On Wednesday the Alabama House of Representatives passed Senate Bill 221, legislation sponsored by Senator Arthur Orr, R-Decatur, that would exclude credit card transaction fees from sales and use tax in the state.
Under the current policies of the Alabama Department of Revenue, merchants who charge credit card transaction fees in Alabama must pay sales and use tax on those fees. SB221 would overrule that policy through statute, officially exempting those fees from sales and use tax moving forward.
Business leaders in the state have praised the bill as an opportunity for statutory clarification and a reduction of costs for both small businesses and consumers. However, the bill is notably opposed by the Alabama League of Municipalities who argued in a recent committee hearing that SB221’s provisions would reduce municipal revenues and thereby harm the services provided by local government.
During that hearing before the House Ways and Means Education Committee, Baker Allen, the League’s director of governmental affairs, said that the bill’s fiscal impact could be as great as $4.6 million based on FY25 revenues from Huntsville.
“It’s expensive to provide essential services such as providing resources to first responders, investing in economic development projects, and facilitating quality of life programs,” Allen told the committee. “Whittling away sales tax revenue decreases the opportunities to provide those services.”
Despite these apparent concerns, SB221 saw no debate on the House floor Wednesday following its introduction by Representative Chad Robertson, R-District 40. The bill went on to pass by a vote of 75-18 with three abstentions.
SB221 will now go to Governor Kay Ivey’s desk, where it will either be signed into law or vetoed as the 2026 legislative session draws to a close.
