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Alabama internet tax challenged

  • Jun 15, 2016 | Gail Cole

 Remote sales tax by any means necessary.

Is it within Alabama’s rights to require out-of-state sellers lacking a physical presence in the state to collect and remit Alabama sales tax? According to Alabama legislators and the Alabama Department of Revenue, it most certainly is.

New requirements for certain remote retailers took effect in Alabama on January 1, 2016. When first enacted, Governor Robert Bentley dared Amazon or any other retailer to sue the state; Alabama was prepared to defend its policy before the Supreme Court. Learn more.

For months, no one took the bait. Adding insult to injury, when South Dakota’s new internet tax took effect on May 1, businesses lined up to file suit. When several businesses let it be known they would not comply with the law, South Dakota launched a suit against them. Alabama’s new policy was like a wallflower at a school dance: entirely ignored.

Not anymore.

One of the defendants in the South Dakota case is Newegg Inc., an online retailer of computer hardware and software based in California. The Retail Industry Leaders Association (RILA) announced on June 14 that Newegg was “challenging the authority of the state of Alabama to require out-of-state retailers to collect and remit the sales tax on purchases made by Alabama retailers.”

The announcement stressed RILA’s desire for a federal solution to the remote sales tax problem but acknowledged, “It’s become increasingly likely that the Supreme Court will re-examine Quill before Congress acts to address this issue.” It went on to express support for “the efforts of states like Alabama and South Dakota to pursue a legal remedy.” Read the announcement.

There is no guarantee any of these suits will reach the Supreme Court, just as there’s no guarantee federal legislators will take up the issue. However, it is likely that states will continue in their efforts to obtain remote sales tax revenue until there is some resolution.

What can businesses do? Prepare for any eventuality with an automated end-to-end sales tax compliance solution. Learn more.

photo credit: alles-schlumpf via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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.