State Rep. Christopher England (D-Tuscaloosa) has pre-filed legislation for the 2024 state legislative session to raise Alabama’s online sales taxes to generate additional funding for public education in the state.

HB17 proposes to raise the tax rate Alabamians pay on online purchases from 8%to 9.25%.

The online sales tax, known as the simplified sellers-use tax (SSUT), is currently put mostly toward Alabama’s general fund budget. England’s bill would allocate the increase to the education trust fund (ETF).

If passed by the Legislature and signed by Governor Ivey, according to England’s bill, the balance of the amounts collected would be distributed as follows:

• “Fifty percent to the State Treasury and allocated 75 percent to the State General Fund and 25 percent to the Education Trust Fund.
• Twenty-five percent to each county in the state on a prorated basis according to population as determined in the most recent federal census prior to the distribution.
• Twenty-five percent of funds to be distributed to each municipality in the state on a prorated basis according to population as determined in the most recent federal census prior to the distribution.”

At one time, no sales tax was collected on online sales. Eventually, individual states passed online sales taxes to recoup revenues being lost to Amazon and other online retailers.

RELATED: Alabama’s tax collections a mixed bag, predict economy is slowing

Every municipality is collecting more revenue from online sales than they were prior to passage of the SSUT. But for destination shopping locations like Hoover, Tuscaloosa, Birmingham, Huntsville, Gadsden, and Mobile, the SSUT has not made up the losses of sales taxes revenues to purchases made online.

Another issue that cities and counties have with the SSUT is that, at 8%, it’s cheaper to buy some goods online than to make the purchase locally, where the combined state, county, and municipal sales taxes can reach 9.5%, 10%, or more.

England’s proposal to raise the SSUT taxes would somewhat level the playing field between the internet retailers and the old legacy retail store fronts.

RELATED: Alabamians to ‘finally’ see grocery tax relief Sept. 1st

The Alabama Reflector reported that State School Superintendent Eric Mackey said the SSUT would “probably be a hot discussion in this legislative session,” during Thursday’s State Board of Education meeting.

The State of Alabama spent $8,798,594.04 on education in the FY2024 budget with 68.07% of those funds going to K-12 education. This is up substantially from the $6.63 billion the state spent on education just five years ago in the FY2019 ETF budget.

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