Alabama Sales Tax Guide for Businesses
- Sales Tax Rate
- Local Taxes
- Department of Revenue
- Tax Line
We wrote this guide for online sellers who want to know if they even have to bother with sales tax in Alabama, and if so, how best to tackle the sales tax situation in the Yellowhammer State.
After reading this, you’ll know:
- Do you or don’t you need to collect Alabama sales tax?
- Which customers do you collect from?
- How much do you collect?
- What do you do with all the sales tax you’ve collected?
- Way more than you probably ever wanted to know about Alabama sales tax!
Do you have sales tax nexus in Alabama?
Good news! You only have to begin thinking about Alabama sales tax if you have sales tax nexus in Alabama.
“Sales tax nexus” is just a fancy way of saying “significant presence” in a state.
Alabama considers a seller to have sales tax nexus in the state if you have any of the following in the state:
- An office or place of business such as a retail store
- A warehouse or inventory stored in the state
- Regular presence of traveling salespeople or other agents
- Remote entity nexus
You can click here to read exactly what the Alabama Department of Revenue (Alabama’s taxing authority) has to say about what constitutes sales tax nexus in Alabama.
Is what you’re selling even taxable?
You’ve probably read this far because you realized you have sales tax nexus in Alabama. Your next step is to determine if what you’re selling is even taxable.
Services in Alabama are generally not taxable. So if you’re a freelance writer or a plumber, you’re in luck and you don’t have to worry about sales tax. But watch out – if the service you provide includes creating or manufacturing a product, you may have to deal with the sales tax on products.
Tangible products are taxable in Alabama , with a few exceptions for items used in agriculture or industry.
So if you sell toys, then charge sales tax to your Alabama customers.
But if you’re a graphic designer, don’t charge sales tax to your Alabama customers.
If you have sales tax nexus in Alabama and your products are taxable, your next step is to register for a sales tax permit.
How to Register for a Sales Tax Permit in Alabama
Sellers with sales tax nexus in Alabama must apply for an Alabama sales tax permit.
Don’t skip this step! Many states consider it unlawful to collect sales tax in their name without a permit. Go here for more on how to register for a sales tax permit in Alabama.
How to Collect Sales Tax in Alabama
So you’ve determined that you have sales tax nexus in Alabama and what you’re selling is taxable. And you’re all set and registered for your Alabama sales tax permit.
The next step is to determine how much sales tax to collect.
Alabama is an destination-based sales tax state. This means that if you are based in Alabama and sell to a buyer in Alabama you should always collect sales tax at the rate of that buyer’s ship to location.
If you are not based in Alabama, but have sales tax nexus in Alabama you are considered an Alabama “remote seller.” This is where things get tricker, since remote sellers are required to collect “use tax,” which can vary slightly from Alabama sales tax rates. If you’re running into this problem as an online seller, no worries! Taxjar SmartCalcs will make sure you collect the right rate every time. (And if you sell on a platform like Amazon, their sales tax engine ensures you collect the right rate, too!)
Should you collect sales tax on shipping charges in Alabama?
As long as you separately state the shipping charges on your bill to your customer, you do not have to charge sales tax on shipping in Alabama.
But if you include shipping in the price of the product you sell the customer, then shipping is considered part of the taxable transaction and Alabama declares that you must collect sales tax on shipping.
Read a full explanation of sales tax on shipping in Alabama here.
Caption: The Top 20 Most Populous Cities in Alabama and their Sales Tax Rates
When are Alabama Sales Tax Returns Due?
Alabama sales tax returns are always due the 20th of the month following the reporting period. You’ll be assigned a sales tax filing frequency when you apply for your Alabama sales tax permit.
Sales tax in Alabama is due monthly unless you have low sales tax liability and request to file and pay either quarterly or annually.
You may elect to file and pay Alabama sales tax quarterly if the total sales tax for which you are liable averaged less than $200/month in the previous calendar year. You must contact the Alabama Department of Revenue no later than February 20th of each calendar year should you decide to switch to quarterly.
You may elect to pay Alabama sales tax annually if the total sales tax for which you were liable in the previous calendar year was $10 or less.
To break it down:
2016 Alabama Monthly Sales Tax Filing Due Dates
|Taxable Period||Due Date|
|January||February 22, 2016*|
|February||March 21, 2016*|
|March||April 20, 2016|
|April||May 20, 2016|
|May||June 20, 2016|
|June||July 20, 2016|
|July||August 22, 2016*|
|August||September 20, 2016|
|September||October 20, 2016|
|October||November 21, 2016*|
|November||December 20, 2016|
|December||January 20, 2017|
*indicates a due date pushed back due to a weekend or holiday
2016 Alabama Quarterly Sales Tax Filing Due Dates
|Taxable Period||Due Date|
|Q1 (Jan - Mar)||April 20, 2016|
|Q2 (Apr - Jun)||July 20, 2016|
|Q3 (Jul - Sep)||October 20, 2016|
|Q4 (Oct - Dec)||January 20, 2017|
2016 Alabama Annual Sales Tax Filing Due Dates
|Taxable Period||Due Date|
|Year 2016||January 20, 2017|
How to File Sales Tax in Alabama
When it comes time to file sales tax in Alabama you must do three things:
- Calculate how much sales tax you owe
- File a sales tax return
- Make a payment
We’ll walk you through these steps.
How to Calculate How Much Sales Tax You Owe in Alabama
Calculating how much sales tax you should remit to the state of Alabama is easy with TaxJar’s Alabama sales tax report.
All you do is connect the channels through which you sell – including Amazon, eBay, Shopify, Square and more – and we’ll calculate exactly how much sales tax you collected. All the information you need to file your Alabama sales tax return will be waiting for you in TaxJar. Start your 30-day free TaxJar trial now!
How to File and Pay Sales Tax in Alabama
If you are remitting more than $750 in one payment, Alabama requires you to pay via electronic funds transfer (EFT) through My Alabama Taxes ONE SPOT.
Note: If paying by EFT Alabama requires that the funds must be transmitted on or before 4pm CT on the day that sales tax is due or be considered late.
But if you are remitting less than $750 and want to pay by mail, just mail your check to this address:
Alabama Department of Revenue
Sales & Use Tax Division
P. O. Box 327790
Montgomery, AL 36132-7790
Other Facts You Should Know about Alabama Sales Tax Filing
There are a few more things you should know about sales tax in Alabama:
- Late Filing Penalty Greater of 10% of tax due or $50.
- Late Payment Penalty 10% of tax due.
Other penalties for fraud or serial offenses include higher penalties and even criminal charges.
Alabama requires that any seller with a sales tax permit file a sales tax return on your due date even if you don’t have any sales tax to report or pay. Click here for a list of states that require zero sales tax returns.
Many states understand that collecting sales tax is a difficult burden on merchants, and will provide a discount to help alleviate some of this burden. In Alabama, a discount is allowed if the tax is paid before the 20th day of the month in which the tax is due. The sales tax discount consists of 5 percent on the first $100 of tax due, and 2 percent of all tax over $100. Monthly discounts can’t go above $400.00. Click here for more about state sales tax discounts.
And that’s it. You’ve mastered Alabama sales tax filing! Now that sales tax is out of the way, you can get back to what you do best – running your business.
Alabama Sales Tax Holidays
Alabama has 2 sales tax holidays in 2016:
February 26-28, 2016: Severe Weather Preparedness Items August 5-7, 2016: Back to School Sales Tax Holiday
Unlike some states, Alabama cities can elect whether or not to participate in sales tax holidays. Visit our blog post For more information about Alabama’s sales tax holidays including which cities are participating and how to handle sales tax holidays as an online seller.
Alabama Sales Tax Resources
For more about Alabama sales tax, check out the Alabama section of the TaxJar blog.