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Alabama 2023 Sales Tax Guide

Alabama 2023 Sales Tax Guide

Alabama Sales Tax in a Word

Alabama, the Heart of Dixie, is the 22nd state in the union and undeniably a place of many great American inventions and innovations. Alabama was home to the world's first electric trolley and is also where the first rocket used to send men to the moon was built. Perhaps this is due to Alabama being the only state with all the natural resources required for making iron and steel. In addition to its history of agriculture and industry, Alabama is also home to many thriving small businesses.

If you’re one of the many small business owners keeping Alabama prospering today, you’re going to want to be sure your business complies with Alabama's sales tax laws. Don't fret! We have assembled this all-in-one guide for sales tax so that you can meet the sales tax compliance requirements for a small business in Alabama.

 

After reading this guide, you will have learned:

  • How to be prepared for your call with the Alabama Department of Revenue.

  • How to contact the Alabama Department of Revenue.

  • When to charge sales tax in Alabama.

  • What goods, products, and services are taxable in Alabama.

  • When you establish a sales tax nexus with the state of Alabama, and the nuances of various thresholds.

  • How to register for a sales tax license in Alabama.

  • How to collect sales tax in Alabama.

  • How to file and pay sales tax in Alabama.

If, after reading, you still have any questions to help you determine your tax sales obligations in Alabama and how to fulfill them, we are here for your small business bookkeeping needs!

 

Alabama Sales Tax Contacts

Do you need to get in touch with the Alabama Department of Revenue?

Are you uncertain about whether to visit, call them, or contact them through their website?

Do you wonder what information you should have ready before you contact them?

If you answered “Yes” to any of these questions, please read onward, as we have just the information you need! :)

 

The Alabama Department of Revenue is reachable by phone at the following numbers: 

  • General Info: (334) 242-1490

  • Paperless Business Accounts: (866) 576-6531

  • Registration for Business Accounts: (334) 242-1584

 

All of Alabama's business and tax phone numbers are located here. 

 

You can also visit their one of their taxpayer service centers or ask them a question via their website. If you are hoping for the fastest response, we always suggest that you call rather than visit in person.

 

When you do call the Alabama Department of Revenue, you will want to have some information on hand. It will save time to have the following information easily accessible before you call:

  • Taxpayer Name

  • EIN

  • Sales & Use Tax ID Number

If you plan on having a third party contact them on your behalf, you’ll want to be sure to have completed a power of attorney form (Form 2428, PDF). If you don’t have a completed form they won’t be able to assist someone else on your behalf.

 

If you have any more questions, please feel free to contact us so we can assist you with your sales tax needs.

 

You can also peruse Alabama's 340 page rulebook here, which is super helpful if you suffer from insomnia and need a cure. 😂

 

Do You Have Nexus in Alabama?

Understanding whether your business has nexus, or tax obligations, in Alabama is essential for complying with sales tax regulations. Nexus can be established through various factors, including physical presence and economic activity. In Alabama, having a physical presence, such as a store or employees, can trigger sales tax obligations. Economic nexus, based on revenue or transaction thresholds, is also a consideration following the South Dakota v. Wayfair Supreme Court decision. Additionally, if you sell through online marketplaces, the actions of the marketplace facilitator may create nexus on your behalf. To ensure compliance and avoid potential issues, it is crucial to evaluate your nexus status in Alabama. In this guide, we will explore the factors that determine nexus and provide insights on how to determine if your business has sales tax obligations in Alabama.

 

What Creates Sales Tax Nexus in Alabama?

Sales tax nexus is essentially a connection between a business and a state that requires the business to collect and remit sales tax in that state. In Alabama, several factors can create sales tax nexus:

 

Physical Nexus in Alabama

Alabama Code § 40-18-31.2 creates the factor presence standard for business activity in the state to determine nexus for business income tax, business privilege tax and financial institution excise tax. The section stipulates that the threshold amounts may be adjusted periodically consistent with the Consumer Price Index.

A corporation is deemed to have “substantial nexus” for the tax period in which they exceed the following thresholds for Alabama:

Tax Year

Property

Payroll

Sales

% of total property, sales, or payroll

January 1, 2015 – December 31, 2018

$50,000

$50,000

$500,000

25% of the total property, total payroll, or total sales.

On or after January 1, 2019

$54,000

$54,000

$538,000

25% of the total property, total payroll, or total sales.

On or after January 1, 2022

$60,000

$60,000

$596,000

25% of the total property, total payroll, or total sales.

 

Corporations that are incorporated in Alabama or have their commercial domicile in the state are considered to have a significant presence in Alabama.

However, if a corporation is neither organized nor commercially domiciled in Alabama and its activities fall within the scope of "mere solicitation of sales" protected by PL 86-272, the factor presence nexus standards established for tax years starting from January 1, 2015, onwards will not be applicable.

To obtain guidance on determining nexus and fulfilling filing obligations for a corporation in Alabama, please complete the nexus questionnaire online at nexus.revenue.alabama.gov.

 

Economic Nexus in Alabama

The effect of the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. on June 21, 2018, is that an out-of-state seller with no physical presence in Alabama (i.e., remote seller) is required to collect and remit Alabama sellers use tax through the Simplified Sellers Use Tax (SSUT) program if total retail sales (taxable and nontaxable) into Alabama for the previous calendar year are above $250,000.  Remote sellers with sales below this amount may also apply to participate in the SSUT program.  Alternatively, this obligation may be satisfied by collecting and remitting under Alabama’s traditional state and local use tax regime.

 
Alabama Simplified Sellers Use Tax Program

The "Simplified Seller Use Tax Remittance Act," also known as Legislative Act 2015-448, offers eligible sellers the opportunity to participate in a program aimed at collecting, reporting, and remitting a flat eight percent (8%) sellers use tax on all sales made into Alabama. To qualify as an eligible seller, one must engage in the sale of tangible personal property or services into Alabama from an inventory or location outside the state. It is essential that the seller lacks a physical presence in Alabama and is not otherwise obligated by Sections 41-4-116 or 40-23-190 of the Code of Alabama 1975 to collect tax on sales made into the state.

 

What is a marketplace facilitator?

Marketplace Facilitators (MPFs) play a significant role in the realm of sales tax collection and reporting. Let's take a closer look at the different categories of MPFs and the obligations they have in relation to the Simplified Sellers Use Tax Remittance Program (SSUT).

First, we have Qualified Marketplace Facilitators who lack any nexus or physical presence in Alabama. These MPFs qualify to report tax collected on their sales in Alabama through the SSUT program. Additionally, they are responsible for collecting and reporting SSUT tax on behalf of the marketplace sellers who conduct sales into Alabama. This provision became effective on January 1, 2019, and was made available starting from June 1, 2018.

Next, we have Non-Qualified Marketplace Facilitators who do have a nexus or physical presence in Alabama. These MPFs are obliged to collect tax on their own sales made within Alabama using different returns, such as Sellers Use, Sales, and Local Tax returns. However, they are also required to collect and report sales tax on behalf of their marketplace sellers who make sales into Alabama using the SSUT return. This requirement came into effect on January 1, 2019, with availability from June 1, 2018.

There are also Non-MPF Filers who participate in the SSUT program but do not operate a marketplace. They are solely sellers who utilize the program for their sales tax collection and reporting purposes.

Finally, we have Marketplace Sellers (MPS) who engage in selling their products or services through a marketplace platform. These sellers rely on MPFs to facilitate their sales, tax collection, and reporting procedures.

Understanding these distinct roles and responsibilities of MPFs and MPS is essential for navigating the complexities of sales tax compliance within the SSUT program.

 

How does a Marketplace Facilitator apply for participation in the SSUT program?

If a Marketplace Facilitator is already an SSUT participant who has been reporting their own sales and intends to start collecting and remitting on behalf of their 3rd party sellers, they may indicate this on the monthly return that is filed in MAT by clicking “Yes” next to the question “Are you a Marketplace Facilitator and need to report sales tax collected from sales made by your Marketplace Sellers?”  Once “Yes” is selected, additional fields will appear on the return where the sales of 3rd party marketplace sellers may be entered.

New applicants should complete the application process.  An email notification will be sent either approving or denying the SSUT application and will include further information.

Apply for Simplified Sellers Use Tax Account

 

What type of sales, if any, are exempt from the collection of SSUT?

In Alabama, it is generally necessary to collect and remit the SSUT 8% flat tax on all sales of taxable products and services, unless certain conditions are met. These conditions include presenting one of the following documents to the seller or the marketplace facilitator: a resale certificate, an Alabama exemption certificate, or an Alabama direct pay permit. By providing any of these documents, sellers or marketplace facilitators can establish that the transaction falls within an exempt category and is not subject to SSUT collection.

It's important to note that the SSUT tax cannot be collected and remitted as a substitute for the sales and use tax that is collected by a licensing official. This rule specifically applies to sales of automotive vehicles, motorboats, truck trailers, trailers, semitrailers, manufactured homes, and travel trailers, which must be licensed by a local licensing official in the state.

 

If a marketplace facilitator (MPF) chooses reporting instead of participating in the SSUT program, what obligations do they have?

If a marketplace facilitator (MPF) chooses to report instead of participating in the Simplified Sellers Use Tax (SSUT) program, they have specific obligations to fulfill.

Starting from January 1, 2019, any MPF that decides not to collect and remit sales, use, or simplified sellers use tax on qualifying retail sale transactions in Alabama is required to report such retail sales and provide customer notifications. These obligations are subject to constitutional limitations and are outlined in Section 40-2-11(7)(b) and the accompanying rules.

To meet these obligations, MPFs electing to report should complete the SSUT application and indicate their choice next to the question pertaining to this specific matter. By fulfilling these requirements, MPFs can maintain compliance with the applicable regulations and ensure accurate reporting of their retail sales activity in Alabama.

 

When an MPF elects to collect and remit SSUT, are there any additional state or local sales and use taxes that need to be paid on marketplace transactions?

When a marketplace facilitator (MPF) chooses to collect and remit Simplified Sellers Use Tax (SSUT), it is important to understand whether additional state or local sales and use taxes are still applicable to marketplace transactions.

Fortunately, the collection and remittance of the simplified sellers use tax provide relief to the MPF, the marketplace seller, and the purchaser. This means that once the SSUT is collected and remitted for a transaction, there is no requirement to pay any additional state or local sales and use taxes related to that specific transaction. The SSUT covers the necessary tax obligations, ensuring that no further taxes are due beyond what has already been collected and remitted.

By adhering to the SSUT program and fulfilling the collection and remittance requirements, all parties involved can have confidence that they have met their tax obligations in relation to state and local sales and use taxes on marketplace transactions.

 

If the MPF chooses not to collect and remit SSUT on behalf of the marketplace seller but decides to comply with the reporting requirements for MPFs, what tax collection obligations does the marketplace seller have?

Marketplace sellers who conduct sales on a non-participating marketplace facilitator's platform must fulfill their obligations under the laws of the state. This includes remitting sales or use taxes for transactions made on or through the non-participating marketplace facilitator's marketplace, as well as on transactions conducted through the marketplace seller's own electronic sales platform or at their retail location within the state.

In Alabama, remote sellers with a qualifying amount of retail sales into the state are required to start collecting simplified sellers use tax starting from October 1, 2019. To ensure a smooth registration process, remote sellers should complete their registration at least three weeks prior to October 1, 2019. On the application, remote sellers may indicate October 1, 2019, as their first sales date. Although remote sellers have the flexibility to register and commence tax collection before October 1, 2019, the first date of collection should align with the indicated first sales date on the application.

 

When the MPF chooses to collect and remit SSUT, are there any additional state or local sales and use taxes that must be paid for marketplace transactions?

Once the simplified sellers use tax has been collected and remitted, the marketplace facilitator, the marketplace seller, and the purchaser are relieved from any obligation to pay additional state or local sales and use taxes on the transactions.

 

Affiliate Nexus in Alabama 

Alabama has implemented a new rule specifying that remote sellers located outside of Alabama must obtain a sales tax license and collect and remit sales tax on all sales within the state, provided they have substantial nexus (significant connection) with the state. Various circumstances could establish this substantial nexus. For instance, if the seller delivers goods within Alabama using their own vehicles, maintains any business place within the state (even temporarily), or employs any representative (like a salesman, solicitor, or installer) in the state for selling, delivering, or taking orders for taxable goods or services. 

Moreover, the nexus rule extends to business activities conducted within the state by the seller's affiliates. This means a remote seller could have a substantial nexus with Alabama if they have a business relationship with an in-state business that operates one or more locations within the state. Indicators of such a relationship might include sharing a similar name, trademark, or business plan, compensating each other based on sales volume or value, or if the in-state business offers services that help the remote seller develop, promote, or maintain their in-state market. The rule provides specific definitions of a related party based on the business's nature. 

Finally, if a licensed seller collects sales tax on a transaction, the purchaser is exempt from any use tax obligations. This rule (Rule 810-6-2-.90.01) became effective on August 24, 2012, as per the Alabama Department of Revenue.

 

 

Click-Through Nexus in Alabama

Alabama does not currently have any laws relate to click-through nexus.

Nice. 

 

 

 

Alabama Sales Tax Registration

Are you launching a new venture that involves selling physical goods in Alabama? If so, it's crucial to register your business with the Alabama Department of Revenue. This ensures you're all set to remit your sales tax punctually.

Don't worry, though! This process is pretty straightforward, and you're about to be completely equipped to handle it. We're going to break down the steps for you, so you're thoroughly prepared to register for your sales tax license.

 

How to Register for Sales Tax in Alabama 

You can apply or register for an Alabama sales tax permit by visiting the My Alabama Taxes site and following the instructions provided to register a new business entity.

Alabama does not offer an old school paper based form you can print and mail in.

 

What Information Do I Need to Register for aN Alabama Sales Tax License?

Great question!

To register for an Alabama sales tax license, you will need the following information:

  • Business Details:

    • Legal business name: Provide the official name of your business as registered with the appropriate authorities.

    • Trade name or DBA (Doing Business As): If applicable, include any alternate name or "doing business as" name used by your business.

    • Business entity type: Specify the legal structure of your business, such as sole proprietorship, partnership, corporation, etc.

    • Federal Employer Identification Number (FEIN): Provide the federal tax identification number assigned to your business by the IRS. This is required for most business entities. If you don't have an FEIN, you can apply for one through the IRS.

    • Social Security Number (SSN): If you are a sole proprietor without an FEIN, you may need to provide your SSN instead.

  • Contact Information:

    • Business address: Provide the physical location of your business, including street address, city, state, and ZIP code.

    • Mailing address: If different from the business address, provide the address where you prefer to receive mail related to your sales tax license.

    • Phone number: Include a contact number where you can be reached during business hours.

    • Email address: Provide a valid email address for communication purposes.

  • Ownership Information:

    • Owner's name(s): Provide the name(s) of the owner(s) or partners of the business.

    • Owner's SSN or FEIN: Provide the Social Security Number or Federal Employer Identification Number for the business owner(s).

  • Product and Service Details:

    • Description of products or services: Provide a general description of the goods or services your business offers.

  • Estimated Sales Information:

    • Anticipated sales volume: Estimate the expected annual sales volume for your business in Alabama.

  • Other Business Information:

    • Out-of-state nexus: Indicate if your business has any physical presence or nexus outside of Alabama.

    • State tax ID number: If your business has been assigned a state tax identification number, provide it if applicable.

This is a general list, and additional information or documentation may be required based on the specific nature of your business and the Alabama Department of Revenue's requirements. It's recommended to visit the official Alabama Department of Revenue website or contact their support services for comprehensive and up-to-date instructions regarding the sales tax license registration process.

 

When you have all this information ready, you can go online and register for your permit at the My Alabama Taxes site.

 

How Much Does it Cost to Register for an Alabama Sales Tax License? 

Zip! Alabama doesn’t charge anything at all to register a new business sales tax permit.

 

Do I Need a Federal Tax ID Number or EIN to Register for an Alabama Sales Tax License?

Yes, you will generally need a Federal Employer Identification Number (FEIN) to register for an Alabama sales tax license. An FEIN is a unique identification number assigned to your business by the Internal Revenue Service (IRS) for tax purposes.

Most businesses, including sole proprietorships with employees, partnerships, corporations, and LLCs, are required to have an FEIN. It serves as a way to identify your business for tax reporting and registration purposes.

When registering for a sales tax license in Alabama, you will likely be asked to provide your FEIN as part of the application process. If you don't already have an FEIN, you can apply for one directly with the IRS. The application can be completed online through the IRS website or by submitting Form SS-4 (Application for Employer Identification Number) via mail or fax.

However, if you are a sole proprietor without any employees and you don't have an FEIN, you may be able to use your Social Security Number (SSN) in place of an FEIN when registering for an Alabama sales tax license.

 

Which Agencies in Alabama Might I Need to Register With Additionally?

In addition to registering for a sales tax license with the Alabama Department of Revenue, there are several other agencies in Alabama that you may need to register with, depending on the nature of your business and specific requirements. Some of the agencies you might need to register with include:

  • Alabama Secretary of State: If you are operating as a corporation, limited liability company (LLC), partnership, or other registered business entity, you may need to register with the Alabama Secretary of State. This registration ensures compliance with state regulations and allows your business to operate legally.

  • Alabama Department of Labor: If you have employees, you may need to register with the Alabama Department of Labor for various employment-related purposes, such as unemployment insurance, workers' compensation, and wage and hour compliance.

  • Alabama Department of Finance - Business Privilege Tax Division: Certain businesses in Alabama, such as corporations, limited liability companies (LLCs), and partnerships, may be required to pay the Alabama Business Privilege Tax. Registration with the Business Privilege Tax Division is necessary for tax reporting and compliance.

  • Alabama Department of Agriculture and Industries: If your business involves agriculture, food processing, or the sale of agricultural products, you may need to register with the Alabama Department of Agriculture and Industries to ensure compliance with relevant regulations and licensing requirements.

  • Local City or County Agencies: Depending on the location of your business, you may need to register with local city or county agencies for additional licenses, permits, or tax requirements. These can include local business licenses, zoning permits, and other local regulatory obligations.

The specific agencies you need to register with may vary based on the nature of your business and its operations. It is recommended to consult with a professional advisor or legal counsel to determine the exact registration requirements applicable to your specific business in Alabama. Additionally, visiting the official websites of the respective agencies or contacting their support services can provide you with the most accurate and up-to-date information regarding additional registration obligations.

Collecting Sales Tax in Alabama

By now you know if you are a business that has established a nexus with Alabama. So you have an understanding about whether, or when, you are required to collect sales tax. Knowing this is just half the battle! Now, we are going to help you with the next half of the battle: how to navigate the process of collecting taxes.

Let’s review some common questions our clients have asked regarding their Alabama Sales Tax obligations.

  • How do I collect Alabama Sales Tax?

  • Who is eligible for Alabama Sales Tax exemptions?

  • What should I do if my customer is exempt from sales tax in Alabama?

  • What happens if I lose an Alabama tax exemption certificate?

After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in Alabama.

 

How to Collect Sales Tax in Alabama?

Because Alabama is a destination-based sales tax state, your business should charge sales tax at the time of the transaction based on the business location rather than that of the buyer.

 

What are the Current Alabama Sales Tax and Use Tax Rates?

Sales and use tax rates vary across municipalities and counties, in addition to what is taxed by the state. The state sales tax rates are as follows: 

 

State Tax Type

State Rate Type

State Tax Rate

Consumers Use

Auto

2.0%

Consumers Use

Farm

1.5%

Consumers Use

General

4.0%

Consumers Use

Manufacturing

1.5%

Lodgings Tax

General (Mountain Lakes Region)

5.0%

Lodgings Tax

General (All Other Areas)

4.0%

Rental Tax

Auto

1.5%

Rental Tax

Linens/Garments

2.0%

Rental Tax

General

4.0%

Sales Tax

Auto

2.0%

Sales Tax

Farm

1.5%

Sales Tax

General/Amusement

4.0%

Sales Tax

Manufacturing

1.5%

Sales Tax

Vending (Food Products)

3.0%

Sales Tax

Vending (All Other)

4.0%

Sellers Use

Auto

2.0%

Sellers Use

Farm

1.5%

Sellers Use

General

4.0%

Sellers Use

Manufacturing

1.5%

 

In addition to the state sales tax, local sales taxes are also due, and these rates vary. The state of Alabama administers over 200 different city and county sales taxes; however, we do not administer all county or city sales taxes. Therefore, be advised to contact all counties and municipalities in which you do business in order to determine if you should register with them to collect their local tax. The discount for local sales tax is the same as for state sales tax. However, non-state administered local taxes that may be filed through My Alabama Taxes/ONE SPOT may have a different discount rate, and My Alabama Taxes has been programmed accordingly. 

 

Need to look up a sales tax rate? 
Search Local Sales, Use, Lodgings & Rental Tax Rates Here

 

 

What Sales are Subject to Sales Tax in Alabama? 

Sales tax is a privilege tax imposed on the retail sale of tangible personal property sold in Alabama
by businesses located in Alabama. The tax is collected by the seller from their customer and
remitted directly to the state. All sales of tangible personal property are retail sales except those
defined as wholesale sales.

 

Is Software as a Service (SaaS) taxed in Alabama?

TLDR: Yes. 

 

Computer hardware, like computers and related equipment, are physical parts of a computer setup. When you buy or rent these, you need to pay Sales Tax, Use Tax, or Rental Tax.

"Computer software" is a series of instructions for a computer. It includes things like system programs, application programs, and utilities. This also applies to software programs that are made for general use or repeated use, even if they are developed in-house and then sold or leased. When you rent or lease software, it's called "licensure."

Software is considered tangible personal property, like a physical object. So, when you buy or license software, you also have to pay Sales Tax, Use Tax, or Rental Tax. This applies no matter how the software is given to you, and it's based on the total amount paid for the software.

"Software programming" is when someone creates or changes software applications for a specific customer. This doesn't include any software that's sold or licensed to the customer as part of the programming. The cost of programming should be listed separately on the invoice, and it isn't taxed if it's separate from the cost of the software. However, the person doing the programming has to pay Sales Tax or Use Tax on the cost of the tangible medium used to transfer the programming to the customer.

A "software maintenance agreement/contract" is a contract that's sold with the software. It can include things like support services, bug fixes, software upgrades, manual revisions, and training services. If the contract is required to buy or license the software, the total cost is subject to tax, even if the contract cost is listed separately from the software cost. If the contract is optional, only the parts of the contract for upgrades, new manuals, and tangible items used in producing the manuals are taxed. But, any fees for support services, bug fixes, and training that are listed separately aren't taxed. If these fees aren't listed separately, the whole contract cost is taxed. However, maintenance contracts sold with software programming are not taxed.

 

What is Exempt from Alabama Sales Tax?

Sales of Tax-Exempt Goods: Certain items are usually exempt from sales tax. These often include prescription medications, fuel such as gasoline and motor oil (though kerosene and fuel oil are not exempt), agricultural products like fertilizer, insecticides, and fungicides, seeds intended for planting, livestock and poultry feed (excluding prepared pet food), baby chicks and poults, and livestock. Labor costs for repair or installation are also exempt, provided they are separately listed on the customer's bill (however, labor costs for fabricating an item are not exempt). Transactions involving the U.S. government, the state of Alabama, or other Alabama state agencies are also typically tax-free. Please note that sales of cigarettes and beer are not exempt from sales or use tax.

 

Sales to Tax-Exempt Entities: Transactions directly involving the federal government, the state of Alabama, counties and cities within the state, schools (excluding daycares), city- and county-owned hospitals and nursing homes, and certain nonprofit organizations specifically exempted by the Alabama Legislature, such as Alabama Sheriffs Boys Ranch, Boy Scouts, and Girl Scouts of America, are generally tax-exempt. However, not all nonprofit organizations are exempt from sales tax.

 

Purchases Made Using Food Stamps: Sales tax is not applied to items purchased with food stamps. However, any other purchases made by individuals participating in the food stamp program are still subject to sales tax.

 

Wholesale Transactions (Resale Sales): Sales made to authorized retail merchants, jobbers, dealers, or other wholesalers for resale purposes are exempt from sales tax

 

Filing and Paying Sales Taxes in Alabama

When it comes to conducting business in Alabama, understanding the process of filing and paying sales taxes is crucial. As a business owner, complying with sales tax regulations is not only a legal requirement but also essential for maintaining smooth operations and avoiding penalties. In this section, we will delve into the details of filing and paying sales taxes in Alabama, providing you with the necessary information and steps to navigate the process effectively. From registration to reporting and remittance, we'll cover the key aspects of fulfilling your sales tax obligations in Alabama, ensuring that you stay on top of your tax responsibilities while fostering a financially healthy business.

 

When to File Taxes in Alabama

Knowing the deadlines for filing taxes is crucial for businesses operating in Alabama. Compliance with the state's tax regulations ensures a smooth and hassle-free tax season while avoiding any penalties or issues. In this section, we will explore the important details regarding when to file taxes in Alabama. We will cover the deadlines for different tax types, including sales tax, income tax, and other applicable taxes, providing you with the necessary information to stay on track with your tax obligations. By understanding the timelines and requirements, you can effectively plan and prepare for tax filing in Alabama, ensuring a seamless process and peace of mind.

 

Alabama Filing Frequencies

Alabama has four sales tax filing frequencies, which are determined by your sales volume.. 

The returns and remittances are due on or before the 20th day of the month following the month during which the tax is accrued.

Example: Tax accrued in January 20xx, is due February 20, 20xx.

Electronic payment information must be transmitted by 4:00 p.m. (Central Standard Time) on or before the due date, to be considered timely paid.

The returns and remittances are due on or before the 20th day of the month following the quarter during which the tax is accrued.

Example: Tax accrued in 1st Calendar Quarter 20xx, is due April 20, 20xx.

Electronic payment information must be transmitted by 4:00 p.m. (Central Standard Time) on or before the due date, to be considered timely paid.

 

You may request quarterly filing status if you have a tax liability of less than $2,400 for the preceding calendar year. 

The returns and remittances are due on or before the 20th day of the month following the semi-annual period during which the tax is accrued.

Example: Tax accrued in 1st semi-annual period 20xx, is due July 20, 20xx. The second semi-annual period 20xx is due January 20, 20XX. 

Electronic payment information must be transmitted by 4:00 p.m. (Central Standard Time) on or before the due date, to be considered timely paid.

You may request bi-annual filing if you have a tax liability of less than $1,200 for the preceding calendar year. You may also request bi-annual filing if you make sales during no more than two 30-consecutive-day periods during the preceding calendar year. 

The returns and remittances are due on or before January 20th of the year following the year during which the tax is accrued.

Example: Tax accrued in calendar year 2020, is due January 20, 2021.

Electronic payment information must be transmitted by 4:00 p.m. (Central Standard Time) on or before the due date, to be considered timely paid.

 

You may request annual filing status if the tax liability for the entire preceding calendar year is less than $600. 

You may also request annual filing if you make sales during no more than one 30-consecutive-day period during the preceding calendar year. 

Changes to your filing frequency can only be requested each year before February 20 in order to file quarterly, bi-annually or annually for that calendar year.  

 

How Do I File aN Alabama Sales Tax Return?

Filing a sales tax return can be a critical task for businesses in Alabama. Properly reporting and remitting sales tax is not only a legal requirement but also essential for maintaining compliance and keeping your business running smoothly. In this section, we will guide you through the process of filing an Alabama sales tax return, providing step-by-step instructions and key information to ensure a seamless and accurate filing experience. From understanding the necessary forms to gathering the required data, we will cover all the essential aspects of filing an Alabama sales tax return. Whether you are a new business owner or looking for a refresher on the process, this guide will equip you with the knowledge and tools to navigate the filing process effectively and meet your sales tax obligations in Alabama.

 

Steps to FIle an Alabama Sales Tax Return

  • Go to My Alabama Taxes and sign in

    • Navigate to the relevant period

    • On the Accounts tab, scroll down to your account and click the File or View a return link.

    • The Returns page is displayed with the List of Returns tab activated. You will see a list of each period and return that can be filed for that period in the table. Find the period and return you wish to file and click the File Now link to start the return.

  • Complete the return

    • Complete the fields, forms, and/or schedules of the return as necessary

    • Fields have indicators telling what you can (or cannot) put in the field

    • Fields with a solid gray underline are editable. Fields with a dotted underline are not editable. Fields which are required will be marked with a Required watermark inside the field and often a red asterisk on the caption of the field. Fields in error will show a red circle with an exclamation inside and the underline will change its color to red.

    • Some returns have several forms or schedules. Click the form or schedule name at the top of the return to complete the information for that form or schedule.

      • If a line item name is displayed as a blue link, you can jump directly to that form or schedule through that link.

      • Fields which are in error will show a red circle with an exclamation inside and the underline will change its color to red. Click the form or schedule name to correct the error or provide the required information.

  • At any point, you can...

    • Click the Save Draft button to save your progress (this does not submit your return)

    • Click the Cancel button to close this window without saving any of your changes.

    • Use the Next and Previous buttons to move back and forth between steps.

    • Click a previously completed step you would like to navigate to directly. This link is on the action bar above the form indicated with a '>' or a checkmark and the name of the step.

  • Submit the return

    • When you have completed the return, click the Submit button to file the return. You will be required to enter your password.

    • A confirmation window will appear. Depending on what type of return you are filing, you will have different options regarding how to proceed. If a button for particular action is not displayed, that action cannot be performed for the return type you just filed.

      • Proceed to Payment

      • No Thanks

      • Done

      • Print Confirmation

      • Print Return

 

Alabama Penalties

Returns filed after the due date are subject to a “failure to timely file” penalty equal to the greater of 10% of the tax required to be paid on the return or $50. Even if there is no activity during the period, a return must be filed. 

Tax payments received after the due date are subject to a “failure to timely pay” penalty equal to 10% of the delinquent tax. If tax is not timely paid, interest is also due at the same rate established by the Secretary of the Treasury under the authority of 26 U.S.C. 6621. Learn more about interest rates.

 

Alabama Discounts

  • Return Type

    Discount Allowed

    State Use Tax: Consumer

    No

    State Use Tax: Seller

    No

    Simplified Sellers Use Tax (SSU)

    Yes, if tax is timely paid: 2% of tax due.  Discount cannot exceed $8,000 per month.

    Rental Tax

    No

    Lodging Tax

    Yes, if tax is timely paid: 5% on the first $100 of tax due, and 2% of all tax over $100.

    City & County Tax (SC)

    Yes, if tax is timely paid: 5% on the first $100 of tax due, and 2% of all tax over $100. Sales tax discount cannot exceed $400 per month per jurisdiction.

    No discount is allowed for Consumers Use Tax, Sellers Use Tax, or Rental Tax.

    Report of Sales & Use Tax Collected by County Licensing Official (CB)

    Yes

    Contractors Gross Receipts Tax (CR)

    Yes

  •  

Alabama Sales Tax Holidays

Alabama has two sales tax holidays: Back-to-School and Severe Weather Preparedness.

 
Back-to-School Sales Tax Holiday – July

The Back-To-School Sales Tax Holiday begins at 12:01 a.m. on the third Friday in July and ends at midnight on the following Sunday, pursuant to §40-23-210 to §40-23-213, Code of Alabama 1975.

Participating Counties and Municipalities

Rule 810-6-3-.65

Law: §§40-23-210 – 213

Act 2006-574

Act 2017-120

Quick Reference Sheet of Exempt Items

 

Severe Weather Preparedness – February

The Severe Weather Preparedness Sales Tax Holiday begins at 12:01 a.m. on Friday of the last full weekend in February and ends at midnight on the following Sunday, pursuant to §40-23-230 to  §40-23-233, Code of Alabama 1975.

Participating Counties and Municipalities

Rule 810-6-3-.66

Law: §§40-23-230 – 233

Act 2012-256

Quick Reference Sheet of Exempt Items

More information about both holidays can be found here.

 


 

Ready to work with an Alabama sales tax expert?

We've love to work with you!

 👉  Book a call here  👈

 

 


 
Have sales tax in more than one state?

Check out All of our Sales Tax Guides

Alabama Sales Tax Guide

Hawaii Sales Tax Guide

Massachusetts Sales Tax Guide

New Mexico Sales Tax Guide

South Dakota Sales Tax Guide

Alaska Sales Tax Guide (N/A)

Idaho Sales Tax Guide

Michigan Sales Tax Guide

New York Sales Tax Guide

Tennessee Sales Tax Guide

Arizona Sales Tax Guide

Illinois Sales Tax Guide

Minnesota Sales Tax Guide

North Carolina Sales Tax Guide

Texas Sales Tax Guide

Arkansas Sales Tax Guide

Indiana Sales Tax Guide

Mississippi Sales Tax Guide

North Dakota Sales Tax Guide

Utah Sales Tax Guide

California Sales Tax Guide

Iowa Sales Tax Guide

Missouri Sales Tax Guide

Ohio Sales Tax Guide

Vermont Sales Tax Guide

Colorado Sales Tax Guide

Kansas Sales Tax Guide

Montana Sales Tax Guide (NA)

Oklahoma Sales Tax Guide

Virginia Sales Tax Guide

Connecticut Sales Tax Guide

Kentucky Sales Tax Guide

Nebraska Sales Tax Guide

Oregon Sales Tax Guide (N/A)

Washington Sales Tax Guide

Delaware Sales Tax Guide (N/A)

Louisiana Sales Tax Guide

Nevada Sales Tax Guide

Pennsylvania Sales Tax Guide

West Virginia Sales Tax Guide

Florida Sales Tax Guide

Maine Sales Tax Guide

New Hampshire Sales Tax Guide (NA)

Rhode Island Sales Tax Guide

Wisconsin Sales Tax Guide

Georgia Sales Tax Guide

Maryland Sales Tax Guide

New Jersey Sales Tax Guide

South Carolina Sales Tax Guide

Wyoming Sales Tax Guide

 

And don't forget to check out our blog about Economic Nexus, which serves as an invaluable resource for businesses who have sales that are subject to sales tax. 

 

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This blog is for informational purposes only and the information is accurate as of 2023-06-19. If you want legal advice on sales tax law for your business, please contact a State and Local Tax (SALT) professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it.

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