Last Updated on August 27, 2020
Most businesses starting in Alabama will need to register for a sales tax license. This is commonly referred to as a seller’s permit, resellers license, sales tax number or sales tax registration. All businesses 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.
Who needs a sales tax license in Alabama?
A business must register for a sales tax license in Alabama when:
- A business has “nexus” (significant presence in the state) such as a retail store, warehouse, inventory or traveling sales people working in the state.
- An Alabama online business is selling to Alabama residents
- An out-of-state business has over $250,000 in sales to Alabama residents
What products and services are taxable in Alabama?
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 in most cases isn’t taxable in Alabama. For instance, let’s say you broke the screen to 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 are taxable in Alabama.
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, LLC)
- Entity name
- Physical location
- Contact information
- Officer/owner Information
- Federal Employer Identification Number (FEIN), or SSN 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
How much does a sales tax license cost in Alabama?
There is no cost for a sales tax license in Alabama.
How long does it take to get an Alabama sales tax license?
Expect 3-5 business days to receive a 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.
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.
How much sales tax is charged?
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 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 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.
Sales tax on purchases for resale
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 distributors will require a sales tax number and in many cases require the reseller to fill out the Alabama Saxes Tax Exemption Certificate, to document the items being purchased are for resale.
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.
3300 Skyway Drive
Auburn, AL 36830
Counties served: Chambers, Clay, Coosa, Lee, Randolph, Russell, Talladega, Tallapoosa
121 Adris Place
Dothan, AL 36303
Counties served: Barbour, Coffee, Covington, Dale, Geneva, Henry, Houston
701 Forrest Avenue
Gadsden, AL 35901
Counties served: Blount, Calhoun, Cherokee, Cleburne, DeKalb, Etowah, Marshall, St. Clair
4920 Corporate Drive, Suite H
Huntsville, AL 35805
Counties served: Cullman, Jackson, Lawrence, Limestone, Madison, Morgan
Hoover, AL 35244
Counties served: Jefferson, Shelby
851 East I-65 Service Road South, Suite 100
Mobile, AL 36606
Counties served: Baldwin, Choctaw, Clarke, Conecuh, Escambia, Mobile, Monroe, Washington, Wilcox
2545 Taylor Road
Montgomery, AL 36117
Counties served: Autauga, Bullock, Buitler, Chilton, Crenshaw, Dallas, Elmore, Lowndes, Macon, Montgomery, Pike
201 South Court Street, Suite 200
Florence, AL 35630
Counties served: Colbert, Franklin, Lauderdale
1434 22nd Avenue
Tuscaloosa, AL 35401
Counties served: Bibb, Fayette, Greene, Hale, Lamar, Marengo, Marion, Perry, Pickens, Sumter, Tuscaloosa, Walker, Winston