Alabama Department of Revenue Wisely Withdraws Controversial Proposal

Yesterday afternoon, the Alabama Department of Revenue (ADOR) withdrew its controversial proposed digital tax regulation, Rule 810-6-5-09, likely in response to the request of the Legislative Council’s newly-appointed Chairman, Senator Paul Sanford (R-Madison/Huntsville). In a letter sent to the Commissioner of Revenue last week, Senator Sanford warned that he would convene a meeting of the Council next Wednesday to consider rejecting the regulation. Senator Sanford’s letter was consistent with the letter delivered to the Commissioner on the date of the administrative hearing on the proposed regulation. There were similar calls to withdraw the proposal by legislative leaders, many in the business community, and some in the media, largely based on the argument that the proposed regulation exceeded the scope of the ADOR’s rule-making authority and was instead within the exclusive jurisdiction of the Legislature to consider.
Despite this announcement by the ADOR, it is unknown whether the ADOR will make any attempts in the future to tax these types of digital services without legislative approval. It is uncertain whether the Legislature will take up this issue in the likely special session later this summer or perhaps will defer consideration until the 2016 regular session (or later).

The authors served as local counsel to the Digital Goods and Services Coalition, one of the many groups that opposed the regulation.