Tuscaloosa, Mountain Brook Sue State Over Online Tax Collections

September 2, 2025

NFIB is following the case, which could affect small businesses statewide

The cities of Tuscaloosa and Mountain Brook have filed a lawsuit challenging Alabama’s Simplified Sellers Use Tax. The lawsuit argues that retailers with stores in Alabama should collect the same state and local sales taxes on online purchases that they do on in-store sales, instead of the flat 8 percent online tax.

City leaders say the current system takes money away from local governments and schools, while the state defends it as a steady source of revenue. If the lawsuit succeeds, it could change how online sales taxes are collected and distributed across Alabama, with major effects on local budgets and on retailers who sell both online and in stores.

NFIB isn’t involved with the lawsuit, but State Director Rosemary Elebash said the organization will be following the case closely. “This is something that could affect small businesses all across the state,” she said. “We’ll be watching and will do whatever we can to ensure that small businesses are treated fairly.”

Topics:

Taxes

State:

Alabama

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