Starting Oct. 1, 2018, Alabama will start collecting on online purchases, even if the seller isn’t located within state lines.
Previously, the only way this tax was collected was if shoppers themselves kept track and paid the tax, but most didn’t. This was because of a 1992 law that specified states could not force businesses to collect sales taxes from shoppers in a state if the business had no physical presence in that state, However, in light of the vastly different retail landscape today, the U.S. Supreme Court recently issued a ruling that overturned that law.
As a result, the Alabama Department of Revenue announced that out-of-state businesses who do more than $250,000 in sales within Alabama must now register with the Alabama Simplified Sellers Use Tax Program (SSUT) and begin collecting sales tax no later than Oct. 1 of this year. Under SSUT, businesses can pay a simple flat 8 percent sales tax rather than navigate the 200-plus varying city and county sales taxes across the state. From this amount, 4 percent goes to the state, 2 percent to counties, and 2 percent to cities. More than 230 out-of-state online retailers already participate in the program, including Amazon, HelloFresh, Overstock.com, Spotify and Ikea.
For Alabama, this change will mean boosted tax revenue, but it will also help level the playing field for in-state small businesses. Several Alabama officials praised the Supreme Court ruling, including Gov. Kay Ivey and Executive Director of the Association of County Commissions of Alabama.
WSFA 12 reported Gov. Ivey’s comments: “The Supreme Court’s ruling related to online sales taxes is a common-sense approach that modernizes existing limitations on the taxation of e-commerce sales and will facilitate collections in our global, technology-driven economy. The change effected by the Court’s decision will promote parity between our state’s brick and mortar businesses and competing out-of-state sellers.”