The Alabama Taxpayers’ Newsletter
Published periodically by JEFF PATTERSON LLC — All rights reserved
™
Issue 7-2015
ADOR DIRECTS OUT-OF-STATE SELLERS TO COLLECT
ALABAMA USE TAX—IS THIS THE NEXT QUILL CASE?
The law firm of JEFF PATTERSON LLC was founded to
represent taxpayers. Its clients
include in-state and out-of-state
business entities — both large
and small — and individuals.
Because JEFF PATTERSON LLC
highly values confidentiality, the
firm does not disclose the identity of its clients. Prior to founding the firm, Jeff Patterson practiced law inside the Alabama
Department of Revenue for
more than 13 years.
The firm represents clients
before state and local tax agencies in Alabama, and before the
IRS, and has represented clients
before tax agencies in other
states and before the United
States Supreme Court. The following is a partial list of the
firm’s areas of representation:
 sales and use taxes
 income tax
 business privilege tax
 trust fund recovery penalty
 local taxes
 federal income/excise taxes
 tax incentives
 regulatory matters
 audits (incl. third party)
 tax litigation
 property tax
 tax-exempt recognition
 collection matters
 unclaimed property.
Friday, the Alabama Department of Revenue officially proposed a
rule that would require out-of-state (remote) sellers who have no physical
presence in this state to collect use tax from their Alabama customers and
to remit that tax to the ADOR. (810-6-2-.90.03) The rule would apply to
the purchase of items over the internet, and by catalog and phone. Some
well-known examples of remote sellers are Amazon.com, Overstock.com,
and LL Bean. Although the rule was announced Friday in the Alabama
Administrative Monthly, the text of the rule has not yet been released.
Currently, remote sellers are not legally required to collect Alabama
sales or use tax, because of the 1992 decision by the United States Supreme
Court in Quill Corp. v. North Dakota. (Nevertheless, some remote sellers do
so voluntarily.) In Quill, North Dakota argued that the company should
have collected and remitted use tax on catalogue goods that were purchased by North Dakotans for use within the state. However, because
Quill had no physical presence in North Dakota, the court held that the tax
violated the Interstate Commerce Clause. Although the case involved use
tax, the court applied its reasoning to sales tax, as well. Thus, today, most
remote sellers who sell to Alabama customers do not collect sales or use
tax, which appears to “save” customers around 10% per purchase. (Of
course, if no sales tax is paid, the use of the property in Alabama creates a
use-tax liability for the Alabama customers, but most do not pay the tax.)
It is clear that the Quill holding trumps the ADOR’s proposed rule.
Therefore, it appears that the ADOR is attempting to set the stage for the
Supreme Court to revisit the issue of state taxation of remote sales. Only
time will tell if the court will be amenable. It is interesting to note, though,
that 6 of the current justices were not members of the Quill court. And recently, current Justice Anthony Kennedy, who was a member of the Quill
court, stated that “the legal system should find an appropriate case for this
court to reexamine Quill …” (Direct Marketing Assn v. Brohl)
The ADOR’s first challenge, however, is to adopt the rule once the
public-hearing process has ended, and then hope that the rule is not suspended by the legislature’s Joint Committee on Administrative Regulation
Review. As we know from recent events (i.e., the ADOR’s proposed rule
on taxing digital transmissions), the committee has the authority to suspend an administrative rule. If the committee does so here, and if the legislature upholds the suspension in the 2016 regular session, Alabama’s version of the Quill case will not materialize.
JEFF PATTERSON
LLC
The Alabama Taxpayers’ Newsletter ™
For more information, contact the firm.
JEFF PATTERSON LLC
Park Place Center
Suite 204
8650 Minnie Brown Road
Montgomery, AL 36117
334.215.4446 (office)
334.462.8438 (cell)
www.jeffpattersonlaw.com
email: jeffpatterson@jeffpattersonlaw.com
Parting Shot:
“This is too difficult for a mathematician. It takes a philosopher. ” Albert Einstein (on filing a tax
return)
The contents of The Alabama Taxpayers’ Newsletter ™ do not constitute the rendering of legal advice and cannot be construed as such; nor
does this newsletter evidence the existence of an attorney-client relationship.
The Alabama Taxpayers’ Newsletter ™ may not be reproduced in whole or in part without first obtaining the express written permission of
JEFF PATTERSON LLC.
Alabama State Bar Rule 7.2(e) requires the following statement: No representation is made that the quality of legal services to be performed is
greater than the quality of legal services performed by other lawyers.
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