According to the Alabama Department of Revenue annual report, business licenses across the state have rebounded by 7.5% since the pandemic reaching over 260,000 issuances in 2023, an all-time high.
Alabama, a state of recovery since 2020, where 227,343 business licenses were issued in the state, a four-year low.
“Sales revenues were up in most (aspects), especially the retail sector, business licenses are based on our gross sales receipts,” said Executive Director of the Alabama League of Municipalities Greg Cochran on contributing factors. “So, therefore, you would have a natural connection that if sales taxes are growing in the economy, then so are business licenses.”
As the state returns to normalcy, the economy has adapted to changing consumer behavior after COVID-19.
“Where we’ve seen a major growth in the economy, and it was certainly spurred on by the pandemic, because of people being isolated at home or in their businesses, has been online sales,” Cochran said. “And to accommodate online sales, we have seen regional distribution centers mushroom throughout our state.”
Due to the increase in online sales, there has been a 17% increase in online sales tax, dubbed SSUT. “That shows a strong delivery of goods into our communities,” Cochran said.
Additionally, in-store shopping has seen an upward trend of three percent. “It’s not apple to apples, but it certainly shows that the consumers are utilizing these extra dollars that came in and the success they are seeing in their workplace to buy goods and services,” Cochran said.
“I think you would have to look at it in the totality of one-time federal dollars that were coming into the state over the last three years,” Cochran said. “Through The American Rescue Plan Act (ARPA) and through the COVID relief efforts that went into businesses and individuals certainly put more dollars into play in our economy.”
In March 2021, municipalities were given $356.4 billion due to ARPA, a supplement from the March 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act that allocated 96.5 million in aid to small businesses.
Business licenses accumulated over $12 million in additional revenue for the state in 2023, pointing to a recent federal increase in the maximum business license fees to $14.
While the overall economy has shifted in recent years business practices have changed. According to the U.S. Small Business Administration (SBA) Office of Advocacy Small Business Profile, 2022 was the first year since the pandemic that total establishments trended upward, netting $5,516. The two years prior carried a net loss of $618.
Although the statistics from SBA establishments for 2023 have not been released, income tax totaled $8.2 billion in 2023, a 1.2% increase. Business licenses increased close to 20,000, an 8.1% spike, nearly eightfold of the 2022 jump.
“Inflation is so high, and we can't find enough employees. So businesses, a lot of them have changed their business hours because they don’t have any coverage,” said National Federation of Independent Business State Director Rosemary Elebash. “So what they’ve done is they look at their lowest producing day. They may close that day, just because they can’t cover or they shorten their hours of when they’re open. That reduces their income plus inflation. So maybe they don’t have their income prior to COVID. They haven’t caught back up because of inflation.”
As inflation has made the economic landscape for businesses difficult to succeed, the income tax boasted an upward tick reaching 52% of the state's revenue.
“(People) will do a home business and they will follow the paperwork and get a business license. And then it may not be a productive business,” Elebash said on the potential fraudulence regarding a spiked income tax.
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