HB 318

This bill would clarify transactions for which simplified sellers use tax cannot be collected and remitted and clarify for which transactions state and local sales or use taxes must be remitted

This bill would provide for a one-time calculation of the combined average state and local sellers use tax rate by adding the state, average county and average municipal sellers use tax rates

A local rate adjustment would then be made to the simplified sellers use tax rate to approximate the combined average state and local sellers use tax rate

Relating to simplified sellers use tax; to modify the definition of eligible seller; to clarify transactions for which simplified sellers use tax cannot be remitted; to clarify transactions for which state and local sales or use taxes must be remitted; and to provide for an adjustment to the simplified sellers use tax rate.

Section 1

Sections 40-23-191, 40-23-192, 40-23-193, 40-23-195, and 40-23-199.2, Code of Alabama 1975, as amended by Act 2018-539 of the 2018 Regular Session, are amended to read as follows:

§40-23-191.

(a) This part shall be titled The Simplified Seller Use Tax Remittance Act.

(b) For the purpose of this part, the following terms shall have the respective meanings ascribed to them in this section:

(1) DEPARTMENT. The Alabama Department of Revenue.

(2) ELIGIBLE SALE. The sale of tangible personal property that is shipped or otherwise delivered to a location within a county and municipality, if applicable, in this state in which the seller does not have a physical location at which it engages in the business of making retail sales transactions.

(2) (3) ELIGIBLE SELLER. A seller that is participating in the simplified sellers use tax remittance program when making an eligible sale of tangible personal property shipped or otherwise delivered in or into this state that sells tangible personal property or a service, but does not have a physical presence in this state or is not otherwise required to collect and remit state and local sales or use tax for sales delivered into the state. The seller shall remain eligible for participation in the Simplified Use Tax Remittance Program unless the seller establishes a presence through a physical business address for the purpose of making in-state retail sales within the State of Alabama or becomes otherwise required to collect and remit sales or use tax pursuant to Section 40-23-190 through an affiliate making retail sales at a physical business address in Alabama. The term also includes a marketplace facilitator as defined in Section 40-23-199.2(a)(2) for all sales made through the marketplace facilitator’s marketplace by or on behalf of a marketplace seller.

(4) IN-STATE SELLER. A seller that has a physical location in this state at which it engages in the business of making retail sales transactions. (3) (5) LOCALITY. A county, municipality, or other local governmental taxing authority which levies a local sales and/or use tax.

(4) (6) SELLER. An individual, trust, estate, fiduciary, partnership, limited liability company, limited liability partnership, corporation, or other legal entity.

(5) (7) SIMPLIFIED SELLERS USE TAX. The tax to be collected, reported, and remitted by eligible sellers who are participating in the program pursuant to requirements and procedures established pursuant to this part.

(6) (8) SIMPLIFIED USE TAX REMITTANCE PROGRAM or PROGRAM. The program established in this part to provide a mechanism for eligible sellers to collect, report, and remit the simplified sellers use tax established pursuant to this part.

(7) (9) STATE. The State of Alabama.

§40-23-192.

(a) There is hereby established The Simplified Sellers Use Tax Remittance Program designed to allow an eligible seller who participates in the program to collect, report, and remit the simplified sellers use tax authorized herein on eligible sales in lieu of the sales or use taxes otherwise due by or on behalf of Alabama customers who have purchased items from the eligible seller that were shipped or otherwise delivered in or into a location in Alabama by the eligible seller. Participation in the program shall be by election of the eligible seller and only those eligible sellers accepted into the program as set out herein shall collect and remit the simplified sellers use tax. Participation in the program shall not be construed as subjecting an eligible seller to franchise, income, occupation, or any other type of taxes or licensing requirements levied or imposed by the state of Alabama or any locality.

(b) The program shall be administered by the department, which pursuant to this part, shall develop and make available to the eligible seller an easily accessible, online system in which to collect, report, and remit the simplified sellers use tax. Participants in the program shall be required to collect, report, and remit the simplified sellers use tax for all eligible sales shipped or otherwise delivered into in or the state as long as remaining a participant in the program. Eligible sellers may continue in the program as long as they comply with all provisions of this part and procedures adopted by the department for participation in the program.

(c) In order to participate in the program, an eligible seller shall make application with the department on a form designed by the department for that purpose. The application shall require, at a minimum, that the eligible seller:

(1) Certifies that he or she is an eligible seller as defined herein.

(2) Agrees to collect, report, and remit the simplified sellers use tax for all eligible sales shipped or otherwise delivered in or into the state as long as he or she remains a participant in the program.

(3) Agrees to provide the department with information related to sales to Alabama customers as required by this part or requested by the department.

(4) Agrees to comply with all program reporting requirements established under program procedures. Any applicant who falsely certifies on his or her application that he or she is an eligible seller with the State of Alabama shall be subject to the negligence and/or fraud penalties under procedures found in Section 40-2A-11.

(d) The department shall review all applications for participation, and where an applicant is determined to satisfy requirements to participate in the program, shall establish a simplified sellers use tax account for the eligible seller which will allow the eligible seller to report and remit all simplified sellers use tax collected pursuant to this part.

(e) A participating eligible seller shall be removed from the program if:

(1) He or she substantially fails to collect, report, and remit simplified sellers use taxes.

(2) He or she fails to submit required reports on a timely basis.

(3) Upon a determination that the seller is no longer an eligible seller, as defined by this part.

(4) There is any other finding by the department that the participant is not in compliance with the terms authorizing participation in the program.

Any participant who fails to report that he or she is no longer eligible for participation in the program or falsely certifies on any report that he or she is eligible shall be subject to the negligence and/or fraud penalties under procedures found in Section 40-2A-11. Removal from the program or assessment of the fraud or negligence penalty shall be subject to appeal rights and procedures established in this title.

§40-23-193.

(a) The simplified sellers use tax due under the program is eight percent of the sales price on any tangible personal property sold or shipped or otherwise delivered in or into Alabama by an eligible seller participating in the program. The collection and remittance of simplified sellers use tax on eligible sales relieves the eligible seller and the purchaser from any additional state or local sales and use taxes on the transaction.

(b) The simplified sellers use tax collected by the eligible seller, at the rate of eight percent, shall be electronically reported in the manner prescribed by the department on or before the 20th day of the month next succeeding the month in which the tax accrues. The eligible seller shall remit the tax at the required rate or the amount of the tax collected, whichever is greater. The required monthly reporting from the eligible seller shall only include statewide totals of the simplified sellers use taxes collected and remitted, and shall not require information related to the location of purchasers or amount of sales in or into a specific locality. The department may not require an eligible seller to report and remit the simplified sellers use tax more frequently than is required for other sellers.

(c) No Except as provided in Section 2 of this act, no eligible seller shall be required to collect the tax at a rate greater than eight percent on eligible sales, regardless of the combined actual sales or use tax rates that may otherwise be applicable. Additionally, no sales for which the simplified sellers use tax is collected on eligible sales shall be subject to any additional sales or use tax from any locality levying a sales or use tax with respect to the purchase or use of the property, regardless of the actual sales or use tax rate that might have otherwise been applicable.

(d) The participating eligible seller shall collect the tax on all purchases eligible sales shipped or otherwise delivered in or into Alabama unless the purchaser furnishes the eligible seller with a valid exemption certificate, sales tax license, or direct pay permit issued by the department. The eligible seller shall retain all exemption certificates, sales tax licenses, or direct pay permits in its files, or in such other manner as directed by the department.

(e) The eligible seller shall provide the purchaser with a statement or invoice showing that the simplified sellers use tax was collected and is to be remitted on the purchaser’s behalf. The statement shall be in a manner prescribed by the department.

(f) Notwithstanding subsection (a), all state, county, and municipal sales or use taxes levied at the point of delivery shall be collected by the seller and remitted to the appropriate taxing authority for the following transactions:

(1) Sales of tangible personal property shipped or otherwise delivered in or into a location within a county or municipality in this state in which the seller has a physical location where it engages in the business of making retail sales.

(2) Sales of tangible personal property shipped or otherwise delivered to any location in this state by an in-state seller that is not participating in the simplified sellers use tax remittance program, whether delivery is made by the seller or another person.

§40-23-195.

(a) The department may adopt, promulgate, and enforce reasonable rules and regulations related to the implementation, administration, and participation in the program. The department shall have exclusive responsibility for reviewing and accepting applications for participation and for the administration, return processing, and review of the eligibility of sellers participating in the program. Eligible sellers participating in the program shall not be subject to audit or review by any Alabama locality for simplified sellers use tax. Eligible sellers shall maintain records of all sales shipped or otherwise delivered in or into Alabama, including copies of invoices showing the purchaser, address, purchase amount, and simplified sellers use tax collected. Such records shall be made available for review and inspection upon request by the department.

(b) The department may disclose the name of eligible sellers, the effective date the eligible seller began participating in the program and, if applicable, the cease date the eligible seller ceased to participate in the program.

§40-23-199.2.

(a) For the purpose of this Act 2018-539 division, the following terms shall have the respective meanings ascribed to them:

(1) DEPARTMENT. The Alabama Department of Revenue.

(2) MARKETPLACE FACILITATOR. A person that contracts with marketplace sellers to facilitate for a consideration, regardless of whether deducted as fees from the transaction, the sale of the marketplace seller’s products through a physical or electronic marketplace operated by a person, and engages:

a. Either directly or indirectly, through one or more affiliated persons in any of the following:

1. Transmitting or otherwise communicating the offer or acceptance between the purchaser and marketplace seller;

2. Owning or operating the infrastructure, electronic or physical, or technology that brings purchasers and marketplace sellers together;

3. Providing a virtual currency that purchasers are allowed or required to use to purchase products from the marketplace seller; or

4. Software development or research and development activities related to any of the activities described in paragraph b. if such activities are directly related to a physical or electronic marketplace operated by a person or an affiliated person, and

b. In any of the following activities with respect to the marketplace seller's products:

1. Payment processing services;

2. Fulfillment or storage services;

3. Listing products for sale;

4. Setting prices;

5. Branding sales as those of the marketplace facilitator;

6. Order taking;

7. Advertising or promotion; or

8. Providing customer service or accepting or assisting with returns or exchanges.

(3) MARKETPLACE SELLER. A seller that is not a related party, as prescribed in Section 40-23-190(c), to a marketplace facilitator and that makes sales through any physical or electronic marketplaces operated by a marketplace facilitator.

(4) PERSON. As defined in Section 40-23-1 (a)(1).

(5) PURCHASER. A person who purchases or contracts to purchase tangible personal property as defined in Section 40-12-220.

(6) QUALIFYING AMOUNT. Two In excess of two hundred and fifty thousand dollars ($250,000) or an amount as otherwise prescribed by the department per year based on the sales from the previous calendar year.

(7) RELATED PARTY. Two entities are related parties under this section if one of the entities meets at least one of the following tests with respect to the other entity:

a. One or both entities is a corporation, and one entity and any party related to that entity in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of Section 318 of the Internal Revenue Code owns directly, indirectly, beneficially, or constructively at least 50 percent of the value of the corporation's outstanding stock;

b. One or both entities is a limited liability company, partnership, estate, or trust and any member, partner, or beneficiary, and the limited liability company, partnership, estate, or trust and its members, partners, or beneficiaries own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50 percent of the profits, or capital, or stock, or value of the other entity or both entities; or

c. An individual stockholder and the members of the stockholder's family, as defined in Section 318 of the Internal Revenue Code, owns directly, indirectly, beneficially, or constructively, in the aggregate, at least 50 percent of the value of both entities' outstanding stock.

(7) (8) RETAIL SALE. As defined in Section 40-23-1(a)(10), other than sales of motor vehicles as defined in Section 40-12-240.

(8) (9) SELLER. An individual, trust, estate, fiduciary, partnership, limited liability company, limited liability partnership, corporation, or other legal entity.

(9) (10) SIMPLIFIED SELLERS USE TAX. The tax as levied under Section 40-23-193.

(10) (11) STATE. The State of Alabama.

(b) By no later than January 1, 2019, marketplace Marketplace facilitators must either register with the department to collect and remit simplified sellers use tax on retail sales made through the marketplace facilitator’s marketplace by or on behalf of a marketplace seller that are shipped or otherwise delivered in or into Alabama, whether by the marketplace facilitator or another person, or report such retail sales and provide customer notifications pursuant to subsection (m). This subsection shall apply to any marketplace facilitator that has more than the qualifying amount in retail sales in Alabama for the preceding 12 months. Such retail sales shall include those made directly by the marketplace facilitator and shall also include those retail sales made by marketplace sellers through the marketplace facilitator’s marketplace. The collection and reporting requirements of this subsection shall not apply to retail sales other than those made through a marketplace facilitator’s marketplace.

(c) Marketplace facilitators that collect simplified sellers use tax under this section shall report and remit the tax in accordance with the provisions of Section 40-23-193 and shall maintain records of all sales shipped or otherwise delivered to a location in Alabama, including copies of invoices showing the purchaser, address, purchase amount, and simplified sellers use tax collected. Such records shall be made available for review and inspection upon request by the department.

(d) Marketplace facilitators who properly collect and then remit to the department in a timely manner simplified sellers use tax on sales in accordance with the provisions of this section by or on behalf of marketplace sellers shall be eligible for the discount provided under Section 40-23-194.

(e) The collection and remittance of simplified sellers use tax relieves the marketplace facilitator, the marketplace seller, and the purchaser from any additional state or local sales and use taxes on the transactions for which simplified sellers use tax was collected and remitted.

(f) Marketplace facilitators that collect simplified sellers use tax shall not be subject to audit or review by any Alabama locality for simplified sellers use tax. Sales by marketplace sellers for which simplified sellers use tax has been collected shall not be subject to audit or review by an Alabama locality for simplified sellers use tax. This exclusion shall not preclude an Alabama locality from auditing or reviewing any other sales by a marketplace seller for which sales or use tax would be due and not satisfied through the collection of simplified sellers use tax on such transactions.

(g) Marketplace sellers for whom marketplace facilitators collect and remit simplified sellers use tax in accordance with the provisions of this section on all sales made by or on behalf of the marketplace seller that are shipped or otherwise delivered in or into Alabama shall be granted the continued participation and amnesty protections provided for eligible sellers under Sections 40-23-198 and 40-23-199.

(h) The marketplace facilitator shall provide the purchaser with a statement or invoice showing that the simplified sellers use tax was collected and shall be remitted on the purchaser’s behalf. The statement shall be in a manner prescribed by the department.

(i) No class action may be brought against a marketplace facilitator in any court of this state on behalf of customers for an overpayment of simplified sellers use tax collected and remitted on sales facilitated by the marketplace facilitator.

(j) Any taxpayer who remits on whose behalf simplified sellers use tax is remitted pursuant to this section shall be entitled to refunds or credits to the same extent and in the same manner provided for in Section 40-23-196 for taxes collected and remitted through the Simplified Sellers Use Tax Remittance Program.

(k) Marketplace facilitators shall be subject to the penalty provisions and procedures of Section 40-2A-11 and reporting requirements of Section 40-2-11(7)(b).

(l) The distribution of simplified sellers use tax remitted by marketplace facilitators shall be made in accordance with Sections 40-23-197 and 40-23-197.1.

(m) Effective January 1, 2019, any marketplace facilitator Marketplace facilitators who does do not collect and remit sales, use, or simplified sellers use tax on Alabama retail sale transactions of qualifying amounts shall be required to report such retail sales and provide customer notifications, within constitutional limitations, pursuant to Section 40-2-11(7)(b) and rules promulgated thereunder.

(n) The department may adopt, promulgate, and enforce reasonable rules and regulations for the administration and enforcement of this Act 2018-539 act."

Section 2

(a) No later than December 31, 2019, the Department shall be required to calculate the combined rate which shall be the sum of the state, average county, and average municipal sellers use tax rate in this state, rounded to the nearest one percent. (b) The combined rate shall be calculated based on the state general sellers use tax rate, county general sellers use tax rates, and municipal general sellers use tax rates in effect as of January 1, 2019. (c) Effective October 1, 2020, a local rate adjustment in the amount of the excess if any of the combined rate over the rate prescribed in section 40-23-193 shall be collected and remitted by sellers participating in the simplified sellers use tax program on all eligible sales. This local rate adjustment to the simplified sellers use tax shall be collected and remitted in addition to the tax prescribed in section 40-23-193 and shall be inclusive of the discount prescribed in section 40-23-194. The proceeds of the local rate adjustment shall be distributed in accordance with the provisions of subsection (b) of Section 40-23-197, less any adjustments as prescribed in Section 40-23-196. The local adjustment levied pursuant to this section shall not exceed one percentage point above the simplified sellers use tax rate prescribed in section 40-23-193.

Section 3

Section 40-23-190, Code of Alabama 1975, as amended by Act 2018-539 of the 2018 Regular Session, is repealed.

Section 4

This act shall become effective October 1, 2019, following its passage and approval by the Governor, or its otherwise becoming law.