Sales Tax Discount Alabama Cases

Sales-tax discounts are unique to taxing schemes involving the collection and remission of sales taxes. Unlike a tax deduction, which is commonly associated with income taxation, a sales-tax discount does not decrease the tax base. Cf. Walter Hellerstein, "State and Local Taxation of Electronic Commerce: Reflections on the Emerging Issues," 52 U. Miami L. Rev. 691, 697-98 (1998); Charles E. McClure, Jr., "Taxation of Electronic Commerce: Economic Objectives, Technological Constraints, and Tax Laws," 52 Tax L. Rev. 269, 338 (1997); and Edward A. Zelinsky, "Are Tax 'Benefits' Constitutionally Equivalent to Direct Expenditures?" 112 Harv. L. Rev. 379, 404 (1998), discussing the components of the tax base for retail sales taxes. In Alabama, as in most States, the sales-tax discount functions as a collection tool; Section 40-23-36(a) expressly disallows the discount if a retailer is delinquent in its remittance. The tax base, which is principally determined by 40-23-2 and further defined by various sales-tax exemptions, see, e.g., 40-23-4 (exempting the sales of lubricating oil, gasoline, and fertilizer, etc., from the collection of the tax), is determined by the type of transaction, and it is not reduced by the allowance of a sales-tax discount. The discount is a monetary incentive, and it is granted to the retailer for making timely remittances. the Legislature "pays" the discount out of collected sales-tax revenues by allowing the retailer to retain a small percentage of the revenue that otherwise would have to be remitted to the State if certain conditions are not met. It follows, then, that the reduction of a discount is not the levy of a tax. See generally, Zelinsky, supra (discussing cases decided by the United States Supreme Court involving issues requiring a determination of whether various kinds of tax breaks in the Internal Revenue Code are expenditures). Consequently, the delegation of powers to the Governor to set a sales-tax discount that is within reasonable limits established by the Legislature is not, in and of itself, an unconstitutional encroachment on the Legislature's power to levy taxes. Therefore, the key question presented here is whether the Legislature has set "reasonable limits." It appears from the record that sales-tax discounts have been allowed since the first sales tax was adopted. from 1939 to 1951 the Legislature authorized the Governor at his or her option to provide for a discount not to exceed 3% of the taxes collected. from 1951 until the present, the Legislature has continued to authorize the Governor at his or her option to provide for a discount that does not exceed 5% of the first $ 100 of taxes levied and 2% of the taxes levied over $ 100. the statute has always included language authorizing a discount "not to exceed" a maximum amount. See Part I, supra.