MONTGOMERY, AL (WSFA) - Beginning on Nov. 1, all Amazon online purchases made by shoppers who live in Alabama will have an additional eight percent sellers use tax.
Amazon will collect the tax and pay to the state on the 20th of each month with the standard two percent discount taxpayers receive for paying on-time.
Melissa Warnke, communications/engagement management for the Alabama Retail Association, said it was not hard to get the e-commerce mega-giant to participate in Alabama's Simplified Use Tax Remittance Program.
"Amazon, for a long time, has been for paying online sales tax," Warnke said. "They have been on the same side of all of the brick-and-mortar businesses that have been fighting for e-fairness."
The program was signed into law in October 2015 and allows online retailers, that do not have operations within the state, to collect, report and distribute the eight percent tax back to the state.
According to Julie Magee, Alabama's Commissioner of Revenue, the state has received nearly $3 million in general funds from the program since it started.
"We have 52 online retailers in the program now," Magee said. "Some of them, you have heard and others, you've never heard of. Three of the companies in the program are amongst the top online retailers. Amazon will be the fourth in that category."
Founded in 1994, Amazon is the largest e-commerce company in the world in terms of revenue. Magee said Amazon's participation in the program will be extremely beneficial for the state.
"Amazon has grown 30 percent in the last year," Magee said. "This new revenue for the state, cities and counties will have a phenomenal impact."
Magee said the state expects to see a $40 to $50 million influx from the tax funds by 2017 and a "substantial" increase by 2018. She said 75 percent of the revenue goes to the state's general fund.
Warnke said Amazon collecting taxes from Alabama residents is good news for local business owners.
"This is great news for retailers all across the state," Warnke said. "For decades, brick-and-mortar stores have been fighting for a level playing field. Essentially, the government has been giving online stores a 10 percent advantage over brick-and-mortar stores."
This 10 percent advantage is the sales tax stores have to pay, which makes their prices higher than the prices charged by online retailers that are not required to charge taxes.
Under Alabama's Simplified Use Tax Remittance Program Act, Amazon would be able to continue to keep the tax rate at eight percent in the event of a federal regulation setting a higher rate for online retailers in the future. The eight percent rate is also still slightly lower than the 10 percent tax some brick-and-mortar stores play in local municipalities, like Montgomery.
While Magee said this act, and Amazon's participation, is helping to replace the sales tax lost by traditional retailers when shoppers shop online, she said it is not going to solve the state's financial issues.
"It helps but it's not a solution," Magee said. "Our general fund needs $85 million now, and Amazon will start in November."
Warnke also pointed out that Amazon is just one of the companies in its business. She said the company's size makes its participation a huge step, but it's a huge step in a process that needs much more attention.