Alabama Sales Tax Guide

Traditional Goods or Services

Goods that are subject to sales tax in Alabama include physical property like furniture, home appliances, and motor vehicles.

Prescription medicine and gasoline are bothtax-exempt.

Some services in Alabama are subject to sales tax. For a detailed list of taxable services, view theAlabama state statuteon sales tax.

The Alabama Department of Revenue has also published a guide tosales tax exemptions and exclusions.

Digital Goods or Services

A digital good or service is anything electronically delivered, such as an album downloaded from iTunes or a film purchased from Amazon.

Alabamarequiresbusinesses to collect sales tax on the sale of digital goods or services.

Store Sales

For traditional business owners selling goods or services on site, calculating sales tax is easy: all sales are taxed at the rate based on the location of the store. Here’s an example of what this scenario looks like:

Mary owns and manages a bookstore in Huntsville, Alabama. Since books are taxable in the state of Alabama, Mary charges her customers a flat-rate sales tax of 9% on all sales. This includes Alabama’s state sales tax rate of 4%, Madison County’s sales tax rate of 0.5%, and Huntsville’s local district tax rate of 4.5%.

In-State Sales

The state of Alabama follows what is known as adestination-basedsales tax policy. This means that long-distance sales within Alabama are taxed according to the address of the buyer. This policy applies to state, county, and city sales taxes.

Consider the following example:

Steve runs his own business selling electronics on eBay out of his home in Dothan, Alabama. A customer living in Gadsden, Alabama finds Steve’s eBay page and purchases a $350 pair of headphones. When calculating the sales tax for this purchase, Steve applies the 4% state tax rate for Alabama, the 4% city sales tax for Gadsden, Alabama and the local county tax rate of 1%. At a total sales tax rate of 9%, the total cost is $381.50 ($31.50 sales tax).

Out-of-State Sales

Alabama businesses only need to pay sales tax on out-of-state sales if they havenexusin other states.Nexusmeans that the business has a physical presence in another state.

Common types ofnexusinclude:

• Aphysical location, such as an office, store, or warehouse
• Anemployee远程工作或旅行销售代表是谁resentative
• Amarketing affiliate
• Drop-shippingfrom a third party seller.
• Atemporary physical location,including festival and fair booths.

How to File

Alabama requires businesses to file sales tax returns and submit sales tax payments online.

How Often Should You File?

How often you need to file depends upon the total amount of sales tax your business collects.

• Annual filing:If your business collects $120 or less during the previous calendar year, your business should elect to file returns on an annual basis.
• Quarterly filing:If your business collects below $2400 during the previous calendar year, your business should elect to file returns on a calendar quarterly basis.
• Monthly filing:If your business does not vote or does not qualify for either of the latter options, your business will, by default, file returns on a monthly basis.

Filing Deadlines

All sales tax return deadlines fall on the20th day of the month, unless it is a weekend or federal holiday, in which case the deadline is moved back to the next business day. Below is a list of this year’s filing deadlines:

Penalties for Late Filing

Alabama charges a $50 fine for late filing. Returns not timely filed are subject to a “failure to timely file” penalty equal to 10% of the tax. Interest is also due at the same rate established by the Secretary of the Treasury under authority of 26 USC 6621.