Alabama’s SSUT Battle Intensifies as Cities, Counties, and Schools Clash Over Tax Revenue

A major statewide dispute is unfolding over Alabama’s Simplified Sellers Use Tax (SSUT), with cities, counties, and school officials all weighing in on how online sales tax revenue should be distributed. While the issue may appear technical at first glance, the outcome could significantly impact funding for local governments, education systems, and public services. Although the conflict centers on state tax policy, leaders in communities such as Auburn are watching closely, knowing the decision could affect budgets and essential services across Alabama.

The debate has grown increasingly urgent in recent months, with lawsuits being filed, political leaders taking sides, and statewide organizations stepping forward to defend their positions. At the heart of the argument is a simple yet critical question: Who should benefit from online sales tax revenue, and how should it be collected?

Counties and Municipalities Unite to Protect the SSUT System

The Association of County Commissions of Alabama (ACCA) is leading the charge to preserve the state’s current tax collection structure. Executive director Sonny Brasfield emphasized that dismantling the SSUT system would not generate additional revenue—rather, it could cause Alabama to lose millions.

“The attempt to dismantle the program does not help generate additional revenue,” Brasfield said. All 67 counties, along with more than 150 local municipalities, have joined the ACCA’s effort to defend the system in court.

Brasfield stressed the importance of explaining to the judiciary why the SSUT is essential for local government operations.

“It’s very important that we be able to tell the court the perspectives of local government—why this revenue is important, why this case is important, and why we believe SSUT is constitutionally defensible,” he said.

Under current law, companies headquartered outside Alabama—such as Amazon, DoorDash, and other major online retailers—pay an 8% simplified sellers use tax. Cities pushing the lawsuit argue these companies should instead pay full state and local sales taxes. However, Brasfield maintains that this is not legally or practically feasible.

“It’s not really a question of if we can make DoorDash pay the local sales tax here in Montgomery—we can’t,” he explained. “The question is, do we take the SSUT and be happy, or do we let them off the hook completely?”

Because the SSUT guarantees revenue from online sellers nationwide, eliminating it would leave Alabama with no mechanism to force out-of-state businesses to collect or remit taxes.

How SSUT Revenue Is Distributed Across Alabama

Since 2016, SSUT revenue has been divided among the state’s General Fund, the Education Trust Fund, counties, and municipalities based on population. Half of all SSUT collections go to local governments—60% to municipalities and 40% to counties.

The remaining 50% is split between the General Fund and Education Trust Fund, with the General Fund receiving 75% and education receiving just 25%.

This formula has long been a point of contention for many cities, especially those that serve as economic hubs. Leaders argue they shoulder more responsibility for infrastructure, public safety, tourism, and daily traffic from residents who live outside city limits.

Communities such as Auburn, Montgomery, Birmingham, Mobile, Huntsville, and Tuscaloosa often attract workers who commute in from surrounding counties. These cities say they need more tax support to keep up with the demand placed on their services.

Alabama Education Association Joins the Fight

The Alabama Education Association (AEA) has also entered the legal battle. On Wednesday, the organization announced it would file a lawsuit challenging the Alabama Department of Revenue’s administration of the SSUT.

“The current application of the SSUT shortchanges Alabama’s local schools,” said AEA associate executive director Theron Stokes. He argues that allowing remote sellers to remit the simplified tax rather than traditional state and local sales taxes diverts millions away from classrooms, teachers, and school operations.

Education leaders say the state’s reliance on the SSUT has created a funding bottleneck. With more consumers shifting to online shopping, they fear education budgets will not keep pace with student needs.

Given the importance of education budgets to cities such as Auburn, which depend heavily on strong local school systems, the lawsuit has added another layer of pressure to an already complicated debate.

Montgomery Takes a Stand for Municipal Revenue

Montgomery Mayor Steven Reed has been outspoken about the need for a more equitable formula. He believes the current distribution shortchanges major cities by tens of millions annually.

“With more and more people making their purchases online, we want to make sure the formula between counties and cities is fair, and right now the current formula is not,” Reed said.

Reed argues that cities generate the most economic activity and therefore should receive a larger share of online tax revenue. Cities bear the highest costs of maintaining infrastructure, public safety, and essential community services—services used not only by residents but also by workers and visitors from surrounding counties.

“We are the economic generators for the state,” Reed said. “It is important for us to receive the revenue needed to provide for the people who work in our city but may live elsewhere.”

Counties Warn of Unintended Consequences

Montgomery County Commission Chairman Doug Singleton agrees there are problems to solve—but not by changing the SSUT system. He warns that shifting to traditional sales tax collection for out-of-state sellers would cause administrative chaos and likely result in lost revenue.

“From my understanding, they’re asking for the out-of-state companies to change it from a use tax to a sales tax,” Singleton said. “That opens it up for a lot of different problems, and constitutionally it’s not allowed anyway. We’ve got to leave it just like it is.”

Despite disagreements between city and county leaders, both Reed and Singleton say the issue remains far more contentious in other areas of Alabama.

What Comes Next for Alabama?

As lawsuits move forward, political tensions continue to rise. The battle over the SSUT could reshape how Alabama funds everything from schools to public safety—and cities like Auburn are watching carefully.

With millions of dollars at stake and competing priorities across the state, the debate is far from over. What remains clear is that the future of Alabama’s online tax system will have major consequences for communities small and large, rural and urban, and for local governments striving to serve their citizens.