Most businesses starting in Alabama will need to register for a sales tax license. This is commonly referred to as a seller’s permit, reseller’s license, sales tax number, or sales tax registration. A business selling a product or offering certain services in Alabama will need to register.
Check out the rest of this guide to find out who needs a sales tax license, what products and services are taxable, how to register for a license, and reporting requirements.
Also See: Guide to Starting a Business in Alabama
Who needs a sales tax license in Alabama?
A business must register for a sales tax license in Alabama when:
- A business has sales tax nexus. Nexus means having a physical presence in the state, such as having a physical location like a retail store or office or using a warehouse or fulfillment center to store inventory.
- An Alabama business is selling taxable products or services to Alabama residents
- An out-of-state business having over $250,000 in sales to Alabama residents
What products and services are taxable in Alabama?
Physical products
There are a few exceptions, but almost all physical products are taxable when sold at retail in Alabama. Common examples include:
- General merchandise like furniture, appliances, and clothing
- Titled or registered items like vehicles
- Digital goods and services like a downloaded movie
Sales of prescription medicine, gasoline, and certain manufacturing and agriculture are tax-exempt.
Labor isn’t taxable in most cases in Alabama. For instance, let’s say you broke the screen of your cell phone and take it to a cell phone repair shop to have it fixed. Sales tax would be added to the selling price of the new screen and any additional parts to fix the phone. The labor to replace the screen isn’t taxable. However, a business that makes furniture will indirectly have sales tax on labor. In this instance, let’s say this business is building a dining room table for a customer. Through labor, the pieces of wood are shaped, sanded, and painted to build this piece of furniture. While the labor isn’t directly taxable, sales tax is charged to the final selling price of the table.
Digital Products
Digital products are taxable in Alabama.
Services
Most services aren’t taxable in Alabama, however, there are a few exceptions.
- Short-term lodging
- Automobile rentals
- Coin-operated amusement devices
A list of common sales tax exemptions is found in the Department of Revenue’s Sales and Use Tax Rules guide.
How to register for a sales tax license in Alabama
A sales tax license can be obtained by registering through the My Alabama Taxes website.
Information needed to register includes:
- Type of business entity: Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC)
- Entity name
- Physical location
- Contact information
- Officer/owner Information
- Federal Employer Identification Number (FEIN) from the IRS, or owner’s Social Security Number if a sole proprietorship with no employees
- Date business formed
- North American Industry Classification System (NAICS) code
- Type of business entity (sole proprietorship, partnership, corporation, LLC)
- Date the business began operating
Sales tax reporting
How is sales tax collected?
When a business makes a sale of a taxable product or service, the business charges the appropriate sales tax rate to the customer. This tax is collected by the business.
What gets a little confusing is that in addition to the state sales tax, the State of Alabama also administers over 200 different city and county sales taxes, however, the state does not collect sales taxes for all of the cities and counties. This means a business must contact all counties and municipality taxing agencies to determine whether they should register with them.
Taxes are filed electronically using the My Alabama Taxes site.
How much is sales tax in Alabama?
The sales tax rate that is charged varies depending on the address of the business if the purchase is made or shipped from a business located in the state. If the seller is based out of the state, the sales tax rate is based on the buyer’s address.
In addition to the statewide tax, there are additional sales taxes that may be added by cities and municipalities. More information on sales tax rates is available from the Alabama Department of Revenue.
When are Alabama sales tax returns due?
The Department of Revenue will determine a filing frequency based on the expected volume of annual sales, which will be monthly, quarterly, or annually. A business with $10 or less in total sales tax liability during the previous calendar year will file on a calendar basis. A business averaging less than $200 per month in the previous calendar year may pay quarterly but will have to contact the Department of Revenue in writing requesting this election by February 20th of each year.
Filings are due on the 20th day of the month following the reporting period, unless the 20th falls on a weekend or federal holiday, in which case would move to the next business day.
Even if the business had no sales during the reporting period, a filing is still required indicating no sales occurred.
How much does a sales tax license cost in Alabama?
There is no cost for a sales tax license in the state of Alabama.
How long does it take to get an Alabama sales tax license?
Expect 3-5 business days to receive an Alabama sales tax license.
After registering, the business will receive an account number and a sales tax license that will need to be displayed at their location.
Do you have to renew your Alabama sales tax license?
The sales tax license is a one-time registration and no renewals are needed. Be mindful that if any information about the business changes such as the mailing address, additional locations, or change in ownership, those changes need to be updated with the Department of Revenue.
How do I get a wholesale license in Alabama?
A business is able to purchase items to resell without paying state sales tax. The tax liability is passed from the distributor to the retailer who will then charge sales tax to the end-user of the item.
Learn more about purchasing inventory without paying sales tax in Alabama.
Wholesalers and suppliers will require a sales tax number and in many cases require the reseller to fill out the Alabama Saxes Tax Certificate of Exemption (also referred to as a wholesale license, reseller’s certificate, or resale certificate) to document the items being purchased are for resale.
Is a business license the same thing as a sales tax license?
In addition to registering for a sales tax permit, there may be other business licenses needed before starting a business in Alabama.
Questions
If you have questions about the sales tax license, the Alabama Department of Revenue can be contacted by calling 334-242-1584 or by visiting or calling a regional office.
Auburn/Opelika
3300 Skyway Drive
Auburn, AL 36830
334-887-9549
Counties served: Chambers, Clay, Coosa, Lee, Randolph, Russell, Talladega, Tallapoosa
Dothan
121 Adris Place
Dothan, AL 36303
334-793-5803
Counties served: Barbour, Coffee, Covington, Dale, Geneva, Henry, Houston
Gasden
701 Forrest Avenue
Gadsden, AL 35901
256-547-0544
Counties served: Blount, Calhoun, Cherokee, Cleburne, DeKalb, Etowah, Marshall, St. Clair
Huntsville
4920 Corporate Drive, Suite H
Huntsville, AL 35805
256-837-2319
Counties served: Cullman, Jackson, Lawrence, Limestone, Madison, Morgan
Jefferson/Shelby
2020 Valleydale Road, Suite 208
Hoover, AL 35244
205-733-2740
Counties served: Jefferson, Shelby
Mobile
851 East I-65 Service Road South, Suite 100
Mobile, AL 36606
251-344-4737
Counties served: Baldwin, Choctaw, Clarke, Conecuh, Escambia, Mobile, Monroe, Washington, Wilcox
Montgomery
2545 Taylor Road
Montgomery, AL 36117
334-242-2677
Counties served: Autauga, Bullock, Buitler, Chilton, Crenshaw, Dallas, Elmore, Lowndes, Macon, Montgomery, Pike
Shoals
201 South Court Street, Suite 200
Florence, AL 35630
256-383-4631
Counties served: Colbert, Franklin, Lauderdale
Tuscaloosa
1434 22nd Avenue
Tuscaloosa, AL 35401
205-759-2571
Counties served: Bibb, Fayette, Greene, Hale, Lamar, Marengo, Marion, Perry, Pickens, Sumter, Tuscaloosa, Walker, Winston
