Schools will soon need to receive portion of internet sales tax revenue
As the holiday season approaches, Troy and Pike County offer a wonderful variety of unique shops and small businesses that offer great gifts for friends and loved ones.
People will stand in lines for hours on the morning of Black Friday at the small-town stores around the Square and up and down the highway at the big box stores.
But following Black Friday is another big sale holiday – Cyber Monday, where the deals are not found at brick and mortar stores in the area, but on the endless virtual storefronts online that offer nearly anything somebody could want to buy.
While Black Friday remains a huge holiday, Cyber Monday is growing with ecommerce becoming a more and more popular way to shop. Outside of online-only deals, the online marketplace offers the incentive of purchasing everything you need while still comfortable in your pajamas. No lines, no fighting (at least not physically) over the last item – online there’s plenty to go around and time to get the best deals.
This is a great convenience for residents, and Alabama took a progressive step a few years ago to bring that lost sales tax revenue into the state.
Less than three years ago, no remote business selling goods in Pike County via the internet had to collect and remit sales tax. Technically, citizens were required to log their purchases and remit the tax back to the state themselves, but next to none of that money ever went back to the state and there was no way for the government to track that lost revenue.
Enter the Simplified Sellers Use Tax (SSUT), passed in 2015 by the Alabama Legislature. This system allowed companies to opt in and commit to remitting a flat tax rate of 8 percent to the state instead of accounting for various local tax rates across Alabama.
This was offered voluntarily to companies that would agree to participate and it worked – Amazon, the top online retailer, began participating in Nov. 2016, contributing to a boost in internet sales tax revenue in Alabama and Pike County.
It was the right choice, as the U.S. Supreme Court ruled in June 2018 that states could hold companies accountable for the remittance of sales tax. Starting Oct. 1, even more companies will be sending in revenue to the state.
But as the way we shop for goods and services shifts and becomes more and more reliant on the internet, we must also shift the way we look at funding our integral public institutions, specifically local schools.
Although local funding is not the primary funding source for the local schools, it still makes up nearly a quarter of each school’s expected revenue. Of that local revenue, the majority overwhelmingly comes from sales taxes. The schools split nearly 2 cents per dollar on every purchase made here in Pike County.
But not when that purchase is made with an internet company such as Amazon. Although the system has been great for bringing in lost revenue, it does not take into account the very real threat that faces schools if internet sales tax revenue is not soon diverted at least partially to education. Just 25 percent of state internet sales tax revenue is being directed to education, compared to nearly all state sales tax revenue at brick and mortar stores.
While the general funds of both the state and county could use an influx of money, it cannot come at the expense of a key revenue source for schools, one of the most important provisions of government.
As online sales tax revenues continue to grow, growth at brick-and mortar stores can only slow or even decline.
Troy City Schools CFO Mickey Daughtry said the same dollars being spent online are dollars not being spent locally. “You’re just reslicing the same pie,” He said.
For the sake of our children, we can’t afford to slice the pie too thin for education.