Madison eyes review of Alabama's online sales tax system
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Brendan Lynch/Axios
Madison is taking a closer look at tax dollars it receives from the state for online purchases, called Simplified Sellers Use Taxes or SSUTs.
Why it matters: If taxes from online purchases were distributed to localities where purchases originated, cities like Madison would see a big bump in tax revenue.
How it works: The state applies an 8% tax to online purchases, takes half that and divvies out the rest.
- The state's half is split 75% to the General Fund and 25% to the Education Trust Fund, and the other half is split 60% to cities and 40% to counties, based on population.
- For example, per its 2025 budget, Madison expects to receive $4 million in 2025 from SSUTs and $21 million from regular sales taxes.
- The state says Madison is set to receive more than $5.42 million in SSUT for calendar year 2025, and Huntsville nearly $20.5 million. The state reports a $15.1 million disbursement for Madison County this year.
Catch up quick: Madison City Council gathered last week for an informal work session with Tuscaloosa Mayor Walt Maddox and his staff about "a more equitable method of taxing online sales."
- Tuscaloosa, with Tuscaloosa City Schools and Mountain Brook, sued the state over its practice of allowing companies with physical locations in Alabama to participate in the SSUT program, utilizing SSUT tax structure instead of normal local and state sales taxes.
- The suit seeks to charge those stores the same local and state taxes as would be collected on a typical in-store purchase, and therefore stay in the community, per Alabama Daily News.
What they're saying: "Alabama's Simplified Sellers Use Tax takes revenue generated in our community and sends it elsewhere," Maddox said in a release last summer.
- A release from Madison says no votes were taken at the workshop and that "discussions are expected to continue in the coming weeks as city leadership gathers more information and considers potential next steps."
- Madison Mayor Ranae Bartlett's office declined to comment Friday.
What we're watching: Huntsville City Council Member John Meredith, whose district surrounds Madison city limits, also attended.
- "It really has a negative impact, obviously, on the city's coffers, but also a tremendous amount on the schools," Meredith said at Thursday's Huntsville City Council meeting.