Alabama Should Join
Marketplace Fairness Fight, Study Says
A University of Alabama at Birmingham study out this week begs for Congress to take action and stop the madness that is the nation's current sales tax collection system. The study's conclusions make it clear the Alabama Legislature should also do what it can to encourage Congress to end the unfair tax advantage certain distant Internet sellers now have over hometown retailers.
"Estimates of Alabama Losses Due to E-Commerce," released Tuesday by Robert A. Robicheaux with the UAB School of Business, puts the tally for uncollected sales and use tax revenue from online purchases in Alabama at more than $1 billion over the next five years. That number just skims the surface of the losses outlined in the study:
- More than $2 billion in sales Alabama retail stores lost in 2011 to far-away online retailers who don't collect sales tax.
- From a $1.3 billion last year and growing to as much as $2.1 billion in 2016 in lost household income.
- From about 1,000 to as many as 4,000 jobs lost annually.
"The economic multiplier affects retailers, bankers, commercial property realtors, developers, advertisers and more," said Robicheaux, the state's premier retail expert, who has served for many years on the ARA board of directors.
>> Read full UAB news release
ARA President Rick Brown said, "Alabama can't afford to continue to lose billions in sales, millions in taxes and thousands of jobs every year. It is time for Congress to quit picking winners and losers when it comes to which sellers must collect sales taxes."
Three bills pending in Congress would make it easier for states, like Alabama, to require Internet sellers to collect sales tax just as local stores do – the Marketplace Fairness Act (S. 1832), the Marketplace Equity Act (H.R. 3179) and the Main Street Fairness Act (S. 1452 and H.R. 2701).
Using a conservative estimated growth rate of 2.0 to 2.5 percent, the estimated growth rate of Alabama's gross domestic product, the study predicts lost sales and use tax revenue will rise from $263 million in 2011 to almost $300 million in 2016. Using a more likely growth rate of 6 to 7.5 percent, closer to the actual growth rate of online sales, the study predicts sales tax revenue losses will grow from $309 million in 2011 to almost $400 million in 2016.
If Congress enacted one of the three pieces of legislation before it and Alabama's Legislature adjusted state tax law to comply with the federal solution, the Alabama Legislature could even consider cutting some of Alabama's current taxes. It has been estimated that eliminating the sales tax on groceries and over-the-counter drugs in Alabama would mean the loss of $280 million to $325 million annually. That revenue could be easily replaced if Alabama sales and use taxes already owed were simply collected, based on the estimates included in the study released this week.
The study outlining what Alabama could gain if it was able to collect taxes that already exist also provided a timely contrast as more Alabama General Fund agencies enumerated what next year's expected $367 million revenue shortfall would mean in terms of lost services to its citizens.
>> Read the full "Estimates of Alabama
Losses Due to E-Commerce"
ARA AGENDA IN ACTION
Gross Income Fix Ready for House Consideration
The House Ways and Means Education Committee on Wednesday approved HB 286 by Rep. Jay Love, R-Montgomery, which would fix a business-recognized inequity in the tax code and make a September rule change regarding gross income taxes fairer for business.
The bill concerns only pass-through entities, such as partnerships, limited partnerships, limited liability corporations and S corporations that operate in multiple states, or about 2,000 to 3,000 Alabama taxpayers, Curtis Stewart, director of the Alabama Department of Revenue's Tax Policy and Research Division said income from pass through entities flows through the entity to the owners' personal income tax returns. Because Alabama allows a deduction for federal income taxes paid, some taxpayers were wiping out their Alabama income tax liability with the federal-income-tax-paid deduction that was a result of income earned in other states.
"(Business has) tried since 2007 to fix the federal income tax loophole," Marty Abroms, a certified public accountant and ARA member since 2002 (pictured right), told the committee. The bill codifies the September regulation that attempted to fix the inequity, plus it allows a 50 percent tax credit for income generated in foreign countries. The rule change the Revenue Department made in September expires Oct. 1 of this year.
By agreeing to this legislation, the state's business community has effectively signed off on increasing their taxes, Love (pictured right), who is also the committee chairman, reminded those on his committee who expressed opposition. The Business Associations' Tax Coalition, a 29-member business trade association group that ARA President Rick Brown chairs, voted this morning to support this legislation, a version of which the group also endorsed last year. The legislation will generate $11.5 million in new revenue for the state in 2012 and $10 million in 2013, according to its fiscal note. Abroms said those estimates are low.
This bill is part of the ARA's 2012 legislative agenda.
Compromise Legislation Would Avoid
Prescription-Only Cold, Allergy Meds
Compromise legislation was introduced Tuesday that will further restrict the sale of ephedrine products, which are used legally to treat colds and illegally in the production of methamphetamine. The Alabama Retail Association worked diligently with the sponsors and other interested parties on this compromise to avoid legislation that would require a physician's prescription for these common medications.
The compromise legislation - HB 363 by Rep. Blaine Galliher, R-Rainbow City, and SB 344 by Sen. Bill Holtzclaw, R-Madison – would:
- Require medication containing ephedrine be sold from behind a pharmacy counter. Nearly every Alabama pharmacy is compliant with the National Precursor Log Exchange, a real-time, stop-sale electronic tracking system in place here since Jan.1, 2011. Alabama is winning the war against meth with this system that has blocked the sale of almost 100,000 boxes of cold and allergy remedies commonly used in the illegal manufacture of methamphetamines.
- Reduce the legally allowable amount of ephedrine that could be purchased in any 30-day period from 9 grams to 7.5 grams, or just under one-quarter of an ounce. That is less than the federal limit.
- Make residents of states that require prescriptions for ephedrine products (only Mississippi and Oregon) present a prescription to buy ephedrine-based cold and allergy medications in Alabama.
- Prohibit anyone with drug paraphernalia or possession convictions from obtaining ephedrine-based products for seven years, and anyone convicted of trafficking in drugs for 10 years.
ARA supports the above compromise, while opposing HBs 29 and 88 by Rep. Mike Millican, R-Hamilton; HB 58 by Rep. Elaine Beech, D-Chatom; HB 92 by Rep. Lynn Greer, R-Rogersville; SBs 23 and 184 by Sen. Roger Bedford, D-Russellville; and SB 52 by Sen. Paul Bussman, R-Cullman. Those bills would make ephedrine available by prescription only, limit access for cold and allergy sufferers to needed medication and drive up related health costs by as much as 50 percent.
House Panel Amends, Approves Capital Credits Bill
Wednesday, the House Economic Development and Tourism Committee amended and approved HB 140 by Rep. Micky Hammon, R-Decatur, which would allow companies that spend at least $100 million on capital improvements and hire at least 100 people to delay the tax credit for up to four years. The full Senate last week unanimously approved the companion measure, SB 48 by Sen. Arthur Orr, R-Decatur.
New or expanding companies typically get an income tax credit for 5 percent of their investment each year for 20 years. Hammon's and Orr's legislation would allow a company that invests $400 million to carry forward the credit for four additional years. The credit can be held for three years for a $300 million investment, two years for $200 million and one year for $100 million.
The House committee amendment made the effective clause the same as the Senate-passed bill. Under the amended bill, capital improvement projects for businesses that aren't yet operational but have already entered into an agreement with the state could qualify for the extended credits. If enacted, the credits also would be available for projects with a state agreement in place on or after Dec. 31, 2011.
Senate OKs Bigger Beer Containers by One-Vote
The Alabama Senate voted 14-13 Tuesday for SB 294 by Sen. Paul Sanford, R-Huntsville, which increases the maximum size of a bottle or can of beer sold by retailers in Alabama from 16 ounces to 25.4 ounces. The bill now goes to the House. Sanford told the Senate his bill would allow the sale of more types of gourmet beer, which often come in larger containers. The House companion is HB 264 by Rep. Jim Barton, R-Mobile.
House Sends Fort Payne Draft Question to Senate
The Alabama House voted 36-0 Tuesday to give the Fort Payne City Council authority to decide if draft beer sales will be allowed in that municipality. HB 129 by Rep. Todd Greeson, R-Ider, now goes to the Senate for consideration.
House Panel to Consider Entertainment Districts
At 1:30 p.m. Wednesday, the House Economic Development and Tourism Committee will consider HB 20 by Rep. James Buskey, D-Mobile, which would allow cities with populations of more than 25,000 to create up to two entertainment districts where patrons can walk from establishment to establishment. The districts must have a minimum of four establishments with liquor licenses nearby and can be as large as a half mile long and a half mile wide. Legislation creating such districts specifically for Montgomery passed in 2010.
House OKs Military ID as Proof of Citizenship
On a vote of 92-0 Thursday, the Alabama House approved HB 38 by Rep. Steve Clouse, R-Ozark, which adds a U.S. Uniformed Services Privilege and Identification Card as acceptable documentation for engaging in business transactions. It is the first change to Alabama's tough new immigration law. Similar bills, SB 171 by Sen. Jimmy Holley, R-Elba, and SB 211 by Sen. Bryan Taylor, R-Prattville, await action by the Senate Judiciary Committee.
Senate and House Ready to Consider
Moving Unemployment Waiting Week
Tuesday on a vote of 5-1, the Senate Job Creation and Economic Development Committee approved SB 300 by Sen. Trip Pittman, R-Daphne, which would move the one-week, unpaid waiting period for unemployment compensation from the 14th to the 1st week of benefits. It now goes to the full Senate. The House companion, HB 285 by Rep. Jack Williams, R-Birmingham, is in line for consideration by the full House.
House Panel Sends Alabama-Food
Restaurant Rebate to a Subcommittee
The House Agriculture and Forestry Committee this week referred HB 37 by Rep. Joe Hubbard, D-Montgomery, which offers restaurants a four percent rebate for buying Alabama-grown food products to a subcommittee. The Alabama Retail Association has asked that the bill be expanded to grocery stores as well. As it stands now, the bill has no funding mechanism.
Senate Panel All in for 'Reg-Flex' Bill
The Senate Business and Labor Committee on Wednesday unanimously approved SB 222 by Sen. Bill Holtzclaw, R-Decatur, which requires a small business regulatory flexibility analysis and a small business economic impact statement when a state agency proposes a new rule or rule change. House could take up the companion, HB 150 by Rep. April Weaver, R-Brierfield, is in line for consideration by the full House.
Workers' Comp. Changes Sent to Senate
After considerable debate and a failed effort to refer SB 77 by Sen. Arthur Orr, R-Decatur, to a subcommittee,
the Senate Business and Labor Committee on Wednesday voted 5-2 to make changes to Alabama's workers' compensation law. The bill:
- clarifies that appellate courts can determine the existence of "substantial evidence" in light of the entire evidentiary record, not just the evidence relied upon by the trial court in making a finding of fact.
- terminates permanent total disability benefits at age 65 or after 500 weeks, whichever is longer.
- increases the cap on weekly permanent partial disability benefits from $220 to $240.
- prohibits a trial judge from considering complaints of pain from a scheduled member as a reason to remove the injury from the schedule.
- establishes that two years with no medical treatment creates a rebuttable presumption that any subsequent treatment is not related to the worker's compensation injury, and that four years with no medical treatment means any subsequent treatment is definitely not related to the workers' compensation injury.
House Panel to Consider Tax-Exempt Insulin,
Other Diabetes Products
Wednesday, the House Ways and Means Education Committee will debate HB 307 by Rep. Ron Johnson, R-Sylacauga, which would make the sale of insulin, insulin syringes, blood or urine testing supplies and related items used to treat diabetes exempt from any state, county, and municipal sales and use taxes if prescribed. The bill applies retroactively to open tax periods. The Senate companion SB 309 by Sen. Gerald Dial, R-Lineville, awaits consideration by the Finance and Taxation General Fund Committee.
Bill Would Create Pharmacy Services Permit
Thursday, Rep. Lynn Greer, R-Rogersville, introduced HB 393 and Sen. Tammy Irons, D-Florence, introduced SB 350 both of which authorize the Alabama Pharmacy Board to create a pharmacy services permit for entities, such as pharmacy call centers, that perform some pharmacy services, but do not receive or inventory drugs, medicines, chemicals, poisons or medical devices. The bills do not expand or limit the existing practice of pharmacy or medicine.
NEXT LEGISLATIVE DAY:
The Alabama House meets at 1 p.m. Tuesday, Feb. 28, for the eighth meeting day of the 2012 regular session. The Senate meets at 2 p.m.