What is the Alabama Business Privilege Tax and Annual Report

One of the requirements of maintaining an LLC in Alabama is filing an Annual Report and paying the Alabama Business Privilege Tax each year.  The Annual Report is used to confirm and update the company’s information with the Alabama Secretary of State, such as the name and address of the registered agent, principal office address, and information of the members or managers of the LLC.  The Business Privilege Tax is a tax for the “privilege” of doing business in Alabama, which is called a franchise tax in some states.

Related: How to Form an LLC in Alabama

Who must file the Alabama Business Privilege Tax and Annual Report

All Alabama corporations, LLCs, and LLPs, must file an Annual Report and Business Privilege Tax each year.

The Annual Report is different from the Initial Business Privilege Tax Return, which is due within 2.5 months after forming the entity.  For this, you will file Form BPT-IN, along with a minimum filing fee of $100.

What is Needed to File your Alabama Business Privilege Tax Return and Annual Report

The Business Privilege Tax Return and Annual Report are filed using Form PPT (for Pass-Through Entities such as sole proprietorships, partnerships, S-Corporations and LLC’s taxed as a pass-through entity) or Form CPT for C-Corporations or LLCs taxed as a C-Corporation.  Be sure to find the correct PPT form, as different entities must use a different PPT form. 

Forms are available from the Alabama Department of Revenue’s My Alabama Taxes Website.

In addition to filling out the form, there are several additional attachments to include, such as:

• Copy of your federal tax return
• Copy of the balance sheet used to compute the taxpayer’s net worth, if not provided with the copy of the federal tax return
• If no federal return is included, a balance sheet and income statement are required
• Documentation to support an exclusion or deduction in the computation of the taxpayer’s net worth, if one is being made

The Tax Return and Annual Report are sent to the Department of Revenue

If sending a return without a payment, send to:

Alabama Department of Revenue
Business Privilege Tax Section
PO Box 327431
Montgomery, AL 36132-7431

Returns with a payment will be sent along with Form BPT-V, and payment to:

Alabama Department of Revenue
Business Privilege Tax Section
P.O. Box 327320
Montgomery, AL 36132-7320

How Much Does The Business Privilege Tax Cost?

The Business Privilege Tax is calculated by multiplying the taxpayer’s net worth in Alabama (assets minus liabilities) by the corresponding tax rate.  The minimum tax is $100. The PPT and CPT form will calculate the amount based on your figures.

How Much Does The Alabama Annual Report Cost?

The filing fee for the annual report is $10. 

Annual Report Deadline

The due date for the Alabama Business Privilege Tax Return and Annual Report is based on the entity’s federal taxable year.

LLC and LLP returns are due no later than 2.5 months after the beginning of the taxpayer’s taxable year.  For most LLCs and LLPs, this is usually March 15^th.  

Corporation returns are due no later than 3.5 months after the beginning of the taxable year.  For most Corporations, this is usually April 15^th.

Penalty for a late filing

A late filing penalty will result in a fee that equals 1% of the amount of tax due on the tax return for each month late, not exceeding 25%.  The minimum late fee is $50.  Not reporting and paying the tax could result in the entity losing good standing with the state of Alabama and eventually dissolving the entity.

An annual notice reminder will be sent in advance of the due date, however, it’s important to make an additional reminder for yourself should you not receive it. 

My business made little or no money.  Do I still have to file an annual report in Alabama?

Even if your Corporation or LLC received no income or had no business activity, the annual report is still required to be filed.