Alabama Tax Tribunal Voids Local Tax Assessments

In VV & Co., LLC v. Cities of Boaz and Albertville, Alabama, Docket Nos. CITY 23-1081-LP and 23-1082-LP (Final Order February 3, 2025), the Alabama Tax Tribunal voided final assessments for sales tax entered by the cities of Boaz and Albertville through their third-party auditing firm, Avenu. The Tribunal determined that the two cities, and Avenu in particular, failed to provide the minimum evidentiary foundation necessary to support the assessments.

Avenu based the two assessments on a desk audit where it determined the taxpayer failed to submit sales tax returns at all to the two cities during the audit period, even though the taxpayer allegedly had done so at some point in the past. The taxpayer claimed in its Notice of Appeal that it was a wholesaler of cars and any tax return would have shown $0.00 tax due. The auditor for Avenu testified that neither Boaz nor Albertville received any documents or reviewed any records that showed the taxpayer made any sales during the applicable audit periods and that the sole foundation for the two final assessments in issue was the fact that the taxpayer did not file returns or pay taxes.

The Tribunal explained that a final assessment must be “based on a minimum evidentiary foundation.” In this case, it determined that the cities of Boaz and Albertville had failed to do so and thus the assessments were voided.

For the Final Order, click here.

Alabama Supreme Court Awards Gas Tax Revenue to Phenix City

The Alabama Supreme Court has ruled in favor of Phenix City in its long-running battle with Russell County regarding the distribution of gas tax proceeds. 

In addition to the fact that Russell County has to restart distributing gas tax revenues to Phenix City, it is estimated that, to date, the amount owed by Russell County to Phenix City for previously collected taxes is around $2.5 million. 

To review the Supreme Court's Opinion, click here.

Alabama bill proposed to exempt sales of optical aids from sales and use tax

Proposed Alabama legislation in the upcoming 2025 General Session would exempt sales of optical aids, including eyeglasses and contact lenses from sales and use tax. 

To see the proposed bill, click here.

ADOR Adopts Regulation on Lodgings Tax Reporting Requirements for Intermediaries and Providers

The Alabama Department of Revenue has now certified a new regulation detailing the collection and reporting requirements for accommodation intermediaries and providers for lodgings tax purposes. 

The regulation provides details on the required annual informational report to be filed electronically by April 20th each year, with the first report due no later that April 20, 2026.

The requirements are for accommodations transactions occurring on or after January 1, 2025.

To view the new regulation, click here.

Tax Tribunal Confirms Paid Tax Return Preparer Penalties

The Alabama Tax Tribunal, in its Opinion and Final Order in Voncille Pompey v. State of Alabama Department of Revenue, Docket No. P. 23-1048-JP (November 19, 2024), upheld the Revenue Department’s assessment of “paid tax return preparer” penalties against Ms. Pompey for 2019, 2020, and 2021 in the amounts of $5,100, $10,200, and $10,250, respectively.

The Department’s investigation began when the Department received a return with a suspiciously large loss reported on Schedule C. On further investigation of the internet protocol (IP) address used to file the return, the Department found approximately 100 returns filed from the same address. Many of those returns featured large business losses on Schedule C without any documentation to substantiate the claimed losses.

Inquires of the taxpayers involved in those returns led the Department to Ms. Pompey, who was identified by several of them as someone who they paid to prepare their returns.

At the hearing before the Tax Tribunal, Ms. Pompey denied being a paid tax return preparer, instead claiming she “would simply answer tax questions when someone called her and offer them [advice] concerning how and where to find the answers to their questions.” When confronted with evidence that she was paid by some of the taxpayers, she stated that the payments she received were only “donations” in an amount that varied depending on the extent to which she had to help them.

Not surprisingly, the Tax Tribunal concluded the “donations” were indeed payments for tax preparation and that Ms. Pompey was subject to the requirements imposed on paid tax return preparers. Therefore, the Tribunal upheld the assessment of the penalties imposed. 

To read the details of the case, click here.