Alabama Sales Tax
If you are a seller in Alabama, you must pay sales tax on items sold to residents of the state.
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Alabama state has different rates for various types of goods and services. Generally, services are not taxable in Alabama, but some exceptions include many food stamp purchases and prescription medicines. The state also has special rates for rental properties and some utilities, such as prepaid wireless charges. Alabama’s general sales tax rate is 4%, but cities and counties may impose up to 7% local sales taxes. These additional rates can significantly increase the total sales tax you need to collect. You can use a free tool to determine the correct combined state and local taxes rate.
If you sell taxable goods or services in Alabama, you must register with the Department of Revenue and obtain an Alabama sales tax number. The process is simple and can be completed online or by mail. The Department of Revenue will then send you a sales tax certificate that you must display on your website. You must also remit the tax collected to the Department of Revenue.
Alabama Sales and Use Tax Rates 2024
| SALES TAX | AUTO | 2.000% |
| SALES TAX | FARM | 1.500% |
| SALES TAX | GENERAL \ AMUSEMENT | 4.000% |
| SALES TAX | FOOD/GROCERY Effective September 1, 2023 | 3.000% |
| SALES TAX | MFG. MACHINE | 1.500% |
| SALES TAX | VENDING (FOOD PRODUCTS) | 3.000% |
| SALES TAX | VENDING (ALL OTHER) | 4.000% |
| SELLERS USE | AUTO | 2.000% |
| SELLERS USE | FARM | 1.500% |
| SELLERS USE | GENERAL | 4.000% |
| SELLERS USE | FOOD/GROCERY Effective September 1, 2023 | 3.000% |
| SELLERS USE | MFG. MACHINE | 1.500% |
Who Must Pay Alabama Sales Tax?
If you are a business owner or are considering opening up a shop in the Heart of Dixie, it is important to understand your sales tax obligations. Sales taxes are imposed on most tangible products and services sold to Alabama residents. However, certain items are exempt from the state’s sales and use tax. These include prescription medications, fuel such as gasoline and motor oil (but not kerosene), agricultural products like fertilizer, insecticides, and fungicides, seeds intended for planting, baby chicks and poults, and livestock. Additionally, labor costs for repairing or installing an item are generally exempt.
As a remote seller, you may be required to collect and remit sales tax in Alabama if you meet the state’s requirements for nexus. This includes having a physical presence in the state, such as an office, warehouse, or distribution center, or having an employee, agent, or representative in the state. In addition, you must also have a substantial economic activity in the state, which is determined by the number of taxable purchases you make. This is known as economic nexus.
How to File Alabama Sales Tax Form?
Businesses in Alabama file their sales tax returns electronically through My Alabama Taxes, a secure online portal. If your business is liable for Alabama sales tax, it’s important to stay on top of your filing and payment obligations. The Heart of Dixie taxes most tangible products, but there are some exemptions. Knowing how often you must file Alabama sales tax returns and pay the applicable rate is crucial.
Sales tax returns and payments are due on the 20th day of the month following the month in which you collected the tax. You can choose to file quarterly if you have a sales tax liability of less than $200 per month on average, but you must notify the state of your intent in writing.
Sales tax compliance is complicated, especially when your business has multiple sales tax rates and different jurisdictions to keep track of. Automating your sales tax management can help simplify the process and ensure you comply with your local and state requirements. You can learn more about how to use AvaTax to streamline your sales tax management here.
