Sales Tax - By State

State Sales Tax Nexus Requirements and General Overview

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Alabama (AL)

AL Sales Tax - Name and General Application of Tax:

Alabama sales tax is a privilege or license tax levied on the gross proceeds or the gross receipts from the businesses of selling at retail or renting tangible personal property or of furnishing entertainment. The use tax on storage, use, or consumption of tangible personal property in the state is a complementary tax and does not apply in situations in which the sales tax is collected.

AL Nexus - General Requirements:

Whether an obligation to collect Alabama use tax attaches to a sale by an out-of-state seller is determined by a combination of federal and state restrictions. At the federal level, the determination revolves around whether a nexus between the sale and Alabama can be established. If there is sufficient nexus, it then must be determined whether the seller is a retailer required to collect tax.

Before a state can tax out-of-state activities, it must be able to show a connection or "nexus" that the activities have with the state.

Alabama law requires out-of-state retailers to collect and remit the use tax on sales of personal property for storage, use, or consumption in Alabama when they meet any of the following conditions:

  • maintaining a place of business in the state (i.e., office, place of distribution, sales or sample room or place, warehouse or storage place);
  • qualifying to do business in the state or registering to collect sales and use tax in the state;
  • soliciting and receiving orders by any representative, agent, salesmen, canvasser, solicitor, or installer in the state;
  • soliciting and receiving orders through broadcasters or publishers located in Alabama that are disseminating advertising primarily to Alabama consumers;
  • soliciting orders for tangible personal property by mail if the solicitations are substantial and recurring and if the retailer benefits from any banking, financing, debt collection, telecommunication, or marketing activities occurring in the state or benefits from the location in the state of authorized installation, servicing, or repair facilities;
  • having, under a franchise or licensing arrangement or contract, a franchisee or licensee operating under its trade name;
  • soliciting, pursuant to a contract with a cable television operator located in the state, orders for tangible personal property by means of advertising that is transmitted or distributed over a cable television system in the state;
  • soliciting orders for tangible personal property by means of a telecommunication or television shopping system that is intended to be broadcast to Alabama consumers by cable television or other means of broadcasting;
  • maintaining any other contact with Alabama that would allow the state to require the seller to collect and remit tax due under the provision of the constitution and laws of the United States;
  • distributing catalogs or other advertising matter and thereby receiving and accepting orders from residents of the state; and
  • delivery within the state by means of a vehicle owned by the selling entity.

AL Local Tax:

Specific enabling acts authorize the imposition of sales and use taxes by municipalities and counties and the imposition of gross receipts taxes similar to the state sales tax by municipalities. However, counties or municipalities may not impose a gross receipts tax similar to the state sales tax, except for those counties or municipalities that imposed such taxes on February 25, 1997

County commissions may administer and collect any local sales and use taxes or other local county taxes. The collection of the local sales and use tax by a county commission must occur at the same time as state sales and use taxes are due, unless otherwise provided by law. By request of county commissions, counties may have the Department of Revenue collect any county sales, use, rental, lodgings, tobacco, or other local taxes if the taxes parallel a state tax in all respects, except the rate.

AL SST/Streamlined Sales Tax:

Alabama is not a member of the Agreement because, although it has enacted legislation authorizing it to enter into the Agreement, it has not yet enacted the changes to its laws necessary to comply with the Agreement's requirements. However, as an Advisor State to the Governing Board it will serve in an ex officio capacity on the Board, with non-voting status, and may speak to any matter presented to the Board for its consideration. It will also have input through its representation on the State and Local Advisory Council, which advises the Board on matters pertaining to the administration of the Agreement.

In addition, Alabama enacted legislation creating a commission to examine its tax laws to see what changes are necessary to come into compliance with the Agreement. The recommendations of the commission, if ratified by the Alabama Legislature, will not be implemented until and unless federal legislation adopting the SST Agreement becomes law.

AL Sourcing:

Destination

AL Resale / Exemption Certificates:

Exemption certificates - Alabama retailers with a sales tax license who make exempt purchases are not required to provide a certificate of resale or exemption. However, persons who are not required to have a sales tax license but who are entitled to make tax-free purchases at wholesale must apply to the Department of Revenue for a certificate of exemption, Form STE-1.

Resale certificates - Purchases that are made for the purpose of resale, i.e., wholesale purchases, are exempt from sales and use tax by reason of being excluded from the definition of "taxable sale" (the purchaser must have secured a sales tax license). The rule allowing sales for resale to be exempt when the purchaser secures a sales tax license also applies to retailers located outside Alabama when they have secured the sales tax license required by law in the state in which they are located. The Alabama Department of Revenue does not require a licensed Alabama retailer to provide a certificate of resale to the supplier in order for a purchase to be a tax-free sale for resale. However, proper records must be kept to substantiate the wholesale character of the sale. A retail and wholesale seller who makes a wholesale sale must show on the invoice (and on a copy retained in the seller's office) the buyer's name, address, and sales tax account number. However, it is not necessary to enter the sales tax account number on each invoice if the sales tax account number is placed one time on the seller's books and such sales are posted to these books, or if the seller maintains a card index file showing the buyer's name, address and sales tax account number.

AL Statute of Limitations:

A preliminary assessment must be entered within three years from the later of the due date of the return or the date the return is filed. If no return is required to be filed, the time period is within three years of the due date of the tax. However, a preliminary assessment may be entered at any time if a required return is not filed, or if a false or fraudulent return is filed with the intent to evade tax. For returns that omit more than 25% of the correct taxable base required to be shown on the return, a preliminary assessment may be entered within six years from the later of the due date of the return or the date the return is filed.

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