Updated on 4/20/2024
If you are an online business owner who sells products or services to customers in Alabama, you may have to deal with sales tax. A sales tax is a tax that is added to the price of taxable goods or services at the point of sale. The sales tax collected by the seller is then remitted to the state and local governments.
Sales tax laws can be complex and confusing, especially for online businesses that sell across state lines. In this blog post, we will explain how sales tax works in Alabama, who needs to collect it, how to register for it, how to collect it, and how to file and remit it.
We will also cover some of the recent changes in sales tax laws that affect online businesses, such as the Supreme Court’s Wayfair decision and the Alabama Simplified Sellers Use Tax Program (SSUT).
What is alabama sales tax rate by address, zip code, & county and how does it work
Alabama has 4% state sales tax rate, a max local sales tax rate of 7.50%, and an average combined state and local sales tax rate of 9.29%. As of September 1, 2023, the state sales tax rate for many food products has been reduced from 4% to 3%
Because Alabama also allows local governments, such as counties and cities, to impose their own sales tax rates on top of the state rate. The local sales tax rates can range from 0% to 7%, making the combined sales tax rate in Alabama anywhere from 4% to 11%.
For example, if you sell a product to a customer in Birmingham, Alabama, you have to charge them a total sales tax rate of 10%, which consists of the state rate of 4%, the county rate of 1%, and the city rate of 5%. If you sell the same product to a customer in Mobile, Alabama, you have to charge them a total sales tax rate of 9%, which consists of the state rate of 4%, the county rate of 1.5%, and the city rate of 3.5%.
To find out the exact sales tax rate for each location in Alabama, you can use AtomicTax sales tax calculator rate lookup
Not all products and services are subject to sales tax in Alabama. Some items are exempt from sales tax, such as prescription drugs, groceries, and certain agricultural products. Some services are also exempt from sales tax, such as medical, legal, and educational services.
What is Alabama internet sales tax and how does it work
Alabama’s internet sales tax, or online sales tax also known as the Simplified Sellers Use Tax is a program that allows eligible sellers to charge a total sales tax of 4% on all online purchases made by Alabama residents. .
How Alabama internet sales tax works
- Out-of-state sellers:
- If an out-of-state seller has a physical presence or exceeds an annual sales threshold in Alabama, they are required to collect and remit the 8% SSUT.
- In the absence of a physical presence, the buyer is responsible for paying use tax at the same 4% rate.
- In-state sellers: All in-state sellers must collect the SSUT on online sales delivered within Alabama.
Internet sales tax is a tax imposed on the sale of goods or services over the internet. The taxability of internet sales depends on the nexus status of the seller and the buyer, the type of product or service sold, and the delivery method.
Collecting Sales Tax in Alabama
Whether you need to collect sales tax in Alabama hinges on a concept called the sales tax nexus. In simpler terms, a nexus is the economic connection that a seller has with a state, this connection is what triggers or determines if a seller is obligated to collect and remit sales tax for a particular location
Who needs to collect sales tax in Alabama?
In Alabama, businesses that have nexus with the state are required to collect sales tax. Nexus refers to establishing a sufficient connection to Alabama, which can happen through physical presence or economic activity.
- Physical presence: Owning a store, warehouse, or any other physical location in Alabama creates nexus.
- Economic activity: Surpassing $250,000 in annual sales within Alabama establishes economic nexus. This means even out-of-state businesses exceeding this sales threshold must collect sales tax on Alabama purchases.
Remember, Alabama also has a complex local sales tax system. So, on top of the state sales tax, you might need to register and collect taxes for specific counties and municipalities where you conduct business. The state has a 4% base sales tax rate, but on top of that, many Alabama localities have additional local sales taxes. As a result, the total tax rate you need to collect will vary depending on the customer’s shipping location. Alabama uses a destination-based sales tax system, so the tax rate is determined by the customer’s address, not the seller’s location.
3 Ways to establish Alabama sales tax nexus
- Physical presence: You will have nexus in Alabama if you have a physical location, such as an office, warehouse, store, or inventory, in the state. You also have nexus if you have employees, contractors, agents, or representatives who work or perform services in the state.
- Economic activity: You will have nexus in Alabama if you have a certain amount of sales or transactions in the state. As of January 1, 2019, Alabama requires online sellers who have made more than $250,000 in sales in the state in the previous calendar year to collect and remit sales tax, regardless of their physical presence. This is due to the Supreme Court’s Wayfair decision in 2018, which overturned the previous rule that required physical presence for nexus. The Wayfair decision gave states the authority to impose sales tax obligations on online sellers based on their economic activity in the state.
- Marketplace facilitator: You will have nexus in Alabama if you sell your products or services through a marketplace facilitator, such as Amazon, eBay, Etsy, or Walmart. A marketplace facilitator is a platform that connects sellers with buyers and handles payment processing, order fulfillment, or other services. As of January 1, 2019, Alabama requires marketplace facilitators who have more than $250,000 of sales in the state in the previous calendar year to collect and remit sales tax on behalf of their sellers, regardless of their physical presence or the sellers’ nexus.
Examples of online businesses that have or do not have nexus in Alabama
1. Online Clothing Store based in Georgia
Say you have an online store that sells clothing and accessories, you are based in Georgia, and you do not have any physical presence or employees in Alabama, but you sell your products through your own website and through Amazon.
For example, in 2023, you had $300,000 of sales in Alabama, of which $200,000 were through your website and $100,000 were through Amazon. You would have nexus in Alabama because you have more than $250,000 of sales in the state, and you would have to collect and remit sales tax on the sales made through your website.
However, you do not have to collect and remit sales tax on the sales made through Amazon because Amazon is a marketplace facilitator that collects and remits sales tax on your behalf.
2. Handmade Jewelry Store based in Alabama
Say you have an online store that sells handmade jewelry, you are based in Alabama, and you have a home office and a workshop in the state. You sell your products through your own website and through Etsy.
For example, in 2023, you had $50,000 of sales in Alabama, of which $40,000 were through your website and $10,000 were through Etsy. You have a nexus in Alabama because you have a physical presence in the state, and you have to collect and remit sales tax on the sales made through your website.
However, you do not have to collect and remit sales tax on the sales made through Etsy, because Etsy is a marketplace facilitator that collects and remits sales tax on your behalf.
3. Digital Products Store, based in California
Say you have an online store that sells digital products, such as e-books, software, and online courses. You are based in California, and you do not have any physical presence or employees in Alabama, but you sell your products through your own website and through Udemy.
For example, let’s say in 2023, you had $100,000 of sales in Alabama, of which $80,000 were through your website and $20,000 were through Udemy. You would not have nexus in Alabama because you do not have a physical presence or more than $250,000 of sales in the state, and you would not have to collect and remit sales tax on any of your sales.
However, you should be aware that Alabama considers some digital products, such as software and streaming services, to be taxable, and you may have to collect and remit sales tax on them if you exceed the sales threshold in the future.
What is the nexus limit in Alabama
Alabama’s economic nexus threshold for sales tax sits at $250,000 in total retail sales within the state during the preceding calendar year. This means that any out-of-state seller (remote seller) exceeding this sales amount in Alabama has “nexus,” establishing a connection that requires them to collect and remit Alabama sales tax on taxable purchases.
Registering for a Sales Tax Permit in Alabama
If you’ve established nexus in Alabama through physical presence, economic activity, or solicitation activities as discussed earlier, you’ll need to register for a sales tax permit with the Alabama Department of Revenue. Here’s a breakdown of the registration process:
How to register and apply for a sales tax permit in Alabama
In Alabama, registering for a sales tax permit is quick and easy, and can be done entirely online through the Alabama Department of Revenue’s My Alabama Taxes (MAT) portal. There’s no fee to register, and the online registration typically takes 3-5 business days to receive your sales tax permit number. While the initial registration is free, there may be other business registration fees applicable depending on your specific circumstances.
Here’s a quick rundown of the process for registering for a sales tax permit in Alabama:
- Gather Information: Prepare your Federal Employer Identification Number (EIN), business entity type, business address, and North American Industry Classification System (NAICS) code.
- Register on My Alabama Taxes: Create an account on MAT and choose to register for a sales and use tax account number.
- Complete the Online Application: Provide your business information and answer any relevant questions.
How much does it cost to register for Alabama sales tax permit
There’s no fee to register for the permit itself, but other business registration fees may apply
How long does it take to recieve an Alabama sales tax permit
Online registration typically takes 3-5 business days to receive your sales tax permit number.
What are Alabama sales tax registration requirements
Alabama requires certain information from businesses to register for a sales tax permit. Here’s what you’ll need to have on hand:
- Federal Tax ID (EIN): Issued by the IRS, this unique number identifies your business for tax purposes.
- Business Entity Structure: Are you a sole proprietorship, partnership, corporation, or LLC? Knowing your business structure helps the state determine the appropriate tax treatment.
- Business Owner Information: Provide details like names, addresses, and Social Security numbers for business owners.
- North American Industry Classification System (NAICS) Code: This code categorizes your business by industry, used for statistical purposes. You can find your NAICS code on the U.S. Census Bureau website.
- Start Date in Alabama: Indicate the date your business began operating in Alabama.
If you need more information or assistance on how to register for sales tax in Alabama, you can contact the Alabama Department of Revenue at the following address:
- Phone: (334) 242-1490 or (866) 576-6531
- Email: ssut@revenue.alabama.gov (for SSUT program) or stexempt@revenue.alabama.gov (for regular sales tax account)
- Website: https://www.revenue.alabama.gov/sales-use/
How to register and apply for a sales tax permit in Alabama via SSUT program
1. Determine Your Eligibility for SSUT Program
Before you can start collecting sales tax in Alabama, you need to register for a sales tax license with the Alabama Department of Revenue. There are two ways to register for sales tax in Alabama, depending on whether you qualify for the Simplified Sellers Use Tax Program (SSUT) or not.
How to qualify for the SSUT program in Alabama
To qualify for the SSUT program, you must meet the following criteria:
- You do not have a physical presence in Alabama
- You sell tangible personal property or services through the internet, catalog, or other remote means
- You have annual sales in Alabama of at least $250,000 based on the previous calendar year
- You are not otherwise obliged to collect and remit sales tax in Alabama
2. Begin the SSUT Program Registration Process
If you qualify for the SSUT program, you can register online through the SSUT Registration Portal. You will need to provide the following information:
- Your business name, address, phone number, email, and website
- Your federal employer identification number (FEIN) or social security number (SSN)
- Your estimated monthly sales in Alabama
- Your bank account information for electronic payment of the tax
Once you register, you will receive a confirmation email with your SSUT account number and instructions on how to file and pay the tax. You will also receive a SSUT certificate that you can display on your website or other sales platforms to inform your customers that you are collecting sales tax on their behalf.
3. Register for a Sales Tax Account
If you do not qualify for the SSUT program, you will need to register for a regular sales tax account with the Alabama Department of Revenue. You can register online through the My Alabama Taxes (MAT) portal. You will need to provide the following information:
- Your entity type and FEIN
- Your business name, address, phone number, email, and website
- Your business activity and NAICS code
- Your estimated monthly sales in Alabama
- Your bank account information for electronic payment of the tax
Once you register, you will receive a confirmation number and an email with your sales tax account number and instructions on how to file and pay the tax. You will also receive a sales tax license that you must display at your place of business.
There are some benefits and drawbacks of each option that you should consider before registering for sales tax in Alabama. Here is a comparison table that summarizes the main differences between the SSUT program and the regular sales tax account:
What is Alabama remote seller sales tax
Alabama has a concept called the Simplified Sellers Use Tax (SSUT) aimed at remote sellers, those without a physical presence in the state. This program allows them to collect a flat 8% sales tax on all taxable sales delivered to Alabama customers. It simplifies the process by avoiding the need to figure out individual local rates, which average around 9.3% combined.
A remote seller is a seller that sells goods or services into Alabama from outside the state and does not have a physical presence or nexus in Alabama. Remote sellers may be required to collect and remit sales or use tax on their sales in Alabama if they meet certain economic thresholds.
According to Rule 810-6-2-.90.03, which took effect in January 2016, a remote seller has an economic nexus in Alabama if it has annual sales of more than $250,000 into the state based on the previous calendar year. The rule also requires the remote seller to register for the Alabama Simplified Sellers Use Tax (SSUT) program and collect and remit a flat 8% use tax on all sales made into Alabama.
What is Alabama simplified seller use tax
Alabama’s Simplified Sellers Use Tax (SSUT) is a program designed for out-of-state sellers who don’t have a physical presence in the state but still want to collect and remit sales tax on purchases made by Alabama residents. This simplifies the process by offering a flat 8% tax rate, rather than dealing with the variations in local and state rates across Alabama. To participate, sellers must apply and be approved by the Alabama Department of Revenue.
Other benefits of the SSUT Program in Alabama
The SSUT program also provides some benefits for remote sellers, such as:
- A 2% discount on the first $400,000 of taxes collected and remitted each month, up to a maximum of $8,000 per month
- Amnesty for any uncollected or unpaid sales or use taxes that were due before the date of registration for the SSUT program
- Protection from class action lawsuits related to the collection and remittance of SSUT
- No obligation to collect and remit local sales or use taxes to the various local jurisdictions in Alabama
As a remote seller, you can apply for the SSUT program online through the Alabama Department of Revenue website. For this, you must file monthly returns and payments electronically through the My Alabama Taxes (MAT) portal.
Differences between the SSUT program and the regular sales tax account:
| SSUT Program | Regular Sales Tax Account |
| Flat 8% sales tax rate | Variable sales tax rate based on the destination of the sale (4% to 11%) |
| No need to track and report local sales tax rates | Need to track and report local sales tax rates for each jurisdiction |
| No need to remit tax to each local jurisdiction | Need to remit tax to each local jurisdiction |
| Audit protection and liability relief | No audit protection and liability relief |
| Eligibility criteria apply | No eligibility criteria apply |
The Alabama sales tax rate you pay depends on the location of your purchase. There’s a base 4% state sales tax, but many localities add on additional local taxes. The maximum local rate is 7.5%, bringing the combined sales tax in some areas to as high as 11%. You can check the specific rate for your area by using our sales tax calculator.
Does Alabama sales tax license expire and how long is it valid for
Absolutely, Alabama sales tax licenses expire annually. This change took effect on November 1, 2020. To maintain compliance, businesses must renew their licenses by December 31st of each year. The renewal process is conveniently handled online through the Alabama Department of Revenue’s My Alabama Taxes (MAT) portal. There’s no fee associated with the renewal. Remember, this applies not only to sales tax licenses but also to other tax licenses like rental tax, seller’s use tax, and lodgings tax.
How long is Alabama sales tax permit valid for
Unlike exemption certificates, Alabama sales tax permits or license, also known as licenses, do not expire for the lifetime of the business, as long as the business operates at the same location and remains in good standing with the state. However, a new regulation implemented in November 2020 requires these licenses to be renewed annually. This renewal process must be completed by December 31st of each year through the Alabama Department of Revenue’s My Alabama Taxes (MAT) portal.
Alabama Sales Tax Rate
Understanding the different sales tax rates applicable in Alabama is crucial for accurate sales tax collection. Here’s a breakdown of what you need to know:
What is Alabama Sales Tax Rate
Alabama’s state sales tax rate is a flat 4%. However, the final sales tax you pay can vary depending on your location because many localities in Alabama add on additional local sales taxes. These local rates can range from 0% to 7.5%, bringing the combined sales tax rate in some areas up to 11%.
Alabma Sales Tax Rate Locator Tools
AtomicTax offers a sales tax rate locator tool to help you determine the specific combined sales tax rate applicable to any location within Alabama. You can find the tool here: AtomicTax Texas Sales Tax Rate Locator Tool
How does alabama sales tax on shipping charges work
In Alabama, shipping charges are subject to sales or use tax if the delivery is made in the seller’s own vehicle or in equipment leased by the seller. If the delivery is made by a common carrier or the U.S. Postal Service, the shipping charges are exempt from sales or use tax if they are billed as a separate item and paid directly or indirectly by the buyer. Shipping charges that are included in the sale price are not excluded from tax.
What is the sales tax rate for Alabama shipping charges
The tax rate for shipping charges is the same as the tax rate for the sale of the goods or services being shipped. The tax rate is determined by the location where the sale is sourced, which is usually the destination of the shipment or delivery.
Shipping charges are the fees charged by a seller or a carrier for the delivery of goods or services to a buyer. Shipping charges may include freight, postage, handling, insurance, or other costs related to the transportation of the goods or services.
Summary of Alabama local sales tax rates
What is Birmingham AL sales tax
The Alabama sales tax rate is currently 4%. The County sales tax rate is 1%. The Birmingham sales tax rate is 4%.
What is sales tax in Madison County Alabama
The combined sales tax rate in Madison County, Alabama is 9% (as of April 19, 2024). This breaks down into two parts:
- 4% Alabama state sales tax: This is the base sales tax applied to all taxable goods and services throughout Alabama.
- 0.5% Madison County sales tax: This is an additional sales tax levied by Madison County on top of the state rate.
For a quick and easy way to calculate the total sales tax on your purchase in Madison County, simply add 9% to the pre-tax price.
What is mobile alabama sales tax rate
The combined sales tax rate in Mobile, Alabama can add up to 10% (as of April 19, 2024). This breaks down into two main components:
- 4% Alabama state sales tax: This is a base tax applied to most taxable goods throughout the state.
- Mobile local sales tax: The city of Mobile adds an additional 5% on top of the state rate, bringing the total to 10%.
What is the sales tax rate in Huntsville, Alabama?
In Huntsville, Alabama, the combined sales tax rate you’ll pay in 2024 is 9%. This breaks down into individual rates for the state, county, and city:
- Alabama state sales tax: 4%
- Madison County sales tax: 0.5% (note that some counties may have different rates)
- Huntsville city sales tax: 4.5%
When making a purchase, the seller will add all these rates together to determine the total sales tax amount.
2024 Alabama cities sales tax rate lookup and zip codes table
| City | Zip Codes | Sales Tax Rate | Special Sales Tax Rate | Combined Sales Tax Rate |
| Birmingham | 35201 – 35299 | 10% | 1% for food and beverages | 11% |
| Montgomery | 36101 – 36191 | 10% | 2.5% for admissions to places of amusement and entertainment | 12.5% |
| Mobile | 36601 – 36695 | 10% | 1% for food and beverages | 11% |
| Huntsville | 35801 – 35899 | 9% | None | 9% |
| Tuscaloosa | 35401 – 35490 | 10% | None | 10% |
| Hoover | 35216, 35226, 35236, 35242, 35244 | 9% | None | 9% |
| Dothan | 36301 – 36305 | 9% | None | 9% |
| Decatur | 35601 – 35699 | 9% | None | 9% |
| Auburn | 36830 – 36832, 36849 | 10% | None | 10% |
| Madison | 35756 – 35758 | 9% | None | 9% |
Calculating Alabama Sales Tax
Once you’ve determined the applicable sales tax rate for your customer’s location in Alabama (as covered in one of the sections above), you can proceed to calculate the sales tax amount for each transaction. Here’s a breakdown of the process:
How to calculate Alabama sales tax
Alabama’s sales tax can vary depending on your location because it has a combined state and local rate. Here’s how to calculate it:
- Find your local sales tax rate: Alabama’s state sales tax rate is 4%. However, many localities add additional taxes. You can find your specific rate by using AtomicTax Sales Tax Calculator.
- Add the state and local rates: Once you have both rates, simply add them together. For example, if your local rate is 5%, your combined sales tax rate would be 4% (state) + 5% (local) = 9%.
- Multiply the sales tax by the pre-tax price: Take the combined sales tax rate you just calculated and multiply it by the original price of the item before tax. For instance, if your combined rate is 9% and your item costs $20, the sales tax amount would be 9% x $20 = $1.80.
- Add the sales tax to the pre-tax price: Finally, add the sales tax you just calculated to the original price to get the final price you’ll pay. In this example, that would be $20 (original price) + $1.80 (sales tax) = $21.80.
Examples of how to calculate sales tax in Alabama for different scenarios
- You buy a book for $15 at a bookstore in Montgomery, Alabama. The sales tax rate for Montgomery is 10%, which consists of the state rate of 4%, the county rate of 2.5%, and the city rate of 3.5%. The sales tax amount is $15 x 0.10 = $1.50. The total price of the purchase is $15 + $1.50 = $16.50.
- You buy a laptop for $1,000 online from a seller in Huntsville, Alabama, and have it shipped to your home in Mobile, Alabama. The sales tax rate for Mobile is 9%, which consists of the state rate of 4%, the county rate of 1.5%, and the city rate of 3.5%. The sales tax amount is $1,000 x 0.09 = $90. The total price of the purchase is $1,000 + $90 = $1,090.
- You buy a pair of shoes for $50 at a mall in Hoover, Alabama. The sales tax rate for Hoover is 9.5%, which consists of the state rate of 4%, the county rate of 1%, and the city rate of 4.5%. The sales tax amount is $50 x 0.095 = $4.75. The total price of the purchase is $50 + $4.75 = $54.75.
How to calculate Alabama sales tax liability
Here’s the breakdown of how to calculate the sales tax liability in Alabama:
- The total amount of your taxable sales in Alabama for the reporting period
- The sales tax rate for each location where you made sales in Alabama
- The amount of sales tax you collected from your customers in Alabama
- The amount of sales tax you paid to your suppliers or vendors in Alabama
- The amount of any deductions or exemptions that apply to your business in Alabama
The basic formula for calculating your sales tax liability in Alabama is:
Sales tax liability = (Taxable sales x Sales tax rate) – (Sales tax collected + Sales tax paid + Deductions + Exemptions)
However, this formula may vary depending on whether you are participating in the Simplified Sellers Use Tax (SSUT) program or not. The SSUT program allows eligible online sellers to collect and remit a flat 8% sales tax rate on all sales made into Alabama instead of tracking and reporting the varying local sales tax rates.
If you are in the SSUT program, you do not need to report your sales by location, and you do not qualify for most deductions or exemptions.
Therefore, the formula for calculating your sales tax liability in the SSUT program is:
Sales tax liability = (Taxable sales x 0.08) – Sales tax collected
Alabama sales tax lookup and calculator
To determine the exact sales tax you’ll pay, you can use AtomicTax sales tax calculator and look up the combined rate for your specific city or county.
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Paying and Filing Sales Tax in Alabama
Having covered sales tax calculation and reporting, let’s delve into the process of paying and filing your Alabama sales tax collections:
How to file, pay and remit sales tax in Alabama
You can file and pay your Alabama sales tax either online or by email. For online sellers, Alabama law mandates that they file and pay sales tax electronically. The payment method is based on your remittance amount. If you’re paying more than $750 in a single transaction, ADOR necessitates using electronic funds transfer (EFT) through My Alabama Taxes ONE SPOT, a dedicated portal for larger payments.
Here’s a detailed breakdown of how to file and pay your Alabama sales tax
The filing and payment methods and frequency depend on whether you are participating in the SSUT program or not.
How to file and pay sales tax through the MAT portal if you are participating in the SSUT program.
If you are participating in the SSUT program, you have to file and pay sales tax online through the My Alabama Taxes (MAT) portal. You cannot file or pay by mail. You have to file and pay monthly, regardless of the amount of tax you collect.
To file and pay sales tax through the MAT portal, you need to follow these steps:
- Log in to your MAT account using your SSUT account number and password
- Click on the “File Return” link under the “I Want To” section
- Select the filing period and click “Next.”
- Enter the total amount of sales made into Alabama and click “Next.”
- Review the summary of the tax due and click “Submit.”
- Select the payment method (ACH debit or credit card) and enter the payment information
- Confirm the payment and click “Submit.”
- Print or save the confirmation page for your records
How to file and pay sales tax online If you are not participating in the SSUT program
If you are not participating in the SSUT program, you can file and pay sales tax either online or by mail.
The filing and payment frequency can be monthly, quarterly, or annually, depending on the amount of tax you collect. The due date is the 20th day of the month following the reporting period.
For example, the sales tax return and payment for the month of January are due by February 20th.
To file and pay sales tax online, you need to follow these steps
- Log in to your MAT account using your sales tax account number and password
- Click on the “File Return” link under the “I Want To” section
- Select the filing period and click “Next”
- Enter the total amount of sales and the taxable amount of sales for each jurisdiction where you have nexus and click “Next”
- Review the summary of the tax due and click “Submit”
- Select the payment method (ACH debit or credit card) and enter the payment information
- Confirm the payment and click “Submit”
- Print or save the confirmation page for your records
How to file and pay alabama sales tax by mail
To file and pay sales tax by mail, you need to follow these steps:
- Download and print the sales tax return form (Form 2100 for monthly filers, Form 2105 for quarterly filers, or Form 2115 for annual filers) from the Alabama Department of Revenue’s website
- Fill out the form with the required information, such as your sales tax account number, business name, address, filing period, total sales, taxable sales, tax rates, and tax due for each jurisdiction where you have nexus
- Sign and date the form
- Write a check or money order payable to the Alabama Department of Revenue for the amount of tax due
- Mail the form and the payment to the following address: Alabama Department of Revenue Sales and Use Tax Division P.O. Box 327790 Montgomery, AL 36132-7790
What is the Alabama sales tax fee?
The Alabama sales tax fee is 5% of the first $100 of sales tax due and 2% of the amount over $100, up to a maximum of $400 per month. For example, if you collect $1,000 of sales tax in a month, you can deduct $25 as the sales tax fee and pay $975 to the ADOR. The Alabama sales tax fee, also known as the discount, is a percentage of the sales tax that you collect that you can keep as a reward for filing and paying your sales tax on time.
What is Alabama sales tax return due date
Alabama sales tax returns and payments are generally due on the 20th day of the month following the month in which you collected the tax. This applies to most businesses selling taxable goods or services in the state. For instance, if you collect sales tax in March, the return and payment would be due by April 20th. Keep in mind that electronic payment information needs to be submitted by 4:00 pm Central Time on the due date to be considered timely.
What is Alabama sales tax filing frequency
By default, Alabama sales tax is filed monthly, with returns and payments due on or before the 20th day of the following month. However, businesses can qualify for less frequent filing options, such as:
- Quarterly filing: If your sales tax liability for the prior year was less than $2,400, you can request permission to file quarterly (April 20th, July 20th, October 20th, and January 20th).
- Annual filing: Businesses with a prior year’s sales tax liability under $600 and sales activity limited to one 30-day period can apply for annual filing.
Alabama Sales and Use Tax Exemption Certification
Understanding sales tax exemptions in Alabama can help you avoid collecting unnecessary tax from your customers. Here’s a breakdown of key points to know:
What is Alabama sales tax exemption
Alabama sales tax exemption is a legal provision that allows certain entities or transactions to be free from the state sales tax. Alabama offers sales tax exemptions on certain goods and to specific customers. Here’s a breakdown:
Exempt Items: Common tax-exempt items include prescription drugs, non-prepared food items (groceries), agricultural supplies (fertilizer, seeds, animal feed), and pollution control equipment.
Exempt Customers: Qualifying non-profit organizations, government agencies, and schools (not including daycare) are typically exempt from sales tax. Businesses purchasing goods for resale can also get an exemption with a valid resale certificate.
What is Alabama sales tax exemption certificate
An Alabama sales tax exemption certificate is a document that proves that a person, firm, or corporation is eligible for a sales tax exemption. The certificate must be presented to the seller at the time of purchase, and the seller must keep a copy of the certificate for at least three years.
There are two types of sales tax exemption certificates in Alabama: one for wholesalers, manufacturers, and other product-based exemptions (Form ST: EX-A1), and one for statutorily exempt entities (Form ST: EX-A1-SE). The forms can be found on the Alabama Department of Revenue website, and must be completed and sent to the appropriate office for approval.
How to register and apply for Alabama sales tax exemptions
To register and apply for Alabama sales tax exemptions, you must follow these steps:
- Step 1: Check Eligibility: Verify if your organization qualifies for exemption based on type or activity (refer to Alabama Sales Tax Rules for details).
- Step 2: Download Application: Get the application form (ST:EX-A1 or ST:EX-A1-SE) from the Alabama Department of Revenue website.
- Step 3: Complete & Submit: Fill out the form with business info, exemption reason, and supporting documents. Mail it to the appropriate office, which could be;
- Product-based exemption: Taxpayer Service Center in your county.
- Statutory exemption: stexemptionunit@revenue.alabama.gov or by mail.
- Step 4: Await Approval: The department will review your application and issue a certificate if approved.
How to renew my alabama sales tax exemption certificate
Alabama sales tax exemption certificates typically require annual renewal. There are two renewal methods depending on if you have a recent application on file:
- New Application: If your existing certificate is expired or you haven’t applied before, submit a new application through the Alabama Department of Revenue.
- Renewal Request (Less Than 3 Years Old): If you have a certificate on file with the department that’s less than three years old and the information remains current, you can request a renewal by email. Send your request to stexemptionunit@revenue.alabama.gov.
Alabama sales tax exemption certificate verification
Here are a couple of options to verify Alabama sales tax exemption certificate
- Contact the seller directly: Many sellers have established procedures for verifying exemption certificates. They may request additional information or ask you to confirm details through the Alabama Department of Revenue’s My Alabama Taxes (MAT) portal.
- Reach out to the Alabama Department of Revenue: The department can verify a certificate’s validity by phone at (334) 242-1490 or by mail. You’ll need to provide the certificate number and expiration date for them to complete the verification.
What services are exempt from sales tax in Alabama?
Services that are exempted in Alabama fall into two categories; services directly tied to the good itself and services rendered to exempt organizations.
Examples of exempt services include labor charges for installing or repairing tangible personal property, provided they are separately billed. Additionally, sales to government entities, qualified non-profits, and certain educational institutions are exempt from sales tax, even for tangible goods. This means many services provided to these organizations would also be exempt.
Visit this resource for a complete list of exemptions in Alabama
Is SaaS taxable in Alabama
In Alabama, SaaS is considered a taxable service, as it involves the creation or manufacturing of a product. SaaS is subject to the state sales or use tax as well as the local sales or use tax, unless a specific exemption applies.
The tax rate for alabama saas sales tax is the same as the tax rate for the sale of tangible personal property in the location where the sale is sourced.
What is Alabama Sales and Use Tax Resale Certificate?
A resale certificate is a specific type of exemption certificate used in Texas for sales tax. Let’s break down the details and how they differ from general exemption certificates:
What is Alabama sales tax resale certificate
A resale certificate is a document that allows a business to purchase goods or services from another business without paying state sales tax. The resale certificate is the seller’s evidence that the buyer intends to resell the goods or services and not use them for their own consumption.
Resale certificates are also known as sales tax permits, reseller numbers, reseller permits, seller’s permits, sales tax exemption certificates, or reseller’s licenses.
Alabama is one of the few states that do not have a separate resale certificate. Instead, an Alabama business that wants to buy goods or services for resale will provide a copy of their Alabama Sales Tax License to the seller.
The Alabama Sales Tax License is the same document that a business needs to register for sales tax in Alabama. The license shows that the business is authorized to collect and remit sales tax to the state, and also to purchase goods or services for resale without paying sales tax.
How to get Alabama sales tax resale certificate
Alabama’s approach to resale certificates differs from some other states. Instead of issuing a separate resale certificate, Alabama uses your existing sales tax permit (also known as a seller’s permit) to verify your tax-exempt purchases for resale. When you register for your sales tax permit, you’re automatically authorized to buy qualifying goods without paying sales tax upfront.
However, it’s important to note that while most vendors will accept your sales tax permit as proof of exemption, Alabama law doesn’t require them to do so. If a vendor charges you sales tax, you can claim a credit when you file your sales tax return.
- Register online via my Alabama taxes (MAT) portal
- Fill out the paper application via mail
How much is a resale license in Alabama and how long it is valid for
The application process is free and the license is valid for one year.
Surprisingly, there is no charge to obtain a resale license in Alabama. Unlike many other states, there’s no application fee or security deposit required.
Additionally, a resale certificate itself isn’t actually a license issued by the state. Instead, it’s a document you complete and provide to your suppliers to exempt you from paying sales tax on purchases you intend to resell. To obtain this benefit, you’ll still need to register for a sales tax permit, which is also free in Alabama.
What is Alabama resale certificate renewal process fee
Alabama does not charge a fee to renew a sales tax license. Since November 1, 2020, all sales tax licenses must be renewed annually online through the My Alabama Taxes (MAT) portal by December 31st. The renewal process is free
How do I verify my sales tax license in Alabama?
Here’s how to verify a resale certificate in Alabama:
- Log in to your My Alabama Taxes account.
- Navigate to the section for verifying resale certificates. This might be labeled “Verify a Resale Certificate” or similar wording.
- Choose the type of identification your customer provided:
- Federal Employer Identification Number (FEIN)
- Individual Taxpayer Identification Number (ITIN)
- Social Security Number (SSN) – Note: Only use this option if your customer has explicitly authorized you to use their SSN for verification.
- Enter the customer’s corresponding ID number along with their Exempt Sales Account Number.
The MAT system will then indicate whether the resale certificate is valid. This helps you determine if you should collect sales tax on the transaction.
How much is Alabama sales tax license renewal fee
The renewal fee is $10 for the SSUT program and $5 for the regular sales tax account
How do I renew my Alabama sales tax license
Alabama sales tax licenses expire annually and require renewal by December 31st to avoid penalties.
Here’s how to renew your Alabama sales tax license:
- My Alabama Taxes (MAT) Portal: Renewals are done online through the Alabama Department of Revenue’s My Alabama Taxes (MAT) portal. You’ll need to log in to your existing MAT account.
- Renew Tax Account License: Within MAT, navigate to the “Tasks” section and click on the “Renew Tax Account License” link.
- Verification and Completion: The renewal process involves verifying your business information and confirming you’re still operating under the same business entity type. Once completed, you can access and print your renewed license within your MAT account.
Remember, there’s no fee to renew your Alabama sales tax license
Alabama Sales Tax Discounts & Holiday
While navigating TAlabama sales tax compliance can seem complex, there is a potential perk for e-commerce businesses: the timely filing discount.
What is Alabama sales tax holiday
A sales tax holiday is a period of time when certain items are exempt from the state sales tax, usually for a specific purpose or occasion. Alabama currently offers two annual sales tax holidays:
Back-to-School Sales Tax Holiday
This holiday runs for three days, starting at 12:01 am on the third Friday of July and ending at midnight the following Sunday. During this period, shoppers can purchase certain school supplies, computers, clothing, and books exempt from the state’s 4% sales tax. Some localities may also choose to exempt local sales taxes during this time.
Severe Weather Preparedness Sales Tax Holiday
This holiday takes place over the last full weekend in February, also lasting from 12:01 am on Friday to midnight on Sunday. It allows for tax-free purchases of certain emergency preparedness items, helping residents stock up on essential supplies for storms and other severe weather events.
There’s also a proposed bill, House Bill 257, that could introduce a new “Alabama Adventure Awaits” sales tax holiday starting in 2025. This would create two additional tax-free weekends focused on outdoor recreation equipment.
To participate in the sales tax holidays, a county or municipality must adopt a resolution or ordinance at least 30 days prior to the weekend of the event and notify the Alabama Department of Revenue. The department maintains a list of participating localities on its website
Alabama sales tax interest and penalty
Unfortunately, late filing or late payments of your sales tax liability in Alabama will result in penalties and interest charges. The interest rate is adjusted quarterly and based on the prime rate.
What is the penalty for paying Alabama state sales taxes late?
Missing the deadline for filing an Alabama state sales tax return can result in a steeper penalty of either 10% of the total tax due or $50, whichever is greater. There’s no minimum tax threshold to avoid this penalty, so even if you owe no sales tax for a period, a late filing incurs a minimum $50 penalty. Additionally, late payments are subject to a 10% penalty on the amount owed, along with interest charges at the current rate. To avoid these penalties, ensure you file your sales tax return and submit payment by the 20th day of the month following the reporting period.
What is Alabama sales tax token
A sales tax token is a small coin that was issued by some states in the US during the 1930s and 1940s to facilitate the collection of sales tax on small purchases. Alabama issued sales tax tokens in two denominations: 1 mill and 5 mills, which were equivalent to 1/10 and 1/2 of a cent, respectively.
These tokens could be used to pay sales tax on purchases of 10 cents or less or to receive change from a sales tax payment.
Alabama discontinued the use of sales tax tokens in 1948, and they are now considered collectible items by numismatists.
What is Alabama sales tax id
Alabama sales tax ID is a number that identifies a business as a registered seller of taxable goods or services in Alabama. A business must obtain a sales tax id from the Alabama Department of Revenue before making any sales in the state.
A sales tax ID is also required for collecting and remitting other taxes, such as rental tax, lodgings tax, sellers use tax, consumer use tax, and utility tax.
What is Alabama sales tax number
A sales tax number is another term for a sales tax ID, which is a number that identifies a business as a registered seller of taxable goods or services in Alabama.
Additionally, a business may have nexus in Alabama if it is organized or commercially domiciled in the state, or if it engages in activities that go beyond the mere solicitation of sales that are protected by Public Law 86-27229.
Amazon sales tax alabama (explained)
Alabama sales tax can be a bit complex, but here’s a breakdown for online shoppers on Amazon:
Amazon collects the tax for you: In most cases, Amazon acts as a marketplace facilitator and handles sales tax collection and remittance to Alabama. This applies to most Amazon-fulfilled orders and many third-party seller orders.
The tax rate varies by location: Alabama has a base state sales tax of 4%, but many localities add on additional local taxes. The final sales tax you pay depends on the specific zip code where your order is delivered.
Simplified Sellers Use Tax (SSUT): Alabama offers a simplified option for certain sellers. They can collect a flat 8% sales tax on all Alabama sales instead of figuring out the specific local rates. Amazon and its affiliates use this method, so you’ll likely see this 8% tax reflected in most purchases.
In summary, when you buy on Amazon and have it shipped to Alabama, Amazon usually takes care of the sales tax for you. The exact rate will depend on your delivery location.
Conclusion
We hope this blog post has helped you understand everything you need to know about Alabama sales tax, from knowing who needs to collect sales tax in the state to understanding how to register, collect, file, and remit the sales tax collected and also knowing when to observe a tax holiday in the state.
To help you comply with Alabama sales tax laws, here is a checklist of the steps that you should follow: