Tuscaloosa mayor threatens lawsuit over Alabama's online sales tax system
Tuscaloosa mayor threatens lawsuit over Alabama's online sales tax system
TUSCALOOSA, Ala. — Mayor Walt Maddox is preparing to take legal action against the state of Alabama, challenging what he describes as an inequitable system for distributing online sales tax revenue. Maddox argues that the current tax law is depriving Tuscaloosa of millions of dollars that could bolster local services.
"Tuscaloosa should keep what they earn," Maddox said, emphasizing the importance of retaining local sales tax revenue to enhance public safety and fund schools.
In March, prior to his re-election, Maddox expressed his concerns, stating, "I think the biggest thing we can do is make certain that sales taxes that are earned in Tuscaloosa stay in Tuscaloosa."
Four months later, the Tuscaloosa City Council has collectively decided to sue the state over its Simplified Sellers Use Tax system. This law, enacted in 2016, allows online retailers to impose an 8% sales tax at checkout, with the revenue distributed across Alabama's cities and counties.
"The city only gets pennies on the dollar of the internet sales tax," Maddox said. "Goods and services that are purchased and delivered right here in Tuscaloosa, those revenues are being exported throughout the state."
Maddox described the situation as the city's greatest challenge yet, noting that last year alone, the tax act cost Tuscaloosa $15 million and the city's school system another $5 million.
"Just imagine what our school system can do with an additional five million dollars in earned sales taxes that is now being shipped to other parts of our state," Maddox said.
The Tuscaloosa City School System recently failed to pass a property tax referendum intended to fund the district, resulting in staff and program cutbacks. The district released a statement saying, "The Tuscaloosa City School System like most school systems across the state, receive zero sales tax when it comes to online sales. As shopping trends have changed, so too must our tax structure so that school systems continue to be supported."
Maddox also highlighted the need for Tuscaloosa's small businesses to have the same advantages as out-of-state corporations in major locations such as California and New York.
Governor Kay Ivey's office has been contacted for a response.
