Legislators discuss online sales tax impact on local schools and municipalities

In a recent Alabama Board of Education Work Session, discussions centered on the implications of the simplified sellers use tax, particularly its impact on local schools and communities. The simplified sellers use tax, often referred to as the online sales tax, currently stands at 8 cents for online purchases. This tax is divided between the state treasury and local governments, with half going to the state and the other half shared between counties and municipalities.

A significant point of contention raised during the meeting was the distribution of these funds. Since a legislative change in 2018, the split has favored cities over counties, with 60% of the tax revenue going to cities and 40% to counties. This shift has sparked debate, especially regarding how online sales tax revenue is allocated to local schools. Unlike in-store purchases, which contribute to local school funding, online purchases do not provide any direct financial support to schools, leading to concerns about funding disparities.

The meeting highlighted that while local schools benefit from in-store sales taxes, they receive nothing from online sales. This discrepancy has prompted discussions about potential legislative changes to ensure that local schools receive a fair share of online sales tax revenue. A proposed bill aims to increase the online sales tax to 9.25 cents, with the additional revenue earmarked for schools. However, this proposal faces opposition from county commissioners and mayors who fear it could reduce their funding.

The board emphasized the importance of addressing these funding issues, particularly as online shopping continues to grow. While in-store sales still dominate, the shift towards online purchasing is significant, and the board recognizes the need for a balanced approach that supports both local governments and educational institutions.

As the legislative session approaches, the board anticipates that discussions around the online sales tax and its impact on local schools will be a focal point, reflecting broader concerns about equitable funding for education across Alabama. The outcome of these discussions could have lasting implications for how schools are funded and how communities support their educational systems.