Alabama's antiquated state and local tax system is almost universally considered to be a poster child for tax reform. Many will debate what type reform is needed, but the need for reform is hardly debatable by anyone not tied to a special interest group.
Recent news out of our neighboring state of Georgia gives one pause to consider yet another way in which Alabama is on track to be left behind due to its "unique" tax system, and subsequently the poorer for it.
This Spring, Georgia's Legislature passed legislation that will bring Georgia into conformity with the Streamlined Sales and Use Tax ("SST") Agreement, effective January 1, 2011. The legislation is currently awaiting the signature of Governor Sonny Perdue.
The purpose of the SST Agreement is to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance. It encourages "remote sellers" selling over the Internet and by mail order to collect tax on sales to customers living in the Streamlined states. It levels the playing field so that local "brick-and-mortar" stores and remote sellers operate under the same rules. It also has as one of its goals the increase of sales and use tax collections for state and local governments from businesses that currently do not have the physical presence required to give them nexus with many states. It is estimated that e-retail sales this year will total $131.4 billion, much of which is not subject to sales tax under current law.
To date, 23 states have passed the conforming legislation to become members of the SST Agreement. Those states represent approximately 33% of the country's population. Several other states are currently considering legislation to adopt the SST Agreement's requirements. Neighboring southern states Tennessee, Arkansas, and North Carolina have already passed the legislation.
As many readers are aware, Alabama is one of only a handful of states to allow local taxing authorities to administer their own taxes. This would need to change in order for Alabama to be allowed to join the SST Agreement. Previous experience indicates that Alabama's municipalities and counties will fight any effort to change the system, as they are generally loath to give up any control of their tax administration.
The result is that Alabama and its local jurisdictions are already missing out on some taxes that larger national companies are voluntarily collecting and remitting to states that are members of the SST Agreement. In addition, legislation has been proposed in Congress to allow SST Agreement member states to collect sales and use taxes from businesses from whom they would not otherwise be able to collect under current U.S. Supreme Court law. If that passes, Alabama will miss out on even more tax revenue.
So, the question is, "Will Alabama cling to its past and the distrust that exists between state and local governments, or embrace a brighter future by putting aside its antiquated and convuluted sales and use tax system and make the statutory changes necessary to become a member of the SST Agreement?"
Your thoughts?
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