The Tuscaloosa City Schools Board of Education will sue the state of Alabama over the distribution of online sales tax revenue after a unanimous vote.
Last week, the Tuscaloosa City Council approved its own lawsuit against the state, challenging the Simplified Sellers Use Tax system. The lawsuit argues the system quietly drains tens of millions of dollars from the city’s budget, negatively impacting local businesses.
With the SSUT system, online retailers charge an 8% sales tax at checkout, then send the money to the state. Half of that stays in Montgomery, split between the state’s general fund and the Education Trust Fund.
The other half is divided among Alabama’s 463 cities and 67 counties, not based on where the sale happened but strictly on population. As a result, a Tuscaloosa resident ordering groceries online from a Tuscaloosa store for delivery to their Tuscaloosa home could be generating tax revenue that ends up in other cities.
“Earned revenue should stay in the communities where it’s generated for our schools, police officers, firefighters and roads,” Tuscaloosa Mayor Walt Maddox said in an Instagram post.
School board member Clint Mountain said that whether or not the lawsuit is successful, it may bring attention to the issue, leading to something being done at the legislative level.
“The first point is that the city of Tuscaloosa is moving forward with this with or without us, and our participation or approval here makes sure that, win, lose, or draw, we will have a seat at the table,” Mountain said. “It’s a very, very complicated issue and it has to do a lot more with the statutory construction of how these funds are collected and distributed, and it may not be as simple as filing a lawsuit… but this is certainly the first step and I think the correct step to take.”
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