TEI urges abandonment of proposed Alabama nexus regulation.

• Position: Tax Executives Institute

On June 10, 2013, TEI submitted comments to the Alabama Department of Revenue on its proposed local sales tax regulation governing seller collection responsibilities. The Institute's letter noted that the proposed regulation would create a more complicated system for determining and complying with sales and use tax obligations in Alabama, and urged the Department to abandon the proposed regulation and retain the existing well-established single nexus threshold for state and local sales taxes. The letter was prepared under the aegis of TEI's State and Local Tax Committee, whose chair is Howard E. Grindle. Robert M. Ahonen of The Babcock & Wilcox Company contributed substantially to the development of TEI's comments. Daniel B. De Jong, TEI Tax Counsel, serves as legal staff liaison to the State and Local Tax Committee and coordinated the preparation of TEI's letter.

Background on TEI

TEI was founded in 1944 to serve the professional needs of business tax professionals. Today, the organization has 55 chapters in North America, Europe, and Asia. Our 7,000 members represent 3,000 of the largest companies in the world, many of which are either resident or do business in Alabama. As the preeminent association of in-house tax professionals worldwide, TEI has a significant interest in promoting sound tax policy, encouraging the uniform and equitable enforcement of the tax laws, and reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike. The Institute is committed to maintaining a system that works--one that builds upon the principle of voluntary compliance and is consistent with sound tax policy. We, along with federal, state, and local governments, have the most at stake in crafting a tax system that is administrable and efficient.

Description of the Proposed Regulation

For decades, Alabama has applied a harmonized rule requiring businesses to collect and remit both state and local sales and use taxes only when the business has "substantial nexus" with both Alabama and the local jurisdiction. This "substantial nexus" standard reflects the jurisdictional limits placed on states by the Due Process and Commerce Clauses of the U.S. Constitution as interpreted by the Supreme Court of the United States. See Alabama Admin. Code r. 810-6-2-.90.01(3); Quill Corp. v. North Dakota, 504 U.S. 298 (1992).

The Proposed Regulation would impose a lower and amorphous nexus threshold for local sales and use...