Alabama Governor Signs Online Sales Tax Reporting Act

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By Chris Marr

Online sales tax reporting requirements can move forward in Alabama under legislation Gov. Robert Bentley (R) signed into law March 22.

S.B. 86, enacted as Act No. 2017-82, authorizes the state’s Department of Revenue to require out-of-state sellers to report their sales to the department and notify Alabama customers of their tax obligations.

The requirements would apply to sellers who don’t already follow the state’s rules requiring remote sellers with more than $250,000 of sales into Alabama to collect and remit sales tax to the state.

Alabama becomes the 10th state to impose some form of notice/reporting regime.

DOR: More Will Collect

The revenue department hasn’t decided when or how it might pursue rulemaking under the new law, said Joe Garrett, deputy revenue commissioner.

He predicted sellers opting to report rather than collect the tax would be few.

“Most remote sellers will choose to collect taking advantage of our simplified sellers use tax system in order to avoid reporting and to save their customers from having to report and remit use tax,” he told Bloomberg BNA.

The new law also makes positive changes to the simplified remittance program, he said, including removing a six month waiting period before program participants could establish a physical presence in Alabama.

Alabama administratively imposed sales tax collection requirements on out-of-state sellers in early 2016. State tax officials have said they hope to seed a case that leads to U.S. Supreme Court review of its 1992 Quill Corp. v North Dakota decision, which prevents states from imposing sales tax collection duties on companies without an in-state physical presence.

Concerning Level of Authority

The broad scope of authority that S.B. 86 gave to the DOR is concerning, as affected companies couldn’t know what to expect in terms of reporting frequency and other details, tax attorney Bruce Ely of Bradley Arant Boult Cummings LLP previously told Bloomberg BNA.

Nevertheless, the department’s rulemaking process should give members of industry a chance to give their input on the reporting requirements, he said.

Similar Bills in Half of States

The Alabama bill was one of many online sales tax-related bills under consideration in roughly half of state legislatures this year, as states ramp up efforts to push the boundaries of sales tax law in the e-commerce age.

Some states are taking the approach of requiring sales tax collection. Others take the reporting/notification approach in line with a Colorado law that recently survived a constitutional challenge when the U.S. Supreme Court declined to review the case in December.

Seven other states introduced reporting bills this legislative session. Those states are Arkansas, Georgia, Hawaii, Kansas, Nebraska, Rhode Island and Utah, where the bill failed.

To contact the reporter on this story: Chris Marr in Atlanta at cMarr@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Act No. 2017-82 is at http://src.bna.com/nfq.

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