There is an email alert circulating regarding an internet sales tax bill asking people to make calls on it. This is an alert we sent out LAST year during the legislative session. There is NOT a bill introduced on the internet sales tax this year and it is not possible to use it to close the shortfall in the general fund budget. If you have any questions, please call or email our Exec. Dir. Brooklyn Roberts at 205-441-9879 or [email protected]
Wall Street credit ratings agency Standard and Poor’s say the current push by states to collect sales tax on internet purchases will yield little in the way of increased revenues:
America’s state governments won’t see many revenue gains any time soon if they triumph in battles to tax sales by out-of-state Internet retailers, a leading Wall Street credit-ratings group said on Monday.
Standard & Poor’s Ratings Services said that state governments were increasingly targeting Internet sales outside their borders but still faced legal hurdles and were unlikely to see much top-line benefit soon.
“At this time, Standard & Poor’s Ratings Services does not think that the amount of revenue states are foregoing by not collecting tax on Internet sales is significant enough to influence state or local ratings,”
States across the country are facing tough budget battles this year and Alabama is no exception. State legislators are under a lot of pressure by retail associations and others to help close that gap by collecting sales tax on internet purchases. Before they act on that, legislators should consider the cost of imposing a tax increase on the people of Alabama. Is an insignificant increase in revenue worth asking citizens to pay more sales tax in what are already tough economic times?
|Focus Of 2011 Session Was Serious Reforms
Last Thursday marked the end of the first Republican-controlled legislative session in 136 years. It was an extremely productive session with Republicans passing several badly needed reforms. The first of these was Representative Greg Canfield’s Rolling Reserve Budget Act which also had the distinction of being the first bill Governor Bentley signed into law. It will have a significant impact on the future budgets and prevent proration for years to come. Also noteworthy were Senator Trip Pittman’s reform of the teacher tenure system, the elimination of the state’s Deferred Retirement Option Program (DROP), and Representative Jay Love’s legislation to increase retirement contributions by state employees.
Alabama made national news with the passage of Senator Scott Beason and Representative Micky Hammon’s immigration reform legislation. According to Kris Kobach, one of the nation’s top immigration lawyers and current Kansas Secretary of State, Alabama now has the strongest law deterring illegal immigration in the country.
The legislature passed pro-life legislation including a ban on abortion after 20 weeks when the unborn child can feel pain (HB18). Unfortunately, several pro-life bills got caught up in the filibuster process and failed to pass. These include Personhood legislation that would define persons as all humans from the point of fertilization and the Health Care Rights of Conscience Act which gives health care providers, institutions and payers the right to decline to perform services that violate their consciences. Also on the health care front, the legislature passed Representative Blaine Galliher’s HB60 which prohibits mandatory participation in any health care system, essentially opting us out of the federal Patient Protection and Affordable Care Act, better known as Obamacare.
The legislature also passed legislation that will improve campaign finance records and improve transparency. Two great examples are Senator Arthur Orr’s SB136 which requires electronic filing of campaign contributions starting a year before the election monthly, and then requires weekly filings beginning a month before the election, and Representative Paul DeMarco’s Fiscal Transparency Act which requires the State Finance Department to produce monthly financial reports for the General Fund and the Education Trust Fund, and to publish them in a prominent place on the department’s website. They also took measures to improve election security by passing Representative Kerry Rich’s amendment to the Alabama Constitution to require voters to provide a valid photo ID in order to vote.
Businesses both big and small will benefit from Representative April Weaver’s legislation to allow businesses to deduct 100% of the amount they pay in health insurance premiums on their state income tax and Representative Blaine Galliher’s bill to authorize an income tax credit for employers creating jobs. The legislature also took steps to protect the right to a secret ballot in employee representation by passing Representative Kurt Wallace’s HB64.
Another good budget measure passed was Representative Jack Williams’ HB13 which will allow for the use of life cycle budgeting in competitive bids and public works projects.
There were a few pieces of controversial legislation that sparked heated debate this session. One such bill would have reauthorized the Forever Wild Land Trust program. Eventually a compromise was reached, and the legislature passed Senator Dick Brewbaker’s constitutional amendment to reauthorize the Forever Wild program allowing the people of Alabama to vote on the issue in 2012.
Representative Jack Williams’ bill to grant the Jefferson County Commission limited home rule to levy additional taxes prompted fierce debate on both sides. After passing the House Jefferson County Delegation by a vote of 9 – 8, the bill died in the Alabama Senate after a contest filed by Senator Scott Beason.
Another controversial bill would have enforced a sales and/or “use” tax on goods ordered on the internet from out of state. Eagle Forum fought hard against this legislation and we are very pleased to say it did not pass. To learn more about this bill, go to alabamaeagle.org. Eagle Forum also worked against Representative John Merrill’s HB6 which would have lowered the mandatory school age from 7 to 6 years of age. This bill was stopped in the Alabama Senate.
There were a few pieces of good legislation that didn’t pass. We would have liked to have seen passed Representative Paul DeMarco’s Taxpayer Bill of Rights (HB427) and Senator Cam Ward’s Foreign Law Prohibition Bill (SB61), along with Senator Dick Brewbaker’s resolution encouraging the State Board of Education to retain complete control over Alabama’s academic standards (SJR153), but time ran out. While Senator Paul Bussman’s shared parenting legislation (SB196) did not pass, a constructive dialogue began and we hope he will come back next year with a stronger bill.
Overall, we think the members of the Alabama Legislature, Speaker Hubbard and Pro Tem Marsh deserve a solid A for this successful session, and we hope they will continue to be committed to passing the kind of serious reforms they addressed this year.
|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.
According to a recent Rasmussen poll, 63% of Americans are opposed to an internet sales tax. Alabama legislators should take note of that poll, and reconsider their support for Rep. Jamie Ison’s HB365.
Rep. Ison has introduced legislation (HB365) to increase enforcement of the 1939 sales and use tax law specifically targeting internet sales. The vast majority of Alabamians are unaware of the law which requires them to remit a “use” tax on items purchased through catalogs or over the internet. The law has never really been enforced, and Alabama retailers are trying to change that.
Local retailers argue they are put at a disadvantage because consumers must pay sales tax when buying at their stores, but do not have to pay sales tax when ordering online. While this is true, there are local retail stores that continue to flourish. The advantages of having the desired goods immediately and without paying shipping and handling often outweigh the benefit of not paying sales tax. Even if that were not the case, legislators cannot use public policy to subsidize business models that don’t work in the current marketplace. The internet is not a fad. Like it or not, business owners must begin to account for it when making their business plans.
Rep. Ison’s proposed legislation puts a huge burden on online retailers and an even bigger burden on individual consumers. As it stands, HB365 will:
- require an obnoxious pop-up window to appear on your computer screen prior to completing a purchase. The warning would inform shoppers that they owe a tax and inform them of penalties for non-compliance. Consumers will be required to indicate they have read and understand the notice before they can proceed with their purchase.
- require retailers to maintain a record of your purchases and send you a statement at the end of every year listing all the items you have bought within the year.
- require retailers to keep your purchase records as well as your acknowledgement of obligation to pay the tax for an indefinite period of time to be set by the Revenue Department.
The bill would very likely be declared unconstitutional. Similar laws in other states have failed on constitutional grounds. This bill discriminates against out of state retailers, actually compels certain retailers to collect a tax, and relieves certain taxpayers from the tax. Alabama is trying to skirt relevant court decisions, but this clearly places a burden on out of state businesses to assist in tax collection, if not collect it directly, in likely violation of the Commerce Clause.
The Bottom Line: This bill has constitutional problems, privacy problems, and tax problems.
The Wall Street Journal has an excellent article on the move by some states to tax internet sales. Conclusion: Taxing internet sales doesn’t work. In fact, it drives business out of the state.
Governor Pat Quinn recently added to his reputation as America’s most taxing politician by signing a law applying the state’s 6.25% sales tax to Internet purchases made in Illinois. Within hours, Amazon, the online book and merchandise seller, announced it would discontinue using any of its 9,000 Illinois small business affiliates to avoid having to collect the tax. Congratulations, Governor. Read More
I hope Alabama legislators are listening. While this article focuses on collecting sales tax from the seller, there is currently a proposal to collect internet sales tax from the consumer in the Alabama legislature. Technically, consumers already have a duty to report internet buys and pay a “use” tax on those orders. However, it is almost impossible to enforce. Most people are unaware this duty even exists, much less follow through with the reporting.
Rep. Ison has introduced legislation that will require sellers to notify consumers of their duty to pay the use tax immediately after their purchase. It will also require retailers to provide consumers with a summary of their purchases throughout the year and their tax obligations on such items. The bill also amends the Alabama personal income tax form to allow for an easier reporting of the use tax.