End of online sales tax sharing a factor in Hubbard shutdown | New

The Lawrence County Commission’s decision to stop sharing sales taxes online slashed more than half a million dollars from the county’s school system’s annual revenue and was one of the factors cited in the decision to close RA Hubbard High after this school year.

The commission distributed $553,866 to the school system from online sales taxes in fiscal year 2021, but halted the practice shortly after the fiscal year ended Sept. 30. The commission said it learned in 2021 that it was “not obligated” to share sales taxes online. with schools. The commission is required to distribute 83.3% of sales tax from physical stores to schools.

District 4 County Commissioner Bobby Burch said under legislation passed in October 2015, the state distributes online sales taxes, also known as Sellers Simplified Use Tax (SSUT), to state county commissions.

“The legislation that passed the SSUT was a use tax,” Burch said. “It was designed for departmental commissions. In the end, no one expected it to be as substantial as it is, and now many school boards across the state are trying to lobby for some of the SSUT use tax. …and that’s understandable.

“In 2021, at an exit (audit) conference, a state auditor informed us that we were not obligated to pay them the same 83.333% they receive in sales tax ( brick and mortar) We chose not to.

In a federal court motion asking that it be allowed to close Hubbard, who is majority black, the school board said one of the financial reasons for closing the school was that it anticipated the loss of flow income from SSUT, which amounted to $553,866. during fiscal year 2021.”

The school system also said it will lose funding for federal COVID-19 relief legislation in 2024.

Since ending its sharing with the school system, the board has received $407,476 in SSUT money from the state in about six months, with the last distribution being April 7.

Burch said the commission is strapped for funds, keeping only half a cent of the 9-cent sales tax in Moulton and the 7-cent sales tax in the county. He said the county collects a 3-cent portion of those physical sales taxes, but distributes 2½ cents to the Lawrence Board of Education, as dictated by law.

“I don’t know of any county that gets less sales tax than we do,” Burch said. “The local BOE receives 2½ cents on every dollar spent. This legislation has been around for decades and has been extremely beneficial to them.

Burch also said brick-and-mortar sales tax collections have skyrocketed in recent years.

“Our county sales taxes have far exceeded all projections, and the sales tax is still about 10 times the SSUT use tax,” he said. “We would certainly welcome any negotiations (with the school board) with these facts in mind.”

School superintendent Jon Bret Smith said that from the time SSUT was implemented until last fall, the school board received a distribution of SSUT that was in the same proportion than the physical sales tax distributed by the county. He said the school board was told in November that it would no longer be receiving a share of the SSUT money.

“Since then, we have been working with the County Commission to determine an appropriate way to distribute these funds,” Smith said. “Although the school system considers this to be a sales tax and the commission believes it is not, we are hopeful that we can reach a compromise soon.”

The commission and the school board plan to have future discussions on the issue, both parties say.

In Morgan County, a 2019 local law sponsored by State Senator Arthur Orr reduced the County Commission’s collection of online sales taxes from 100% to 5%, redirecting the bulk of taxes to school districts in Morgan County, Decatur City and Hartselle City, with small amounts redirected to volunteer fire departments.

The Morgan County Commission initially refused to redirect sales taxes online and fought a lawsuit brought by local school systems, saying the statewide SSUT law superseded local law. However, an appeals court and ultimately the state Supreme Court ruled that the legislature had the power, through local law, to direct the Morgan County commission to redirect tax revenue online sales she received.

There is no local law governing online sales tax distributions in Lawrence County.

Smith said the end of the Lawrence County Commission’s SSUT distributions “certainly played a role” in the proposal to shut down RA Hubbard. “It wasn’t just one thing financially that was the deciding factor, though,” he said. “The money (SSUT) has stopped.”

The school board argued that RA Hubbard, with its 148 students in grades 7-12, had a per-student cost for fiscal year 2020 of $18,030, or $5,200 per student more than the cost of the second highest secondary school, East Lawrence High in the Caddo Community. Lawrence County High’s cost per student is $10,020.

Court documents show the school board argued the district would save about $569,000 a year if Hubbard was closed. “The estimated cost of keeping RA Hubbard open is over $1 million per year,” the documents say.

Falling enrollment at RA Hubbard in North Courtland was also a big deal for the closure, Smith said. The school’s student population has grown from 323 in 2009 to 148 this year.

Both the county commission and the school system suffered financial losses following the 2014 closure of the International Paper mill in Courtland. In 2012, International Paper paid $1.89 million in ad valorem taxes. In 2020, the factory only paid $130,296. Smith said one-third of ad valorem taxes go to fund education in the county. In 2012, the school board received $630,191 in ad valorem taxes, up from $43,432 in 2020, according to court documents.

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David A. Albanese