Supporters of a bill aimed at keeping big online retailers such as Amazon enrolled in a program that pays the state sales tax admit it has an unintended consequence.
Sen. Trip Pittman (R-Montrose) said SB 130 was never meant to allow stores that have brick-and-mortar locations, such as Wal-Mart or Target, to enroll in the Simplified Sellers Use Tax (SSUT) program if they have online platforms. Instead, Pittman said, the bill is supposed to allow Amazon to remain enrolled in the program even if it is determined the retailer has a nexus in the state.
The bill would amend a 2015 law allowing Amazon and other online-only retailers to voluntarily pay sales tax throughout the state through the SSUT. The state would receive half of the 8 percent tax, while the rest would be split among cities and counties based upon population.
If a store pays sales tax in Mobile, for instance, the state would receive 4 percent of the 10 percent sales tax, the city would receive 5 percent and the county would get 1 percent.
As written, city officials are concerned the SSUT amendment could allow stores with brick-and-mortar locations to opt into SSUT for website sales. If that were to happen, Executive Director of Finance Paul Wesch said the city could lose as much as $13 million to $15 million in revenue.
In addition, the SSUT would give major retailers with an online presence an advantage over brick-and-mortar locations, Wesch said.
“The people who really get hurt here are our retailers,” Wesch said, “the people out there having to bear the burden of a having a brick-and-mortar presence.”
At issue for the state is the potential loss of revenue from Amazon if the largest cities in Alabama can successfully argue the retailer — through its acquisition of Whole Foods — has nexus in the state.
Wesch said there is a two-part test to determine whether Amazon has a nexus in the state. Whole Foods would first have to be considered an affiliate of Amazon. Wesch said the Alabama Department of Revenue considers the two companies related. Second, the two companies would have to share marketing efforts. Wesch said based upon this test he believes Amazon would be ineligible for the SSUT.
SB 130 would make Amazon eligible for SSUT regardless of nexus, Pittman said. He acknowledged the bill would have an impact on the state’s largest cities, but argued that the majority of Amazon purchases in the state come from customers who live outside the limits of those cities.
The Mobile City Council has discussed moving away from sales tax as the main source of revenue for the city. A council committee recommended a one-cent sales tax increase be extended for five years, but also discussed the possibility of lowering the city’s reliance on sales tax revenue.