was sold. As you know, the sales tax rate varies from one area to another. In Alabama’s case, the money collected under our SSUT Act was divided 50/50 between the state and cities and counties. The city’s and county’s half is disbursed based on population. The state’s half is divided 75 percent to the General Fund and 25 percent to the Education Fund.

  Chairman Clouse estimates that the state will reap an additional $18-20 million from the Supreme Court decision. The Supreme Court’s 5-to-4 ruling overruled decades of old decisions that had cost the state billions of dollars over the years.

  The cases the Court overturned said that if a business was shipping an online customer’s purchase to a state where the business did not have a physical presence like a store, warehouse, or office, the business did not have to collect sales tax and remit to the state. Over the decades, this has been referred to as the Physical Presence Rule.

  Retiring Justice Anthony Kennedy wrote the majority opinion. He said, “Every year the Physical Presence Rule becomes further removed from economic reality and results in significant revenue losses to the state.” Retail trade groups praised the ruling saying that it levels the playing field for local and online businesses. President Trump praised the decision via Twitter. The President hailed the Supreme Court opinion as a “Big victory for fairness and for our country.”

  About the author: Steve Flowers is Alabama’s leading political columnist. His weekly column appears in over 60 Alabama newspapers. He served 16 years in the state legislature. Steve may be reached at He can also be found on Facebook and Twitter.

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