Tuscaloosa Drops Lawsuit Over Online Sales Tax Distribution

The City of Tuscaloosa, Tuscaloosa City Schools and other plaintiffs have dropped their lawsuit over their claim of inequitable online sales tax distribution.

Some state lawmakers, the Alabama County Commissions Association (ACCA) and more than 100 smaller cities had banned together to oppose the suit filed in August. But all parties have voiced a willingness to negotiate over court action.

The suit had claimed the online taxing program violates the state constitution because individuals and private corporations do not have the power to levy taxes, which the plaintiffs claim the SSUT allows them to do.

A post on the City of Tuscaloosa's Facebook Live website announced the decision, "The City of Tuscaloosa has voluntarily dismissed our legal challenge to the state’s handling of the Simplified Sellers Use Tax (SSUT) in a good faith effort to work side by side with the Alabama legislature to produce a comprehensive resolution that ensures tax dollars generated in our city stay in our city."

The suit against the Alabama Department of Revenue challenged the legality of the state’s 8% flat tax on online sales. The paperwork for dismissal was filed Wednesday.

The post did note that by dismissing its legal challenge without prejudice, the City of Tuscaloosa will preserve its ability to reassert its legal rights should those discussions fail to produce a comprehensive resolution that ensures tax dollars generated in the city stay in the city.

“Each day, we work hard making our schools strong and our neighborhoods safer.” Tuscaloosa Mayor Walt Maddox wrote in the post. “For nearly a decade, we have been working to find common sense solutions to the outdated SSUT system. This decision reflects our commitment to protect the State’s general fund and modernize our sales tax code to destination sourcing.”

Power Alabama Atmore Senator Greg Albritton (R-22) had repeatedly stated the issue belongs in the legislature and not the courts. In retaliation he had two bills severely limiting the ability of municipalities to collect sales and use taxes.

Maddox says he is taking Albritton's word that the issue can be negotiated.

ACCA Executive Director, and Tuscaloosa native, Sonny Brasfield led the opposition by all 67 counties, including Tuscaloosa County. “We think the simplified sellers use tax is well within the constitutional framework that the U.S. Supreme Court gave us in the South Dakota vs Wayfair case"," Brasfield told ACCA member counties, "and to make any changes puts the money at risk.”

Tuscaloosa has claimed that SSUT diverts tens of millions of locally generated tax dollars away from essential public services each year.