Internet sales tax revenue a click away or too complicated?

Montgomery - As Alabama grapples to find money for lean state budgets, an under-tapped source of sales tax revenue sits as close as most people's computer screens.

But tapping the source is not simply a matter of billing people and companies that owe the tax, even if laws already require them to pay.

In a state where even the suggestion of new taxes brings a strong public outcry, any proposal for a new tax is probably deader than Elvis.

But what makes collecting an already existing tax so hard?

"It's complicated," Alabama Revenue Commissioner Tim Russell said.

"Precisely," said Sonny Brasfield, executive director of the Association of County Commissions of Alabama.

Brasfield represents the National Association of Counties, a group working on a 22-state Streamlined Sales Tax plan that collects sales tax through a single collection point in each state. Alabama participates in talks with the group but has not agreed to the group's push for a uniform tax rate statewide.

The group wants Congress to pass federal laws to make collecting Internet sales tax easier. But Brasfield said until Congress acts, he doubts joining the group's efforts would help Alabama.

"Until Congress changes federal law, the process is voluntary anyway," Brasfield said. He said Alabama now gets about $300 million per year in taxes from Internet sales. Most comes from companies that voluntarily pay the tax because their computer systems are set up to pay in other states.

Russell estimates the state loses $104 million to $170 million per year in education revenue on Internet purchases where sales taxes are not paid. But Alabama's tax structure is not uniform for all purchases as it is in most other states.

Alabama's sales tax rate for farm machinery and industrial equipment purchases, for instance, is 1-2 percent, an amount that Brasfield said could not be included if the state went to uniform tax rate.

In a state unlikely to increase the sales tax rate on farm equipment and industrial machinery, Brasfield said, "We would lose more than we would gain until the federal government makes uniform tax rate mandatory."

Although Alabama state income tax forms include space for taxpayers to report the amount of their Internet purchases, Russell said too few report or understand why they should.

The state also has tax regulations for companies selling on the Internet. State law requires companies that have "brick and mortar" businesses in the state but also sell their products on the Internet to pay sales tax on in-state purchases. Most large businesses voluntarily pay Internet sales taxes to Alabama. Some, especially smaller ones, do not.

M.J. Ellington is the Montgomery bureau chief for the TimesDaily.