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Alabama to Amazon: Sue Me


 Alabama to Amazon: Sue me and we'll take it to the Supreme Court.

Update 1.1.2016: Remote sellers with a substantial economic presence in Alabama must collect and remit sales tax

Last week, Governor Robert Bentley of Alabama threw down the gauntlet to Amazon.com. Go ahead and sue the state for going after online sales tax, he said. Let’s get the issue before the United States Supreme Court and be done with it, already.

In a similar spirit, the Alabama Department of Revenue has issued Proposed Rule 810-6-2-.90.03, which seeks to create new requirements for certain out-of-state sellers making significant sales into Alabama. It requires certain “out-of-state sellers who lack an Alabama physical presence but who are making retail sales of tangible personal property into the state have a substantial economic presence in Alabama for sales and use tax purposes” to register for a license with the Department and collect and remit sales and use tax.

The new rule would take effect on January 1, 2016 and apply to the sellers who:

  • Make retail sales of tangible personal property in Alabama in excess of $250,000 per year (based on the previous calendar year’s sales).
  • Conduct one or more of the activities described in Section 40-23- 68, Code of Alabama 1975.

Few people want to be sued; those who provoke a suit typically feel confident of a winning verdict or see no other recourse. Governor Bentley may be both.

Confidence

Last spring, in a concurring opinion about Colorado's Internet tax law, Supreme Court Justice Kennedy wrote, “… [I]t is unwise to delay any longer a reconsideration of the Court’s holding in Quill. A case questionable even when decided, Quill now harms States to a degree far greater than could have been anticipated earlier.” His impassioned opinion was heralded by all who would like the federal government to grant states the authority to impose sales tax on remote sales. Read more.

Desperation

Alabama needs more revenue. The state has mounting debt and an ailing General Fund. The governor is seeking a solution that will “fundamentally change the way the state budgets and solve this problem for the long term.” Collecting sales tax from remote sellers could be an integral part of the long-term plan.

A long road

Alabamans need not worry about Internet sales tax just yet. If the proposed regulation is approved after public comments, public hearings, and review, it will undoubtedly be challenged. Legal experts remind that it could then "take several years and several courts to even present a test case to the U.S. Supreme Court, and even then, the Supreme Court might deny certiorari if a sufficient number of justices so vote."

Still, it never hurts to be prepared. Simplify sales tax compliance in all states with automated sales tax software. Learn more.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.