Madison Drops Lawsuit Against State Over Online Tax

City leaders seek legislative solution to SSUT revenue distribution issues

Published on Feb. 22, 2026

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The city of Madison has voluntarily dismissed its legal challenge to Alabama's handling of the Simplified Sellers Use Tax (SSUT), a tax on online purchases, in an effort to pursue a legislative solution with the state legislature. Madison and other cities, including Tuscaloosa, Montgomery, and Hoover, had joined a lawsuit over the distribution of SSUT revenue, with 50% going to state funds and the remaining 50% allocated to local governments. By dropping the lawsuit, city leaders hope to have open dialogue with state lawmakers to find a resolution that ensures tax money generated in Madison stays in Madison.

Why it matters

The SSUT revenue distribution has negatively impacted Madison's ability to fund public services like public safety, education, parks, and infrastructure. By dismissing the lawsuit, city leaders aim to work collaboratively with the state legislature to find a solution that better serves local communities.

The details

In December 2025, the City of Madison joined a lawsuit filed by the City of Tuscaloosa challenging the state's handling of the SSUT. At the request of Alabama's legislative leadership, Madison and other cities have now voluntarily dismissed their claims to pursue a legislative solution during the current session. By dismissing the legal challenge without prejudice, the city can reassert its arguments if discussions with the legislature fail to produce a timely and adequate result.

  • In December 2025, the City of Madison joined a lawsuit filed by the City of Tuscaloosa.
  • On February 18, 2026, the City of Madison voluntarily dismissed its legal challenge.

The players

Ranae Bartlett

The mayor of Madison, Alabama.

Rex Reynolds

A Republican state representative from Huntsville, Alabama, and the House chairman of the General Fund budget committee.

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What they’re saying

“Our city's ability to provide for public safety, education, parks, and roads and infrastructure has been negatively impacted by the state distribution of internet sales tax. I look forward to working with the Alabama legislature to find a solution that ensures tax money generated in Madison stays in Madison.”

— Ranae Bartlett, Mayor of Madison

“I think at this point, really, what I can say is that now that the suit has been dropped, I expect immediate and much dialogue related to what we may or may not be able to do in the future. We were just really in a position that we couldn't be talking about it while the lawsuit was filed. Now, this will give us the opportunity to have dialogue.”

— Rex Reynolds, State Representative, House General Fund Budget Committee Chairman (1819 News)

What’s next

The Alabama legislature will now have the opportunity to work with Madison and other cities to find a legislative solution to the SSUT revenue distribution issues.

The takeaway

This case highlights the ongoing tensions between state and local governments over the distribution of tax revenue, particularly as more commerce shifts online. By dismissing the lawsuit, Madison is hoping to find a collaborative solution with state lawmakers that better serves the financial needs of the local community.