News

City Council Backs Statewide Effort to Fix Alabama’s Online Sales Tax System

Decatur, Alabama

The Decatur City Council voted on December 8th to support a statewide effort aimed at fixing Alabama’s Simplified Sellers Use Tax, or SSUT. The resolution endorses the goals of the ongoing lawsuit brought by several Alabama cities and school systems. Decatur will not join the lawsuit at this time, but the city backs the push for a fair system that treats online and in-person sales equally.

The action follows a detailed briefing from Chief Financial Officer Kyle Demeester, who explained how SSUT impacts Decatur’s long-term revenue and essential services. His presentation revealed a clear trend: as more residents shop online, the city loses millions through an outdated formula that sends local dollars across the state instead of directly back to Decatur.

Why SSUT Matters to Decatur

Online shopping now makes up more than 16 percent of all U.S. retail sales. In Decatur, 71 percent of residents made an online purchase through Amazon in the last six months. The challenge is that SSUT does not follow traditional sales tax rules. Instead of matching the 9 percent sales tax shoppers pay at local stores, SSUT applies a flat 8 percent statewide rate. Half goes to the state, and the other half is divided among all cities and counties based on population, not where the purchase is made or delivered.

Demeester compared a typical $100 local purchase with a $100 online purchase:

• Traditional in-store sale: Decatur receives $3.00, and Decatur City Schools receive $1.00. 
• Online SSUT sale: Decatur receives just $0.03, and Decatur City Schools receive $0.01.

That gap accumulates. According to the city’s review of SSUT distributions, Decatur has lost over $55 million since 2016. Annual losses now average more than $7 million.

Impact on City Services and Schools

Sales and use taxes account for half of Decatur’s General Fund revenue. As online shopping increases, the mix shifts toward SSUT. Since 2021, SSUT revenue statewide has risen by 77 percent. While this growth might seem positive, the structure means Decatur earns far less per sale than it would with traditional sales tax.

That loss affects services residents depend on:

• Public safety: Roughly 36 percent of the General Fund supports police and fire. 
• Education: The city is scheduled to transfer $31.2 million to Decatur City Schools in FY26. 
• Community support: More than $4 million is allocated to outside agencies each year.

Demeester also warned that a weakened revenue stream could threaten the city’s strong credit ratings (Aa2 from Moody’s and AA from Standard & Poor’s), which enable the city to borrow at favorable rates for major projects.

Why Cities Across Alabama Are Challenging SSUT

Tuscaloosa, Mountain Brook, Montgomery, and Tuscaloosa City Schools are among the numerous plaintiffs in the lawsuit. They argue that SSUT:

• Gives online retailers an advantage over local stores 
• Reduces funding for schools and city services 
• Allows some companies to avoid paying full local sales tax even when in-state facilities fulfil orders 
• Distributes online revenue in ways that do not reflect local spending patterns

Demeester’s presentation provided examples of companies labeled as “marketplace facilitators,” meaning they can charge SSUT even when orders are fulfilled from Alabama locations — bypassing traditional local sales tax rules. Examples include Amazon, DoorDash, Shipt, and major grocery chains with in-state distribution centers.

Decatur’s Position

Before the vote, Mayor Kent Lawrence addressed the council:

“SSUT is not fair the way it is being handled and distributed today. I support correcting the process because the distribution is not equitable. The city supports the fix, which is what this lawsuit is about. If the City Council wants to draft a resolution of support for the lawsuit, I am good with that. If the City Council wants to join the other cities in Alabama in the lawsuit to correct SSUT distribution, I will support that as well.”

The resolution affirms three points:

1. Decatur supports correcting the SSUT system. 
2. The city agrees with the goals raised by the plaintiffs and Alabama’s Big 10 Mayors. 
3. Decatur will not join the lawsuit at this time but will continue to advocate for a fair statewide solution.

What Comes Next

Decatur will continue collaborating with statewide leaders to update online sales tax rules. The city will also keep an eye on the lawsuit as it progresses. Any long-term solution will probably need both legislative action and coordination between cities and counties.

The city urges residents to stay informed. SSUT is already part of daily life, and any change will impact how local services are funded in the years ahead.