New Alabama Bill Could Hike Online Sales Tax—What Shoppers Need to Know

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Shoppers in Alabama may soon see a change in the sales tax they pay on online purchases if a new bill proposed by State Representative Chris England becomes law. The bill aims to raise the current online sales tax from 8% to 9.25%, aligning it more closely with the sales tax rates in many North Alabama cities.

Currently, sales tax rates vary across the state, with shoppers in cities like Huntsville and Decatur paying 9%, in Florence 9.5%, and in Guntersville 10% when they make purchases at brick-and-mortar stores. However, the tax on online purchases remains at a lower, flat rate of 8% statewide, thanks to the Simplified Sellers Use Tax program.

This program, originally designed to simplify tax collection for businesses selling products online in Alabama, has inadvertently created a situation where online purchases are taxed less than in-store purchases, potentially giving online retailers an edge over local businesses.

Representative England, who drafted the bill, argues that this discrepancy places brick-and-mortar stores at a significant disadvantage. "It puts our brick-and-mortar stores at a complete disadvantage," England said. "People actually go into the store, look at the item, and then go home and order it online to save on taxes."

The proposed bill seeks to address this issue by raising the online sales tax to 9.25%, making it more expensive than the sales tax in many cities. This change, according to England, is intended to encourage shoppers to support local businesses by leveling the playing field between online and in-person purchases.

But the bill has another important objective. Under the current Simplified Sellers Use Tax program, the revenue collected from online sales does not go to the local governments where the buyers reside. Instead, the tax is distributed across the state, with a significant portion going to areas that had no involvement in the transaction.

England's bill aims to change that by ensuring that the revenue from the increased online sales tax stays within the local community. "The money would stay local; it would go to your local school board, roads, and bridges," England explained. This change would mean that tax dollars spent online would directly benefit the local services and infrastructure that residents rely on, rather than being dispersed elsewhere in the state.

If passed, the bill would not only bring online sales tax rates in line with or above those of local brick-and-mortar stores but would also ensure that local communities benefit more directly from the taxes collected on these purchases. This change is expected to provide a boost to local economies, particularly in areas where brick-and-mortar businesses have struggled to compete with online retailers.

The bill is currently under discussion in the Alabama Legislature, and its progress will be closely watched by both local businesses and consumers across the state. If enacted, the new tax rate could take effect as early as next year, potentially reshaping the landscape of both online shopping and local retail in Alabama.