A new bill to change the Simplified Sellers Use Tax — generally known as the online sales tax — has been filed, this one focusing on goods and foods picked up at local stores and restaurants via delivery services.
Currently, purchases made at a local restaurant through an app such as DoorDash or UberEats are subject to the 8% SSUT, the same as an online retail purchase from a company based outside the state. But the same meal bought in person at the restaurant is subject to the traditional state and local communities’ sales taxes, which combined are often a bit higher than that 8% SSUT.
However, SSUT and traditional sales taxes are distributed differently. For several years, advocates for local governments have said they lose money on SSUT, and local retailers are at a disadvantage because they have to charge a higher tax rate — 9.3% is the state average — than their out-of-state online competitors.
Now, House Bill 364 by Rep. James Lomax, R-Huntsville, would take local deliveries out of the SSUT system and apply the local and state sales tax rates to them. In Huntsville, the combined sales tax is 9%.
“Your local Chick-fil-A, Walmart, your local mom and pop store, they’re taxed at a local tax rate, so that tax revenue goes back into whatever community you’re in to pay for infrastructure, schools, managing government, everything you can imagine,” Lomax told IAP on Monday. “But in Alabama, if you order from a local restaurant or store through a delivery app like DoorDash, UberEATS, GrubHub, any of these … because the way our SSUT is formulated currently, it’s treated as an out-of-state online sale.
“So even though a local business prepares your order, a local driver carries it and local roads are used to deliver it to you, your tax dollars get routed up and into SSUT, which then gets dealt out and gazillion different ways to things that are not your local city government and where that business is a beneficiary of all that infrastructure that local tax dollars paid for.”
Lomax’s bill was filed in late February and assigned to the House General Fund committee.
“We are working closely with (the Alabama Department of Revenue) to understand any impact this legislation could have on the overall SSUT current structure, beyond the scope of this bill,” committee chairman Rep. Rex Reynolds, R-Hazel Green, said Monday.
An effort to raise the SSUT died last year amid opposition from Republicans who didn’t want to raise a tax, even if it put it on par with the tax paid on purchases made in person.
Currently, 50% of the SSUT revenue collected goes to the state where it is further split, 75% to the state General Fund and 25% to the Education Trust Fund. The other half is split among local governments, 40% to counties on a population basis and 60% to municipalities on a population basis.
Lomax said he knows some people will call his bill a tax increase.
“It’s not, it’s a tax loophole that we’re adjusting,” he said.