Tuberville Headlines Internet Sales Tax Summit In Tuscaloosa

TUSCALOOSA, AL — Leaders from Tuscaloosa and around the state heard a range of topics Monday at the Tuscaloosa River Market during a summit focused on reforming the distribution of Alabama's internet sales tax, which included what amounted to a campaign stop by Republican gubernatorial hopeful and Alabama's Senior U.S. Senator Tommy Tuberville.

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Formally referred to as the Simplified Sellers Use Tax (SSUT), the state's internet sales tax is a complicated issue and has been described as a financial burr in the saddle of city leaders around the state for nearly a decade. Cities like Tuscaloosa and Mountain Brook have already announced legal action against the state to reform the distribution model, with local leaders also receiving recent support from the Tuscaloosa City Board of Education.

"The city is in year eight now of trying to address this issue," Tuscaloosa Mayor Walt Maddox told the media during Monday's summit. "Other communities now are beginning to wrap their arms around the losses that they're seeing, whether it's in their local governments or whether it's in their school system. So, the more we discuss it, the more educated people become, the more we have an opportunity to solve it with the Alabama legislature."

Maddox, officials from Tuscaloosa City Schools (TCS) and the city's legal team each held discussions Monday to provide updates or otherwise bring leaders from outside of the area up to speed on the current state of the fight for reform.

"People in Tuscaloosa pay enough taxes," Maddox told members of the media. "They pay enough taxes. But they should get the services that they pay for through the taxes through online sales. So what I'm asking for is the sales that are generated in Tuscaloosa stay in Tuscaloosa. We're not asking for money from an oil well in the Gulf of Mexico. We're not asking for coal severance tax from somewhere up in other parts of our state. All we're asking for is that the taxes generated in Tuscaloosa stay in Tuscaloosa."

As Patch reported in our in-depth look at the issue in 2024, SSUT was first created as a volunteer "opt-in" program when it was implemented in Alabama in 2016 — initially designed to mimic sales taxes as a way to recoup revenue lost to online sales as the concept grew in popularity.

A couple of years later came the landmark ruling by the U.S. Supreme Court South Dakota v. Wayfair, which provided states the authority to tax out-of-state companies making online sales in their state.

At present, an 8% sales tax is collected from online sales in Alabama and then split down the middle and distributed between the state's coffers and local governments.

The aforementioned percentage can also be compared to the 10% sales tax collected from traditional brick-and-mortar businesses in places like Tuscaloosa.

Alabama then allocates 75% of its portion to the state general fund, while the rest of the state's share is statutorily required to go into the Education Trust Fund.

At the local level, the 4%, which is distributed from the state is then divided again between municipalities, which receive 60%, while counties get 40%.

ALSO READ: Understanding Tuscaloosa's Tug-Of-War Over Internet Sales Tax

Maddox has long claimed the city is losing out more and more each year with the current distribution and collection model, pointing out that Tuscaloosa lost over $12.1 million in "earned" sales tax revenues before projecting that those losses will total $14.6 million in FY 2025.

While smaller municipalities in more rural areas have questioned what constitutes "earned" sales tax revenue, Maddox — who was joined Monday by a large delegation of mayors from around the state — has sought to even the playing field for local businesses competing with online retailers.

"The fact that a local business now, if it uses a third-party app like DoorDash or Uber Eats, becomes an internet sales tax, on the surface may sound harmless but then what you realize is that it costs your community millions. And when I say community, it costs your police officers, your firefighters, your school system and I think people, once they begin to understand that dynamic, they then begin to see why this is such an important issue to municipalities across Alabama."

Along with concern from smaller towns in rural areas, the battle for SSUT reform has also pitted counties against larger municipalities, with the Association of County Commissions of Alabama (ACCA) taking an opposing stand to the proposed changes.

ACCA Executive Director Sonny Brasfield last week told Centreville Mayor Mike Oakley in an email obtained by Patch that the estimates of lost revenue are incorrectly inflated by Maddox in an attempt to get attention and rely on national data regarding online sales and not state data.

Indeed, Brasfield claimed in his email that Tuscaloosa's estimates on lost revenue "are at least 40 percent too high."

"And, honestly, the estimates are incorrect even more significantly than that because [Maddox] underestimates the revenue the City of Tuscaloosa receives from online shopping by using only 1 percent as the base of his online revenue ...," he wrote. "Remember, SSUT revenue in the entire state (from all sales in the entire state) is put into one pot and Tuscaloosa receives its percentage of ALL internet sales that occur in the state. Not just from the sales in Tuscaloosa."

When asked Monday about the potential impact on rural communities and small towns, Maddox said they deserved to know what the impact would be and pointed to when the city and others collaborated on state-sponsored legislation that would unpack that data from Alabama Department of Revenue (ADOR).

"That bill was opposed by ADOR and also the County Commission Association," Maddox said. "I think the reason why is no one wants to understand or see that this has a detrimental impact not only on the larger cities but also to smaller towns in Alabama. Think about the stat that was shown earlier: 61% of the people in Greensboro, Alabama, shopped on Amazon in the last six weeks; 73% of people in Riverside, Alabama, population of 2,000, shopped on Amazon in the last six weeks."

Maddox went on to say there is data available showing people in rural Alabama are shopping online as much, if not more, than in urban areas.

This is where the concept of "destination sourcing" comes into play, which is most easily explained as applying sales tax based on the location where the buyer receives the goods or services.

"Destination sourcing actually might be a way for [small towns] to get more money, not less," he explained during his brief press conference Monday. "That's why transparency, data is important to the equation. Is there anything wrong with asking for data? So this is not just a [ten largest cities in Alabama] problem. No, there's 60 cities in there today that are losing money according to the 2023 [Public Affairs Research Council of Alabama] study. I think that number could be even higher if we could get more transparency on this issue."

Maddox and other mayors of the "Big Ten" cities will seek to do this through spreading education on internet sales reform to communities across the state, despite the fact that the legislature is unlikely to budge anytime soon on a measure viewed by many as a tax increase.

"For eight years, the City of Tuscaloosa, the City of Mobile and, quite frankly, nearly two dozen cities now have tried to solve this problem," Maddox said. "We have to bring it to the forefront to get people to sit down and let's find a solution. In any compromise, no one's going to walk away 100% happy. But isn't that what leadership is about? And I'm excited that in a year and a half, we're going to have a new administration [in the governor's office]. We're going to have a new opportunity, a new energy and I think what we want to do is take advantage of that new energy to sit down and find solutions. Just because it's complex doesn't mean we should walk away."

The "new energy" Maddox is alluding to is U.S. Sen. Tommy Tuberville, viewed by many — including Maddox — as the odds-on favorite to be Alabama's next governor.

Maddox, who ran unsuccessfully for the state's highest office as a Democrat in 2018, lauded Tuberville for taking the "time out of his schedule to come here to listen and to learn and to engage with us.

"That says a lot about a person who wants to lead our entire state," Maddox added. "I know it impressed me."

While the former Auburn head football coach and first-term senator declined to offer his stance on internet sales tax reform at the SSUT Summit, he told the crowd that he decided to run for governor after seeing how much "money" and "power" were being given back to states under the administration of President Donald Trump.

He also echoed Maddox in saying that the people of Alabama and the United States have been taxed enough, before touting Trump's tariff strategy and the state's potential for industrial growth contributing to large-scale economic gains in coming years.

"A lot of people don't like the tariffs, I understand that," he said. "We're having to pay a little bit more at the grocery store or on clothing, things that are made outside of this country. But for us to pay our debt down, most of it's going to come through tariffs. They're predicting this year $500 billion to $700 billion will come back into our country from tariffs this year. And that was even before the EU deal or the Japanese deal. So, we can't put the burden on American taxpayers. We have to put the burden on people that live out of the country, that are taking away from us."

Nowhere in Tuberville's keynote address did he directly mention the internet sales tax issue and later said there was "no way" those in the federal government would weigh in on such an important issue that should be decided solely by the people of Alabama.

"This is a problem that goes on not just with Alabama, but other states," Tuberville said. "All the mayors are in on trying to work something out. I hate that there has to be a lawsuit, from mayors and municipalities through the state government. I wish we could work this out. But again, it's up to them. I won't have anything to say about this. Now, if they ask my opinion, I'll give it to them. I meet with all these mayors all the time. They come to Washington, D.C., so I'll keep up with the progress, whether it's progress or whether it's going forward or going backward for the next year and a half."

Tuberville then said his approach, if elected, would be to meet with other governors across the country to better understand how they've handled the internet sales tax issue and how to best apply any successful methods back in Alabama.

"I suggested that to all the mayors, but it is a problem," he said. "But again, I just heard [Maddox] say that, 'everybody's tired of taxes.' We've got enough taxes. They just need to be distributed right. And I'm not here to say whether they're right and wrong. I don't have a dog in that hunt until I take over as governor here in about a year and a half. ... It's not something you say, 'well, it'll eventually go away.' It's not going to go away. It's going to be enhanced and that's fine. People don't like to go to the stores. They'd rather buy it off a computer or their phone and there's got to be an answer."

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