MONTGOMERY, Ala. – Under current law, every business in Alabama that generates a monthly average of $5,000 or more in sales taxes must make estimated monthly tax payments the following year. A new bill sponsored by Rep. Danny Garrett, R-Trussville, would raise that cap to $20,000, reducing both costs and paperwork for about 3,100 small businesses.
Businesses in Alabama first began making estimated monthly sales tax payments in 1983. Last year, lawmakers raised the threshold cap from $2,500 to $5,000, meaning businesses that see approximately $1.5 million or less in annual sales are not required to make the monthly payments. That increased threshold affected around 2,500 businesses.
“We’ve now come back to basically increase that threshold from $5,000 to $20,000, and that would mean that an additional 3,100 sales tax licensees would no longer have to make monthly estimated sales tax payments,” Garrett said during a House Ways and Means Education Committee meeting last week. “There’s no revenue net effect, it’s a bureaucratic-type thing, it would eliminate some red tape and would help.”
If Garrett’s bill eventually becomes law, businesses could make up to $6 million in annual sales before being required to make the payments.
Calling it a “good move for small businesses,” Garrett also shared that the proposal had been endorsed by the Alabama Small Business Commission, an appointed group of elected officials and business representatives.
The bill saw no opposition among committee members, with Rep. Barbara Drummond, D-Mobile, saying “anytime we can do anything to help small businesses, I think this is wonderful.”
Rosemary Elebash, the Alabama state director for the National Federation of Independent Business, told Alabama Daily News that beyond cutting red tape for businesses, it could also cut their costs.
“For many small businesses, they pay an outside firm to do a lot of their work, an accounting firm to file these sales taxes,” Elebash said.
“So if you go from monthly — charging you 12 times — and decide to go quarterly, then you’re only going to pay that outside firm four times to do it, or you go semi-annually (and) pay twice. So it’s a savings from that standpoint, but also from the standpoint of just the paperwork.”
Elebash went on to praise not only Garrett, but Lt. Gov. Will Ainsworth, who chairs the Alabama Small Business Commission, for their focus on promoting legislation that aids Alabama’s small business community.
“This is one of those check-mark items that I think adds in the column of making Alabama more business friendly,” Elebash said.
The bill ultimately received a unanimous favorable report from the committee, and will go on to be further reviewed after lawmakers return from break next week.