Alabama Cities Challenge State’s Uniform Tax Collection System

Alabama’s Simplified Sales and Use Tax system faces a constitutional challenge from cities and school districts that allege the tax collection mechanism shortchanges them by allowing retailers with a physical presence in the state—including giants such as Amazon and Walmart—to remit taxes at a lower rate.

The cities of Tuscaloosa and Mountain Brook, as well as Tuscaloosa City Schools, filed suit Tuesday in the Circuit Court of Montgomery County against the Alabama Department of Revenue. The suit asks the court to invalidate portions of the tax system and require merchants with a “substantial nexus” in the state to collect ...