The City of Tuscaloosa dropped a lawsuit it filed last August against the Alabama Department of Revenue’s handling of the Simplified Sellers Use Tax, the state’s internet sales tax system, on Wednesday.
Tuscaloosa Mayor Walt Maddox said dropping the suit was in an effort to work with the Alabama legislature rather than against it.
“For nearly a decade, we have been working to find common sense solutions to the outdated SSUT system,” Maddox said. “This decision reflects our commitment to protect the state’s General Fund and modernize our sales tax code to destination sourcing.”
The legal challenge was dismissed without prejudice, meaning that the City of Tuscaloosa will still be able to refile the lawsuit in the future if it is unable to come to an agreement with the state legislature. As of Wednesday, all plaintiffs have decided to dismiss the lawsuit.
SSUT was passed in 2015 and establishes an 8% flat sales tax on all online purchases made in Alabama. In some parts of the state, this is higher than the local tax rate one would pay when purchasing in person, and in others it’s lower, including Tuscaloosa, where the tax rate is 10%.
Taxes collected from online purchases, such as food delivery apps, are distributed by state agencies at the capital in Montgomery to other parts of Alabama. Everything that goes into the order, from the preparation of the food to delivery, is local, but the tax dollars spent ordering it online don’t necessarily go back into the local community.
The City of Tuscaloosa took issue with the taxes, as well as other municipalities and school systems across the state which joined to file the initial lawsuit. Sonny Brasfield, executive director of the Association of County Commissions of Alabama, said the legislature was pleased with this decision.
“When SSUT was created more than 10 years ago, we sought to create a simple system for remote retailers to remit taxes on behalf of their customers,” Brasfield said. “SSUT continues to be a national model even a decade later.”
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