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View All Corporate Income Tax FAQs

Does our corporation have Nexus in Alabama?

Alabama Code § 40-18-31.2 creates the factor presence standard for business activity in the state to determine nexus for business income tax, business privilege tax and financial institution excise tax. The section stipulates that the threshold amounts may be adjusted periodically consistent with the Consumer Price Index.

A corporation is deemed to have “substantial nexus” for the tax period in which they exceed the following thresholds for Alabama:

For tax years January 1, 2015 – December 31, 2018:

$50,000 of property,
$50,000 of payroll,
$500,000 of sales, or
25% of the total property, total payroll, or total sales.

For tax years beginning on or after January 1, 2019:

$54,000 of property,
$54,000 of payroll,
$538,000 of sales, or
25% of the total property, total payroll, or total sales.

Corporations organized in Alabama or commercially domiciled in this state have substantial nexus in Alabama.

If a corporation is not organized or commercially domiciled in Alabama, and the activities do not exceed the standard of “mere solicitation of sales” that fall under the protection of PL 86-272, the factor presence nexus standards established for tax years beginning January 1, 2015 forward will not apply.

For assistance in determining nexus and filing responsibilities of a corporation in Alabama, complete the nexus questionnaire online at nexus.revenue.alabama.gov.

Alabama Code § 40-18-31.2 creates the factor presence standard for business activity in the state to determine nexus for business income tax, business privilege tax and financial institution excise tax. The section stipulates that the threshold amounts may be adjusted periodically consistent with the Consumer Price Index.

A corporation is deemed to have “substantial nexus” for the tax period in which they exceed the following thresholds for Alabama:

For tax years January 1, 2015 – December 31, 2018:

  • $50,000 of property,
  • $50,000 of payroll,
  • $500,000 of sales, or
  • 25% of the total property, total payroll, or total sales.

 

For tax years beginning on or after January 1, 2019:

  • $54,000 of property,
  • $54,000 of payroll,
  • $538,000 of sales, or
  • 25% of the total property, total payroll, or total sales.

 

For tax years beginning on or after January 1, 2022:

  • $60,000 of property,
  • $60,000 of payroll,
  • $596,000 of sales, or
  • 25% of the total property, total payroll, or total sales.

 

Corporations organized in Alabama or commercially domiciled in this state have substantial nexus in Alabama.

If a corporation is not organized or commercially domiciled in Alabama, and the activities do not exceed the standard of “mere solicitation of sales” that fall under the protection of PL 86-272, the factor presence nexus standards established for tax years beginning January 1, 2015, forward will not apply.

For assistance in determining nexus and filing responsibilities of a corporation in Alabama, complete the nexus questionnaire online at nexus.revenue.alabama.gov.

Related FAQs in Corporate Income Tax

View information on the Small Business Health Premiums Deduction (Act 2008-559, amended by Act 2011-155). View Form 4020- Small Business Health Insurance Deduction Information.

View information regarding Alabama Consolidated Income Tax Returns.

C-corporations, and those LLCs that have elected to file as a c-corporation, doing business in Alabama or deriving income from sources within Alabama, including income from property located in Alabama and on every corporation licensed or qualified to transact business in Alabama except for those corporations specifically exempted by §40-18-32.

Yes. If the company has registered or qualified to do business in the state, a Form 20C is required to report no activity and/or business activity as provided by Sections 40-18-2 and 40-18-31, Code of Alabama 1975.

Yes. If an extension has been granted for federal purposes, the extension is also granted for Alabama purposes; the Federal Form 7004 must be submitted with the Form 20C.

NOTE: This is an extension for filing purposes ONLY. The full amount of the tax liability is due by the original due date of the return.

Yes. Alabama Code §40-2A-7(c)(2) states, “A petition for refund shall be filed with the department or an automatic refund issued pursuant to Section 40-29-71, or a credit allowed, within (i) three years from the date that the return was filed, or (ii) two years from the date of payment of the tax, whichever is later, or, if no return was timely filed, two years from the date of payment of the tax.”