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Ready to Reap Internet Tax Benefits?

As the U.S. Senate has passed a bill that would add sales tax on Internet sales, Alabama officials are scurrying to make sure the state is ready to participate.

The Marketplace Fairness Act of 2013, approved in the Senate in early May, allows states and municipalities to collect their share of sales taxes — estimated at $200 million or more dollars to the state and municipalities.

The problem is that states must simplify their tax structures to participate. Revenue Commissioner Julie Magee and her chief deputy Curtis Stewart believe Alabama is covered due to the One Spot system approved by the state Legislature last year.

It allows merchants to use specialized software to calculate tax rates for any spot in the state. They’re even developing an app to make it more convenient for store owners or even delivery people who need to write an invoice on the spot. The new One Spot system goes live on October 1.

Alabama economist Semoon Chang, whose Gulf Coast Center for Impact Studies advises several local companies and governments, worries that the state isn’t as ready as it thinks.

The problem for Alabama, says Chang, is that states must simplify their sales tax structure to participate. Ten states and the District of Columbia have a single, state-wide tax rate and are poised to collect their share of internet sales tax once the bill makes it through the House and gets a presidential signature.

But Alabama, by contrast, has hundreds of separate tax rates. The town of Spanish Fort, in Baldwin County, has three different rates, he says — 8.5 percent in most of the city; 9.5 percent in the Eastern Shore Center, a rate designed to recoup the cost of infrastructure improvements, and 10.95 percent in the Town Center, home of Bass Pro Shop, where sales — and sales taxes — have come in lower than anticipated when the city approved the project.

More than a chance to recoup money, it would be a “golden opportunity” to restructure and lower sales taxes, Chang says, which he believes would lead to stronger sales for Alabama businesses.

Says Chang of the Marketplace Fairness Act, “I think it will pass, and we’ll want the money. But we can’t wait until it passes to start working on it.”

Says Magee, who also serves on a multi-state commission preparing for the potential new system:  “I think Alabama will be prepared.”

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