|HB 365 is the first step to enforcement of a 1939 law regarding a use tax on goods ordered from outside the state. It imposes a huge burden on consumers who will have to keep track of every purchase they make over the internet and be responsible for figuring and remitting their sales or use tax obligations to the Department of Revenue. It also imposes a new burden on out-of-state retailers who will be responsible for notifying you of your obligation to pay the sales or use tax with a pop-up box that requires you to click to acknowledge that you’ve been notified. Retailers will have to keep records of your acknowledgment for an indefinite period of time. Retailers will also be required to send you a list of items you’ve purchased at the end of every year with your sales or use tax obligation noted. HB365 also raises some serious privacy concerns. It allows the Alabama Department of Revenue to impose penalties for non-compliance. Enforcement would require the state to monitor what its citizens are buying off the internet and there are serious concerns over how this will be done.
The United States Constitution grants Congress certain enumerated powers, one of which is the power to regulate interstate commerce. Article I, Section 8, Clause 3 states in part, “The Congress shall have power to regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes.” While we sympathize with local retailers who are forced to charge state sales tax, the Constitution makes it clear that this is a problem for the federal government to address. Colorado recently passed a law very similar to HB365 and a federal judge has issued an injunction preventing enforcment on those grounds.
Other states that have passed the law, such as North Carolina, are already looking to repeal it because they have witnessed first hand the negative reprecussions of the internet sales tax. The law has failed to collect any additional revenue for the state or level the playing field with in-state businesses, instead costing many North Carolina advertisers their jobs.
The issue of sales tax and the internet may be one that needs to be addressed, but HB365 is not the answer.