Morgan County Online Sales Tax Money Decision Celebrated By Education Groups

By MARY SELL, Alabama Daily News

A recent Alabama Supreme Court ruling will mean millions of dollars in online tax revenue for Morgan County schools and is a victory for schools statewide, supporters say.

Some expect more local legislation similar to that in Northern Alabama County in the next legislative session.

Earlier this month, the court upheld the constitutionality of a 2019 local law from Sen. Arthur Orr that directed the bulk of online sales tax revenue, known as SSUT, received by the county commission to county public schools.

Orr said the local bill mirrored the existing distribution of the county’s brick-and-mortar sales tax – revenues that have declined as more people shop online.

“In Morgan County, Internet sales tax money was really coming at the expense of school kids’ money,” Orr said recently.

He said he expects other lawmakers to introduce similar bills if their counties have similar sales tax distributions.

Ryan Hollingsworth, executive director of Alabama School Superintendents, agreed.

“The SSUT collected in April 2021 was up 71.77% from April 2020,” Hollingsworth said. “SUUT continues to grow at a much faster rate than regular sales tax collected in physical stores. It is evident that more and more people are shopping online and this will have a negative impact on the collection of sales taxes at the local level which are used to fund local schools.

Traditional sales tax revenue increased 38.16% in April.

The statewide SSUT law provides for an 8% online sales tax to be collected by the state, half of which is allocated to the General State Fund and the Trust Fund for education. The other half will be allocated to municipalities and departments. State-wide law allocates a portion of the local half “to each county in the state, (to be) deposited into the general fund of the respective county commission.”

Local law, however, requires the Morgan County Commission to redirect anything but 5% of the online sales taxes it collects.

Shortly before the date of entry into force of the law of October 1, 2019, the committee did not adopt a resolution that would have allowed the distribution of income as required, The Daily Decatur reported.

According to Daily, Hartselle Town Schools sued the county commission as soon as the law came into effect, and Morgan County Schools and Decatur Town Schools joined the lawsuit later in October 2019. The Alabama Education Association assisted school systems in the litigation.

The Montgomery County Circuit Court ruled in March 2020 that commissioners “must do what local law requires,” but the commission appealed to the state Supreme Court.

In a statement to the Alabama Daily News, the AEA said the case still concerns the future of funding for schools in Alabama.

“Morgan County school systems will receive much needed revenue as a result of this Supreme Court ruling, which will not only allow them to maintain their excellent school systems, but also provide the necessary innovative programs that will make them exceptional. school systems, ”the statement read. “The online sales tax is the funding source of the future, as the traditional funding of public education through physical sales has changed and online sales have taken on a larger share of the business of the Marlet. Friday’s victory was a massive victory for the future of public education in Alabama, it shows that education funding in Alabama can and will be modernized for our students to be successful.

The Morgan County Commission legal defense focused on Section 105 of the Alabama Constitution, which generally prohibits a local law from contradicting a statewide law, reported the Daily. The statewide Simplified Sellers Use Tax (SSUT) law, which became mandatory for most online retailers on January 1, 2019, provides for an 8% online sales tax to be collected by the state , a portion to be allocated “to each county in the state, (to be) deposited into the general fund of the respective county commission.”

Local law, however, specifies a formula to redirect the money left over after the commission retains 5%. Volunteer firefighters receive 1.5% of the remaining funds, and the county’s three public school systems share the rest. The bill’s formula divides online sales taxes in much the same way that physical sales taxes are divided.

The Supreme Court ruled that the local law did not conflict with statewide SSUT law.

“Instead, he’s telling Morgan County that he has to spend some funds already deposited in his general fund for specific expenses. How to spend UTSA proceeds was a matter or a question left for another day – and the legislature chose to answer this open question in Morgan County with local law, ”according to the majority opinion.

The Association of County Commissions of Alabama was not directly involved in the lawsuit, but filed an amicus brief last year on behalf of Morgan County. Executive Director Sonny Brasfield then said the issue was not with UTSA, but counties had to deliver programs and services while money from the general fund was withdrawn.

Brasfield said the association was disappointed with the decision, but didn’t think it represented a drastic change in the relationship between state statutes and local laws.

“But if this represents a change by the courts, I think there will be impacts at the local government level,” Brasfield said on Monday. “If the legislature cannot protect county funding by general law, if you cannot protect that revenue by general law, then this creates very serious problems for long-term operations at the local level.”

Brasfield said local bills do not get the same scrutiny in a legislative session as statewide bills. As a general rule, if all the legislators in a particular county agree on a bill for that specific county, the legislation passes easily.

Brasfield said he didn’t think more local schools would try to get SSUT money the way schools in Morgan County did.

“At the local level, county commissions and school boards have to work together for either to be successful,” he said. “I believe education leaders will tell you that without a good relationship with the county commission their efforts are much more difficult. And part of the county’s function is to make the community better, and education is one of those things.

Sally Smith, executive director of the Alabama Association of School Boards, agreed the decision has an impact beyond the three Morgan County school systems.

“The broader impact is that the court upheld the authority of the legislature to craft local laws based on local needs as it sees fit,” Smith said. “The NACC was proud to file a friend of the court case in support of local school boards to protect the desperately needed funding earmarked for these students. “

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