Alabama Losing Millions In Sales Taxes

The State of Alabama is whining and crying about sales taxes lost because the purchases were made out of state. And it's wrong, they say, because even if you buy something out of state, whether the purchase is on the Internet or through a catalog, you owe a 4% use tax on that purchase. The fact that the vast majority of us don't PAY such a tax is "costing" the state of Alabama millions of dollars.

The Alabama Department of Revenue wants people to know they are expected to pay a 4 per­cent use tax on purchases made on the Internet, from television shopping channels and from cat­alogs if no tax is charged by the retailer.

William Fox, an economics professor at the University of Tennessee and director of the school's Center for Business and Economic Research, esti­mated in his research that Ala­bama lost more than $100 mil­lion in revenue in 2009 from e-commerce sales.

To tell the absolute truth, I don't care one whit about Alabama "losing revenue" because of Internet or catalog sales. Tough it out... Citizens of the United States have the absolute right to avoid paying taxes wherever possible.


Because Alabama cannot collect sales tax on a sale that takes place outside the state, they have a "use" tax. The amount for both taxes is the same rate, 4% of the purchase price. If I bought something in the state, I'd pay a 4% sales tax at time of purchase. If I bought it via the Internet (for example) from outside the state, I'd owe a 4% use tax at the time I file my state income tax return.

Every time you make an Internet or catalog purchase, you're supposed to keep track and voluntarily pay the required tax at the end of the year.

To the State of Alabama: in my opinion, it's GOOD that most people ignore your largely unenforceable tax. The world doesn't turn around how much money you take from the citizens of Alabama. WE earned the money, and it's OUR money to spend as we see fit.

To be honest, I wonder if use taxes are even legal. Look, when levying a tax, you have to tax some activity. The TV you purchase at Best Buy isn't taxed, your PURCHASE of that TV is taxed. The purchase is the key, that's the activity that is taxed. The difference between a sales tax and a use tax is that a sales tax is levied on a purchase INSIDE the region where they have taxing authority, and a use tax is levied on a purchase made OUTSIDE that region.

Now let's look at use taxes. What activity are they taxing? If they're taxing the out-of-state purchase, then I believe the tax is unconstitutional. One state cannot tax a transaction made in another state. Can you imagine the chaos and insanity if they COULD? If they're taxing the importation of the goods into the state, then we have another problem. States are not allowed to impose barriers to inter-state trade... that's the Federal government's job. So a state CANNOT tax goods that are imported from another state.

Another thought. If they're taxing the transportation of the goods into the state, is the property of people MOVING into the state taxed at the same rate? If not, what is the difference between the goods in question, i.e. why is one taxable and the other not?

I'd like to see use taxes challenged on a Constitutional basis, I really would. The idea of a use tax is that some transaction took place outside of their taxing authority, and they want a piece of it. Period.

And that's wrong.