There are plenty of reasons to revamp Alabama’s tax code, not the least of which is an extraordinarily low property tax rate that has forced a rise in sales tax to fund government services at state and local levels.
Taxing sales is often considered regressive in that poorer people pay a greater percentage of their income in tax than do wealthier people. Many would argue that the tax burden is more fairly distributed across the socioeconomic strata than property tax, which affects, directly, only property owners.
Property tax, however, is more stable; sales tax revenues are fluid, and will rise and fall depending on the state of the economy.
Now technology has added a new wrinkle: As online shopping increases, local governments are seeing tax revenues decrease. For Dothan, it’s been labeled “a force of turbulence” – it may not have created a significant threat yet, but the potential is there.
The problem is that online shoppers are not charged sales tax if the merchant doesn’t have a physical presence in Alabama. In other words, if you make a purchase from Apple.com, you’ll be charged Alabama sales tax because the company operates a store at The Summit in Birmingham. Ditto Barnes and Noble’s online store. But a purchase from Amazon.com would not be subject to sales tax because there are no physical Amazon stores -- in Alabama or anywhere else.
To illustrate how the issue has befuddled state officials, they’re relying on Alabama shoppers to tell them when they’ve spent money online and voluntarily offer up the state tax on those purchases.
Yes, and pigs fly.
Ideally, Alabama tax structure would get a top-to-bottom overhaul, along with the antiquated constitution that surrounds it, and the result would be a code that allows for fair, equitable assessment that would provide a stable funding stream for the operation of government services without crippling taxpayers.
No one likes taxes. Many will drive out of the way to shave a few cents off each dollar; that would explain the success of merchants along Brannon Stand Road just outside Dothan City limits, where sales tax is 5 percent instead of the 9 percent assessed in the city of Dothan. And someone who can save more than $100 by purchasing expensive electronic items from an online, out-of-state firm would certainly be fiscally responsible to do so.
However, there will likely come a time – sooner than later – when state and local officials are forced to address a loss of tax revenue from online sales.
They’d be wise to act beforehand and overhaul the tax code rather than “fix” it with another ill-conceived remedy.
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