Two landmark bills, HB 597 (Rep. Jack Williams, R-Vestavia Hills) and SB 459 (Sen. Slade Blackwell, R-Mountain Brook), have been introduced in the Alabama Legislature that would create a single point e-filing system for filing and remitting both state and local sales and use taxes. The Optional Network Election for Single Point Online Transactions (“ONE SPOT”) system would be administered by the Alabama Department of Revenue (“ADOR”) and be made available for use, free of charge, both by taxpayers and all Alabama municipalities and counties.
With support for the ONE SPOT system from various business organizations and reportedly from the associations representing municipalities and counties as well, we expect HB 597 to be fast-tracked by House and Senate Republican leadership. HB 597 is pending before the House Commerce and Small Business Committee, and is scheduled for a first review and vote on Wednesday, April 4. Representative Williams, who chairs that committee, commented that: “The single point filing system is a business-friendly approach to filing sales and use tax returns. The state should be leading the effort toward making compliance as easy as possible for those trying to comply with our state tax code.”
According to Senator Blackwell, “This bill could be one of the most important, pro-business items of legislation that the Legislature passes this year. A single point of filing for Alabama businesses is long overdue. This bill is one of the major recommendations of our Streamlining State Government Initiative and I am honored to be the Senate sponsor.” Blackwell’s bill also comes up for a vote on April 4, before the Senate Banking & Insurance Committee which he chairs.
Under current Alabama law, if a taxpayer is doing business in more than one municipality or county in Alabama, the taxpayer must file a sales and use tax return with each of those local taxing jurisdictions as well as with the ADOR. This administrative nightmare is mitigated by the fact that most small and mid-size municipalities and counties have engaged either the ADOR or, more often, a contract auditing firm to handle their sales and use tax administration/auditing function. Alabama is unique among the 50 states by allowing each city and county to make that election, and most of them have indeed opted either to self-administer (usually the larger cities and counties) or to engage a contract auditing firm. Thus, the administrative burden and cost for companies doing business in more than one locality in Alabama has made the state the poster child for the Streamlined Sales Tax initiative.
Importantly, HB 597 and SB 459 mandate that all local taxing jurisdictions utilize the ONE SPOT system for both tax returns and remittances. Taxpayers, however, are not required to use the ONE SPOT system; they may elect to use the new system or continue to file and pay in the same manner as they are now. Once a taxpayer decides to use ONE SPOT, however, they must comply with the requirements of the act and any rules promulgated by ADOR regarding the system. HB 597 and SB 459 also require that financial assistance be made available to assist local taxing jurisdictions as needed to ensure that their computer systems are capable of effectively interfacing with ONE SPOT. HB 597 and SB 459 require that the ONE SPOT system be implemented and available for use by taxpayers by September 30, 2013.
In addition, HB 597 and SB 459 create a State and Local Advisory Committee to ensure that local taxing jurisdictions have meaningful input into the development and operation of ONE SPOT. The committee will review the design and operation of ONE SPOT and make recommendations to the ADOR regarding the system. The committee will consist of eight members: three representatives appointed by the Association of County Commissions of Alabama; three representatives appointed by the Alabama League of Municipalities; one representative appointed by the Alabama Retail Association; and one representative appointed by the Business Council of Alabama.
The role of the State and Local Advisory Committee is limited in one sense, but very influential in another. The committee cannot review the ADOR’s administration of state-level taxes or state-administered local taxes, nor can it review any other ADOR matter beyond the ONE SPOT system. The committee, however, would have the power to appeal, by majority vote of the members, any recommendation it makes to the ADOR regarding ONE SPOT that is rejected. The appellate body will be the Legislative Council of the Alabama Legislature. The Legislative Council will then determine if the recommendation should nevertheless be implemented, and determinations made by the Legislative Council will be final.
* Our law clerk, J. Sims Rhyne, III, provided valuable insight into this Alert. Sims is a third-year law student at Cumberland School of Law at Samford University in Birmingham and is expected to join the firm this fall as an associate. He is the author of Comment, “A Useless Use Tax: Why Alabama is the Poster Child for the Streamlined Sales and Use Tax Agreement,” 41 Cumberland Law Review 337 (Spring 2012) (just published).
© March 2012. Bruce P. Ely/William T. Thistle, II/J. Sims Rhyne, III/Bradley Arant Boult Cummings LLP. All rights reserved.