If you are a small business owner who sells online to customers in the US or have an e-commerce store that sells to customers in the US, you may wonder how to comply with sales tax laws in Birmingham, Alabama.
Read: What is sales tax and how it works
Sales tax is a tax imposed on the sale of tangible personal property and certain services, and it is collected by the seller from the buyer at the point of sale. Sales tax rates and rules vary by state, county, and city, and they can be complex and confusing for online sellers.
In this blog post, we will explain the basics of sales tax in Birmingham, Alabama, and how it affects your online business. We will cover the following topics:
- The current sales tax rate in Birmingham, Alabama, and how it is composed of state, county, and city rates.
- The special sales tax rates that apply to certain items or transactions in Birmingham, Alabama, such as food and beverages, admissions to places of amusement and entertainment, etc.
- The sales tax nexus rules determine whether a business has to collect and remit sales tax in Birmingham, Alabama, and how they are affected by the South Dakota v. Wayfair, Inc. Supreme Court decision and the Alabama Simplified Sellers Use Tax (SSUT) program.
- The sales tax filing and payment requirements and deadlines for businesses in Birmingham, Alabama, and the penalties and interest for late or non-compliance.
- The sales tax exemptions and refunds that are available for certain types of buyers or sellers in Birmingham, Alabama, such as non-profit organizations, government entities, resellers, etc.
By the end of this blog post, you will have a better understanding of sales tax compliance in Birmingham, Alabama, and how to avoid common pitfalls and challenges. Let’s get started!
What is the sales tax rate in Birmingham, Alabama
The current sales tax rate in Birmingham, Alabama, is 10%. This rate is composed of the following components:
- The state sales tax rate of 4%, which applies to all sales of tangible personal property and certain services in Alabama.
- The county sales tax rate of 2%, which applies to all sales of tangible personal property and certain services in Jefferson County, where Birmingham is located.
- The city sales tax rate of 4%, which applies to all sales of tangible personal property and certain services in Birmingham.
The sales tax rate is applied to the total amount of the sale, including any shipping and handling charges, unless the seller is separately stating the charges on the invoice or receipt.
What are the special sales tax rates in Birmingham, Alabama
In addition to the general sales tax rate of 10%, there are some special sales tax rates that apply to certain items or transactions in Birmingham, Alabama. These include:
- A reduced sales tax rate of 1% for food and beverages sold by grocery stores, convenience stores, and similar establishments. This rate applies to the state, county, and city portions of the sales tax.
- An additional sales tax rate of 2.5% for admissions to places of amusement and entertainment, such as theaters, concerts, sporting events, etc. This rate applies only to the city portion of the sales tax, and it is added to the general sales tax rate of 10%, resulting in a total sales tax rate of 12.5% for admissions.
These special sales tax rates are subject to change, and they may not apply to all types of food and beverages, or all types of admissions.
Birmingham tax jurisdiction breakdown for 2024
The sales tax rate in Birmingham, Alabama is composed of the state, county, and city portions of the sales tax. The sales tax rate is applied to the total amount of the sale, including any shipping and handling charges, unless the seller is separately stating the charges on the invoice or receipt. Here is the table that shows the tax jurisdiction breakdown for 2024:
| Tax Jurisdiction | Sales Tax Rate |
|---|---|
| State | 4% |
| County | 2% |
| City | 4% |
| Total | 10% |
How to establish (or determine if you have) sales tax nexus in Birmingham, Alabama
Sales tax nexus can be established by various factors, such as having a physical presence, an economic presence, or a contractual relationship with a third party in the jurisdiction.
In Birmingham, Alabama, you have a sales tax nexus if you have any of the following:
- A physical presence, such as an office, warehouse, store, or employee in Birmingham, Alabama.
- An economic presence, such as selling more than $250,000 of tangible personal property or certain services to customers in Alabama in the previous calendar year,.
- A contractual relationship with a third party, such as an affiliate, agent, or marketplace facilitator, who performs activities on your behalf in Birmingham, Alabama, such as soliciting sales, storing inventory, or fulfilling orders.
The Sales tax nexus rules in Birmingham, Alabama vs the South Dakota v. Wayfair, Inc.
The sales tax nexus rules in Birmingham, Alabama, are affected by the South Dakota v. Wayfair, Inc. Supreme Court decision, which was issued in June 2018. This decision overturned the previous physical presence standard for sales tax nexus and allowed states to impose sales tax obligations on remote sellers based on their economic presence or sales volume in the state.
As a result of this decision, Alabama enacted the Simplified Sellers Use Tax (SSUT) program, which is a voluntary program that allows remote sellers to collect and remit a flat sales tax rate of 8% on all sales to customers in Alabama, regardless of the location of the customer or the seller.
Read: What is SSUT program and how does it work
Read: How to register and apply for Alabama sales tax permit or license
Read: How to collect, file and pay sales tax in Alabama
What is Birmingham economic sales threshold?
The economic sales threshold is the amount of sales that a remote seller must have in a state, county, or city before they are required to collect and remit sales tax in that jurisdiction.
In Birmingham, Alabama, the economic sales threshold is $250,000 of retail sales of tangible personal property delivered into the state in the previous calendar year. This means that if you are a remote seller who sells more than $250,000 of goods to customers in Alabama in a year, you must register for a sales tax permit, collect and remit the sales tax, and file and pay the sales tax returns in Birmingham, Alabama.
The economic sales threshold applies to the state, county, and city portions of the sales tax. However, if you are a remote seller who sells through a registered marketplace facilitator, such as Amazon or eBay, you do not have to collect and remit the sales tax yourself, as the marketplace facilitator will do it on your behalf. In that case, marketplace sales are excluded from the economic sales threshold for individual sellers.
What is Birmingham transaction threshold?
The transaction threshold is the number of transactions that a remote seller must have in a state, county, or city before they are required to collect and remit sales tax in that jurisdiction. The transaction threshold is another way of measuring the seller’s economic presence or activity in the state.
In Birmingham, Alabama, there is no transaction threshold for remote sellers. This means that the number of transactions that you have with customers in Alabama does not matter for sales tax purposes. You only have to collect and remit the sales tax if you exceed the economic sales threshold of $250,000 of retail sales of tangible personal property delivered into the state in the previous calendar year.
Alabama is one of the states that has eliminated the transaction threshold for remote sellers, following the trend of simplifying sales tax compliance for online sellers. Other states that have removed the transaction threshold include California, Colorado, Iowa, Louisiana, Maine, Massachusetts, North Dakota, South Dakota, Washington, and Wisconsin
ZIP codes associated with Birmingham and their respective sales tax rate, county, special, and combined sales tax rate
| ZIP Code | Sales Tax Rate | County Sales Tax Rate | Special Sales Tax Rate | Combined Sales Tax Rate |
|---|---|---|---|---|
| 35201 | 10% | 2% | None | 10% |
| 35290 | 10% | 2% | None | 10% |
| 35202 | 10% | 2% | None | 10% |
| 35203 | 10% | 2% | None | 10% |
| 35204 | 10% | 2% | None | 10% |
| 35205 | 10% | 2% | None | 10% |
| 35206 | 10% | 2% | None | 10% |
| 35207 | 10% | 2% | None | 10% |
| 35208 | 10% | 2% | None | 10% |
| 35209 | 10% | 2% | None | 10% |
| 35210 | 10% | 2% | None | 10% |
| 35211 | 10% | 2% | None | 10% |
| 35212 | 10% | 2% | None | 10% |
| 35213 | 10% | 2% | None | 10% |
| 35214 | 10% | 2% | None | 10% |
| 35215 | 10% | 2% | None | 10% |
| 35216 | 9% | 1% | None | 9% |
| 35217 | 10% | 2% | None | 10% |
| 35218 | 10% | 2% | None | 10% |
| 35219 | 10% | 2% | None | 10% |
| 35220 | 10% | 2% | None | 10% |
| 35221 | 10% | 2% | None | 10% |
| 35222 | 10% | 2% | None | 10% |
| 35223 | 10% | 2% | None | 10% |
| 35224 | 10% | 2% | None | 10% |
| 35226 | 9% | 1% | None | 9% |
| 35226 | 9% | 1% | None | 9% |
| 35228 | 10% | 2% | None | 10% |
| 35229 | 10% | 2% | None | 10% |
| 35231 | 10% | 2% | None | 10% |
| 35232 | 10% | 2% | None | 10% |
| 35233 | 10% | 2% | None | 10% |
| 35234 | 10% | 2% | None | 10% |
| 35235 | 10% | 2% | None | 10% |
| 35236 | 9% | 1% | None | 9% |
| 35237 | 10% | 2% | None | 10% |
| 35238 | 10% | 2% | None | 10% |
| 35242 | 10% | 2% | None | 10% |
| 35243 | 10% | 2% | None | 10% |
| 35244 | 9% | 1% | None | 9% |
| 35246 | 10% | 2% | None | 10% |
| 35249 | 10% | 2% | None | 10% |
| 35253 | 10% | 2% | None | 10% |
| 35254 | 10% | 2% | None | 10% |
| 35255 | 10% | 2% | None | 10% |
| 35259 | 10% | 2% | None | 10% |
| 35260 | 10% | 2% | None | 10% |
| 35261 | 10% | 2% | None | 10% |
| 35266 | 10% | 2% | None | 10% |
| 35282 | 10% | 2% | None | 10% |
| 35283 | 10% | 2% | None | 10% |
| 35285 | 10% | 2% | None | 10% |
| 35287 | 10% | 2% | None | 10% |
| 35288 | 10% | 2% | None | 10% |
| 35290 | 10% | 2% | None | 10% |
| 35291 | 10% | 2% | None | 10% |
Birmingham, Alabama sales tax returns filing due dates
You must file and pay your sales tax returns by the 20th day of the month following the reporting period, unless the due date falls on a weekend or a holiday, in which case the due date is the next business day.
Birmingham, Alabama, sales tax returns reporting periods and thresholds
The reporting period can be monthly, quarterly, or annually, depending on the amount of sales tax that you collect in Alabama.
Birmingham, Alabama, sales tax returns reporting periods and thresholds
| Reporting Period | Threshold |
|---|---|
| Monthly | If you collect more than $200 of sales tax in Alabama in the previous calendar year, or in any month during the current calendar year, you must file and pay your sales tax returns monthly. |
| Quarterly | If you collect less than $200 of sales tax in Alabama in each month of the previous calendar year, and in each month of the current calendar year, you can file and pay your sales tax returns quarterly. The quarterly periods are January-March, April-June, July-September, and October-December. |
| Annually | If you collect less than $50 of sales tax in Alabama in each month of the previous calendar year, and in each month of the current calendar year, you can file and pay your sales tax returns annually. The annual period is January-December. |
If you file and pay your sales tax returns electronically, you may be eligible for a discount of 1.5% of the sales tax due, up to a maximum of $400 per month. However, if you file and pay your sales tax returns late or not at all, you may be subject to penalties and interest.
Alabama Sales Tax Penalty and Interest Rates
| Penalty or Interest | Rate |
|---|---|
| Penalty for late filing or payment | 10% of the sales tax due, or $50, whichever is greater |
| Penalty for failure to file or pay | 25% of the sales tax due, or $50, whichever is greater |
| Interest for late payment | 1% per month, or fraction thereof, from the due date until the date of payment |
The sales tax exemptions and refunds in Birmingham, Alabama
In some cases, you may not have to collect or pay sales tax in Birmingham, Alabama, if you or your customers qualify for certain sales tax exemptions or refunds. These include:
- Exemptions for certain types of buyers or sellers, such as non-profit organizations, government entities, resellers, manufacturers, farmers, etc. To claim these exemptions, you or your customers must provide a valid exemption certificate or other documentation to prove your eligibility.
- Exemptions for certain types of products or services, such as prescription drugs, medical devices, textbooks, newspapers, magazines, etc. To claim these exemptions, you must keep records of the items sold and the sales tax collected or not collected.
- Refunds for sales tax paid in error, or for sales tax paid on items that are returned, exchanged, or cancelled. To claim these refunds, you must file a refund claim form with the Alabama Department of Revenue, and provide supporting documents such as invoices, receipts, credit memos, etc.
How to comply with sales tax laws in Birmingham, Alabama: a step-by-step guide
Here is a step-by-step guide on how to do that:
- Step 1: Determine if you have sales tax nexus in Birmingham, Alabama, by checking the physical and economic presence criteria and the impact of the South Dakota v. Wayfair, Inc. Supreme Court decision and the Alabama Simplified Sellers Use Tax (SSUT) program. We have discussed these factors in the previous section, so you can refer to that for more details.
- Step 2: Register for a sales tax permit in Birmingham, Alabama, by completing the online or paper application form and paying the registration fee if applicable. You can register online through the [My Alabama Taxes (MAT)] portal or by completing and mailing the [Combined Registration/Application Form]. There is no fee for registering for a sales tax permit in Alabama.
- Step 3: Calculate the sales tax rate and amount for each sale in Birmingham, Alabama, by applying the combined state, county, and city rate of 10% and the special rates for food and beverages, admissions to places of amusement and entertainment, etc. You can use the AtomicTax Sales Tax Calculator tool to help you with this calculation.
- Step 4: Collect and remit the sales tax to the Alabama Department of Revenue by filing the monthly, quarterly, or annual sales tax return and paying the sales tax due by the specified deadline. You can file and pay your sales tax returns online through AtomicTax autofiling portal or by using the paper forms provided by the department. You must file and pay your sales tax returns by the 20th day of the month following the reporting period, unless the due date falls on a weekend or a holiday, in which case the due date is the next business day.
- Step 5: Keep track of the sales tax records and documents, such as invoices, receipts, exemption certificates, etc., and be prepared for audits or disputes. You must keep your sales tax records and documents for at least three years from the date of filing or payment, or longer if required by law. You must also make your sales tax records and documents available for inspection by the Alabama Department of Revenue or any authorized agent, upon request.
You may be subject to audits or disputes by the Alabama Department of Revenue or by your customers, if there are any errors or discrepancies in your sales tax collection or remittance. You should cooperate with the auditors or the disputing parties, and provide any evidence or explanation that can support your position. You should also be aware of your rights and responsibilities as a taxpayer, and seek professional advice if necessary.
Conclusion
Sales tax compliance in Birmingham, Alabama can be challenging and confusing for online sellers, but it is also important and beneficial. By following the steps and processes that we have outlined in this blog post, you can avoid common pitfalls and challenges, and ensure that you are collecting and remitting the correct amount of sales tax to the Alabama Department of Revenue. You can also take advantage of the sales tax exemptions and refunds that are available for certain types of buyers or sellers, and save money and time.
We hope that this blog post has been helpful and informative for you. If you have any questions or comments, please feel free to leave them below.