Gov. Kay Ivey today signed into law a bill expected to increase the taxes Alabama collects for online sales.

The state started the Simplified Sellers Use Tax three years ago to help collect taxes owed by Alabama customers on purchases from online vendors.

The bill signed into law today, sponsored by Rep. Rod Scott, D-Fairfield, expands the reach of the SSUT to capture purchases from third-party vendors that sell products through Amazon and other online marketplaces.

The change is estimated to increase state and local revenues by $23 million to $39 million a year.

"This legislation will help bring about a competitive balance between brick-and-mortar retailers in Alabama and third-party online sellers, while streamlining the collection of use taxes that are currently due on online transactions," Ivey said in a press release.

The use tax is the sales tax for products bought out of state for use in Alabama. But the tax often goes unpaid because federal courts have ruled that companies aren't responsible for collecting sales taxes for states where they have no stores or physical presence. That leaves it to customers to report and pay the tax, but that rarely happens.

The growth of online sales is a worry for state and local governments that depend on tax dollars and raises fairness concerns for brick-and-mortar retailers who tax every sale.

The SSUT has addressed part of the problem. Almost 200 online retailers have signed up, including the largest, Amazon, as well as Overstock, LL Bean and Zappos and others. The program generated $56 million in tax revenue during the last fiscal year and has raised $27 million the first four months of this fiscal year, the governor's office said.

But officials said the program failed to reach the third-party segment of the online sales market until the new law.

"This should get that third piece of the pie and hopefully close that gap," Deputy Revenue Commissioner Curtis Stewart said.

Participation in the SSUT is voluntary for retailers. A benefit is they collect a flat 8 percent tax on all sales to Alabama customers rather than various rates for every city and county.

Only companies with no physical presence in Alabama are eligible for the SSUT. Amazon became a key participant when it signed up.

But then Amazon's acquisition of Whole Foods, which has stores in Alabama, appeared to make the online giant ineligible.

Scott's bill, in addition to trying to capture the taxes on third-party vendors, amended the law to allow SSUT participants to stay in the program if they acquire a business with a physical presence in Alabama.

The new law does not allow companies that already had a physical presence in Alabama to collect the SSUT instead of standard sales and use taxes.

Half the money collected through the SSUT goes to the state and half goes to cities and counties. Scott's bill changed how the city/county share is distributed. Cities will get 60 percent and counties 40 percent, distributed according to population. The previous split was 50/50.

Kelley Gillikin, director of tax policy and governmental relations for the Department of Revenue, said the 60-40 percent split approximately reflects the proportions of the population in cities and in unincorporated areas.

Of the state's share, 75 percent goes to the General Fund and 25 percent to the Education Trust Fund. Scott's bill does not change the distribution of the state money.