On December 21, 2001, the Alabama Legislature passed Act No. 2001-1090 in order for the State of Alabama to be in compliance with the provisions of the federal Mobile Telecommunications Sourcing Act of 2000. The new legislation amends Sections 40-21-80, 40-21-82, 40-21-100, and 40-21-102, Code of Alabama 1975, to include interstate toll telephone service in the definition of telephone services which are subject to the utility gross receipts tax and the utility service use tax. This legislation also allows a utility furnishing telephone services to deduct and retain from the gross amount of tax billed by the utility nine-tenths of one percent of the amount of such tax billed. These changes are effective for customer bills dated on and after February 1, 2002, regardless of when the services being billed were provided. However, effective October 1, 2002, the amount deducted and retained by the provider shall be one-fourth of one percent of the gross amount of such tax billed.

Effective with bills dated on or after April 1, 2002, the new law decreases the tax rate on providing telephone services from six and seven-tenths percent (6.7%) to six percent (6%) of all gross sales or gross receipts. Tax forms indicating the new tax rate will be provided prior to the May 20, 2002, due date for taxes due for the month of April 2002. For the months of February and March 2002, you may report the deduction of the amount retained from the gross amount of tax on line 11 of the current form. Please identify this deduction on the form.

The Department amended the following rules to implement these changes: 810-6-5-.26 and 810-6-5-.26.05. These rules are available on our web site.

Notices to Taxpayers