Madison and Mobile Join Expanding Lawsuit as Debate Over SSUT Funding Intensifies Across Alabama
By Speakin’ Out News
Across Alabama, municipalities large and small are entering a legal showdown with the state over how online sales tax revenue is collected and distributed. What began as a lawsuit launched by Tuscaloosa and Mountain Brook has grown into a statewide movement, as cities including Hoover, Madison, and Mobile argue that the state’s Simplified Sellers Use Tax (SSUT) system is depriving them of millions needed for education, infrastructure, and essential services.
The controversy centers on the SSUT, enacted in 2016 to streamline online sales tax collection. The law imposes a flat 8% tax on all online purchases, regardless of delivery location. Half of that revenue remains with the state, and the other half is distributed to all 463 municipalities and 67 counties based solely on population — not where purchases are made.
City leaders contend this model fails to reflect modern commerce. With online retail booming, cities with the highest purchasing activity receive only a fraction of the revenue generated by their residents. Many argue that the SSUT system penalizes growth and diverts local dollars to municipalities that are not producing comparable levels of economic activity.
Tuscaloosa Mayor Walt Maddox, one of the first officials to challenge the system, said his city expects to lose more than $14.6 million this fiscal year under the current formula. “Tuscaloosa should keep what it earns,” Maddox has said repeatedly — a sentiment echoed by a mounting coalition of mayors.
A Growing List of Cities Joining the Fight
The lawsuit has gained momentum as cities take deeper financial stock of the impact of SSUT. This winter, Hooverjoined the lawsuit through a unanimous city council vote, estimating annual losses between $7 million and $10 million.
On Monday, Mobile became the latest to enter the legal battle. Standing at Government Plaza, Mayor Spiro Cheriogotis warned that SSUT poses a growing threat to the city’s financial stability as online buying increases.
He said Mobile is losing $34 million every year under the SSUT distribution model — a figure expected to balloon as digital commerce accelerates.
“Yes, this lawsuit could blow up SSUT and change the landscape completely,” Cheriogotis said during a news conference. “We have no choice but to defend Mobile’s financial future.”
Mobile’s decision solidifies the involvement of some of Alabama’s largest and fastest-growing cities, significantly raising the stakes.
North Alabama: Madison Joins, Decatur Declines
North Alabama leaders weighed in this week, with Madison voting to join the lawsuit and Decatur opting not to participate.
Madison officials said they reviewed the city’s tax data during a work session and found that the SSUT redistribution drastically diminishes the revenue needed to support schools, policing, parks, and roadways. Following the analysis, the Madison City Council unanimously voted to join.
The city issued a detailed statement:
“Madison taxpayers have the right to receive the benefit from the tax dollars they pay… The City remains committed to protecting the long-term financial stability of our community and ensuring fair and equitable tax policies for all Alabama municipalities.”
Decatur leaders echoed concerns about the SSUT model but declined to join the lawsuit, citing the cost of litigation as the primary factor.
Opposition and Political Pushback
While cities are lining up to challenge SSUT, counties and some state leaders have mounted a fierce defense of the existing system.
The Association of County Commissions of Alabama (ACCA) — representing all 67 counties — has been among the most vocal opponents of altering SSUT. Counties, particularly smaller and rural ones, rely heavily on the distribution formula, which they say ensures equitable support for areas with limited tax bases.
Sonny Brasfield, ACCA’s executive director, said the push from big cities was expected but misguided.
“The biggest cities are fixated on erasing the nation’s most efficient system for collecting Internet revenue,” Brasfield said. “That’s not going to happen.”
Brasfield and other county officials warn that dramatically changing SSUT could destabilize county budgets statewide and create funding shortfalls for critical services such as road maintenance, emergency response, and public health.
State lawmakers have also stepped into the fray. A legislative committee recently paused several legal service contracts in protest of the cities’ lawsuit, emphasizing that tax distribution is a legislative responsibility, not a matter for the courts.
The stakes are high: Alabama reported that SSUT generated $851.2 million in 2024, an increase of 34% in just two years and a staggering 1,500% surge since the program’s first year. With online purchasing rising every year, the financial implications of any change to the system could be profound.
What Could Change — and What’s Next
The cities involved in the lawsuit are seeking to move SSUT to a destination-based sourcing model, which would direct tax revenue to the locality where goods are delivered. Such a shift would mirror how traditional in-store sales taxes are collected and could significantly increase funding for major cities and high-growth communities.
If the courts side with the cities, the outcome could reshape Alabama’s municipal financial landscape, pulling revenue back into urban centers while shrinking distributions to smaller counties and towns.
With Tuscaloosa, Mountain Brook, Hoover, Madison, and Mobile now aligned — and other cities watching closely — the fight over SSUT has become a defining test of fairness, growth, and economic responsibility in Alabama.
What began as a lawsuit filed by two municipalities has rapidly become a statewide referendum on how Alabama should fund its future in the age of digital commerce. The outcome will determine whether Alabama’s tax structure keeps pace with changing consumer behavior — or whether the state maintains a redistribution system that cities say no longer reflects economic reality.
