City staff warns online-sales tax shift has cost Decatur millions

City staff told the Decatur City Council that Alabama's remote sales allocation under the Streamlined Sales and Use Tax (SSUT) program has sharply reduced the portion of sales tax retained by Decatur, costing the city millions of dollars since 2016.

Kyle, a city staff member who briefed the council, said the local share of tax revenue from a hypothetical $100 purchase differs when the sale happens with a local seller versus an SSUT-participating remote seller. "Assume you have a $100 purchase here in Decatur," Kyle said. "The consumer will pay $109 because of a 9% sales tax. Of the $9 in tax, $4 goes to the state and $5 to local government. ... Now assume you make that same $100 purchase on a company that's in the SSUT program, DoorDash, Amazon, whoever. The total cost to that consumer is $108, so $1 less."

Kyle explained how that change reallocates funds: of the $8 collected on an SSUT sale, $4 goes to the state (with $1 to the Education Trust Fund and $3 to the state general fund) and $4 to local government, but only 3 cents of the dollar goes to Decatur's general fund under the SSUT population-based split. He said the city estimated a $7.5 million loss in fiscal 2024 and an estimated $47.8 million since the program began in 2016.

The presenter cited U.S. Census Bureau retail data showing online sales grew from 7.5% of retail in 2016 to 16% in 2024 and said the city, as part of a group he called the "Big 10," has used those figures to estimate local losses.

Councilmembers asked clarifying questions about trends and the presenter's calculations. No formal council action was recorded on the SSUT presentation at the meeting.

The presentation did not reference a particular local ordinance or state statute, but focused on revenue allocation formulas and published federal retail statistics. The council did not adopt policy changes during the session; staff said the material was provided for awareness and further study.

Why it matters: The shift in how remote sales tax dollars are allocated can materially affect Decatur's general fund revenue and budgeting for services, as the staff numbers presented are in the multi-million-dollar range.