When it comes to online commerce, Alabama can be a punishingly difficult state in which to do business. But it doesn’t have to be this way. It’s high time Alabama’s laws and regulators catch up to commerce in the 21st Century.
Table of Contents
- Welcome to Byzantium
- Alabama Treats Out-of-State E-Commerce Businesses Better Than In-State E-Commerce Businesses
- A Simple Solution
Welcome to Byzantium
As an e-commerce business owner, I deal with Alabama’s Byzantine tax and regulatory regime every month. In fact, every time I file my monthly sales taxes, I get a notice like the one below:
ATTENTION: Taxpayer of Sales/Sellers Use/Consumers Use RE: Taxpayer ID# █ █ █ █ █ (KAISER CAPITAL INVESTMENTS LLC) - Request To Contact Our Tax Office This notification is being sent to request that you or someone authorized to represent your business, please contact our office upon your receipt of this notification. We need to discuss the status of your Montgomery County, Alabama taxpayer account. It appears there may be questions as to possible missing returns and/or an unpaid account balance on your sales, use, lodgings, gasoline, motor fuels or rental tax account(s) with our office. Please contact our office by phone at █ █ █ █ or by email at █ █ █ █ at the earliest to resolve any outstanding questions related to your taxpayer account. Thank you in advance for your prompt attention in this matter. Your cooperation to ensure that your taxpayer account is in good standing with this office is appreciated. ██████████ County Commission Tax & Audit Department P.O. Box ██ ████, AL █████
I called the unnamed county that sent me the notification. They put me in touch with their sales tax specialist. I explained to him that I do not conduct business in the county. I simply sold products online and every now and then someone in their county buys from me. Thus, I am required to pay sales tax to that county.
The person told me that I needed to obtain a business license in their county and submit other documentation. I explained to him that that wasn’t going to happen. I’d rather not ship products to people in that county than to begin complying with such onerous regulation.
He followed up our conversation with this email:
Brandon – It was nice talking to you this morning. Per our conversation, please fill out the attached ████████ County Sales/Use Tax Application and return to me. Please make sure Line 11 is filled out correctly and let me know if you have questions about the form. Also, in addition to the application, please provide copies of your Articles of Organization and State Business License. This should complete the registration with us. If you were a “one-time” filer for May 2020, then you may send me a letter as well to close your account with our jurisdiction. However, we must have the completed application and requested docs before we can proceed to close your account. Thank you. Respectfully, ████ ████ Revenue Auditor ████████ County Commission P.O. Box ████ ████████, AL ████-██ 334-███-████
It may not sound like too much to ask. It would take an hour, at most, to comply with his request. But imagine having to do this for every county and municipality in the state!
Eventually, there were a few more back-and-forth conversations with the county. Finally, I called Representative Paul Lee for assistance. I knew he has passed laws making it easier for companies to make deliveries in the state. So I hoped he could point me in the right direction.
Paul put me in touch with a Rosemarry Ellenmash with the National Federation of Independent Businesses. She pointed me to the Alabama law that stated, very clearly, that the Revenue Auditor from the unnamed county was out of line by asking me to complete a business license and supply them with the requested documentation.
The result was this email I sent the Auditor:
Hi ███, [redacted] As for completing a business license for ██████ County: per Alabama law, I am not required to comply. Please see the link below. Go to the bottom of page 7 and read lines 23 - 25. https://revenue.alabama.gov/wp-content/uploads/2017/08/Act_2017-415.pdf Thank you, - Brandon Shoupe
I never received any response from the auditor.
Alabama Law is Catching Up But Regulators Are Not
The above episode shows that Alabama is at least trying to make it easier to do modern forms of business in the state. However, some of people charged with enforcing Alabama’s tax laws are stuck in the 1980’s.
Events like the ones above aren’t the only form of alarming–and in my opinion, harassing–communication I receive from taxing authorities. Sometimes, I get a letter in the mail like this one:
The thing is, I’ve received the exact same letter from LaShonda Johnson before for other municipalities. Inevitably, I call or email LaShonda, explain that I have an e-commerce business and ship products via common carrier and the problem goes away.
But I get tired of receiving the same letter from the same person and having to send in the same explanation over and over…. and over.
Alabama Treats Out-of-State E-commerce Businesses Better Than In-State E-commerce Businesses
If I were from another state, I could file a single Simplified Sellers Use Tax (SSUT) report with the state of Alabama. This taxes I paid into the SSUT would then be divided between the state government, every county governments, and every municipality. This distribution formula is simple, fair, and enshrined in law.
Since I am unfortunate enough to be an in-state e-commerce business, I have to file two reports:
- State Sales Tax Report
- Local Sales Tax Report
The State Report is easy enough and only takes about 3 minutes to do. I simply do the following:
- Provide the total value of in-state sales the previous month
- The online report calculates my taxes due
- I pay the tax online
The Local Sales Tax Report is a different story. The tool the state provides is simple enough, but to determine the local governments you owe money is an entirely different story.
Alabama’s Department of Revenue does provide a sales tax lookup by address tool. This would be fine if you are an e-commerce business making a handful of in-state sales per month. But even this helpful tool becomes onerous once your in-state sales begin to number in the dozens. The onerousness is magnified because I must also go through my records and look up the addresses for each in-state transaction.
The Local Sales Tax report takes about ⅓ of a productive day from me every month and I am by no means a large business compared to some.
A Simple Solution
I believe in-state, e-commerce-only businesses should be afforded the same simplified sales tax filings afforded to out-of-state e-commerce businesses. We should simply be able to pay the state the SSUT’s prescribed flat tax rate and be done with it.
In doing so, it would make our state much more friendly to e-commerce businesses, which is continuing its march to becoming the dominant form of retail sales.