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If the relocation company is a nonresident entity and is listed on the closing statement as the seller, then the relocation company is subject to the requirements of Section 40-18-86.
Alabama law requires the buyer to withhold tax on the sale or transfer of Alabama real estate by a nonresident. In order to withhold, the buyer must determine if the “seller” is a nonresident. Inherent in this provision is the need to properly determine the “seller” of the property. As such, the buyer must inquire as to whether the LLC-seller is a disregarded entity in order to properly determine the seller.
The federal classification for income tax purposes applies for Alabama income tax purposes. Since Section 40-18-86 is the withholding of income tax, the federal classification also applies for income tax withholding purposes. Accordingly, a SMLLC whose status is disregarded for federal income tax purposes is not considered the seller for purposes of Section 40-18-86. Instead, the owner of the SMLLC is considered the seller for purposes of the Alabama law.
If the seller or transferor has filed Alabama returns or appropriate extensions for the most recent two tax years whose original due dates have passed, then that condition will be considered satisfied.
No. In order to qualify as a deemed resident, all of the qualifying conditions must be satisfied.
The payment of the amount withheld by the buyer is considered as an estimate paid on behalf of the nonresident seller. If the seller is a corporation, the amount paid by the buyer for the seller will be claimed on the seller’s Form 20C as an estimate payment.
The pass-through entity seller must allocate and pass through the withholding credit in the same manner as it passes through its income. It should be passed through each tier in multitiered situations until it is claimed. Each partner’s, shareholder’s, or member’s share of the withholding should be listed on the K-1 Form with a schedule showing how it was passed through, and each partner, shareholder, and member should be provided a copy of the original withholding statements issued to the seller by the purchaser (Form WNR and Form WNR-V). The partner, shareholder, or member should claim credit for his or her share of the withholding on the Alabama income tax return, and attach a copy of the K-1 Form, the schedule showing how it was passed through, and a copy of the withholding calculation form issued to the seller by the purchaser (Form WNR). If the pass-through entity files a composite return, it may claim credit on the return, and attach the Form WNR. If some of the nonresident partners, shareholders, or members are not included on the composite return, credit may only be claimed for the portion of the withholding that is attributable to the partners, shareholders, or members who are included on the composite return.
Under Alabama law, standing timber is real property. Once timber is severed from the stump, it becomes personal property. If title to the timber passes before it is severed from the stump, withholding under Code of Alabama 1975, Section 40-18-86 is required. If title to the timber does not pass until after it is severed from the stump, withholding is required only if the underlying land is sold with the timber.
A financial institution, as defined in Section 40-16-1, generally is not subject to Alabama income tax, so the withholding under Section 40-18-86 on the sale is not required if the seller is a financial institution subject to Alabama’s Financial Institution Excise Tax (FIET).
If the insurance company pays a tax to Alabama on its premium income, it is not subject to Alabama income tax, and withholding on the sale is not required.
Not unless the transaction results in unrelated business taxable income under Internal Revenue Code Section 512. In general, any transaction which results in unrelated business income as defined in Internal Revenue Code Section 512 is subject to withholding. Transactions which do not result in unrelated income are not subject to withholding.
In order to be exempt from withholding, the property must be the principal residence of the seller or transferor for purposes of the income exclusion under the Internal Revenue Code. This rule applies no matter how much time elapses after the seller relocates to another state. As long as the property qualifies as a principal residence under the Internal Revenue Code, the exemption from withholding applies for the gain that is excluded from federal and Alabama AGI under the Internal Revenue Code.
As in an exchange of property such as a like-kind exchange, withholding is not required on a Section 1031 exchange to the extent that the income from the sale is not subject to Alabama income tax. Transfers of real property under a Section 1031 exchange where gain may be realized by the seller, but completely not recognized by the seller for Alabama income tax purposes are not subject to the withholding provisions of Alabama Code Section 40-18-86. Transfers of real property where gain is realized by the seller, but partially not recognized by the seller for Alabama income tax purposes, are subject to the withholding provisions of Alabama Code Section 40-18-86 only to the extent of the recognized gain, such as a Section 1031 exchange where monies received by the seller exceed the exchange transaction. If the transaction is a “deferred” Section 1031 exchange, the transaction will qualify for the exemption to the withholding requirement only if the seller agrees to have the qualified intermediary file the required payment voucher and remit any withholding due to the Alabama Department of Revenue in the event that monies remain after the 180-day deferral period.
Withholding is not required to the extent that the income from the sale is not subject to Alabama income tax. Transfers of real property where gain is realized by the seller, but completely not recognized by the seller for Alabama income tax purposes, such as a like kind exchange, are not subject to the withholding provisions of Alabama Code Section 40-18-86. Transfers of real property where gain is realized by the seller, but partially not recognized by the seller for Alabama income tax purposes, are subject to the withholding provisions of Alabama Code Section 40-18-86 only to the extent of the recognized gain.
No. The filing of an affidavit establishing an exemption is not required. However, the buyer may wish to have the seller execute Form NR-AF3 or a similar affidavit, in order to document the buyer’s reliance on the seller’s representation of exemption.
No, an Alabama resident does not need to provide an affidavit since this withholding law does not apply to residents. The affidavit is for nonresident sellers who wish to be “deemed” residents for withholding purposes. In a transaction where a nonresident seller is considered a “deemed resident” of Alabama, the buyer should retain a copy of the affidavit, and must submit the original copy to the Alabama Department of Revenue. Even though an affidavit is not required when the seller is an Alabama resident, the affidavit may be used by a resident seller if the buyer wishes to document the seller’s representation of Alabama residency. In this situation, the affidavit does not need to be sent to the Alabama Department of Revenue, but the buyer and seller may wish to keep copies for their records.
A buyer’s reasonable reliance on a seller’s affidavit should be sufficient. The standard is a “good faith” reliance standard. A buyer will be held liable if he had actual or constructive knowledge that the seller’s affidavit was false or contained erroneous information. The buyer may rely on the seller’s affidavit unless the buyer knows or should know, based on the buyer’s knowledge at the time of closing, that statements made on the affidavit are false. The buyer has no duty to investigate the statements made on a seller’s affidavit.
Yes. The residency of the owners of the property will be determined separately. Withholding is required only on the purchase price or gain recognized by the nonresident sellers. In the case of co-owners who are married, ownership is determined separately if one owner is a nonresident. Separate forms must be completed for each nonresident seller/transferor who will be required to file an Alabama income tax return.
Yes, since Section 40-18-86, Code of Alabama 1975, allows a seller to base withholding on the recognizable gain from a transaction. Transactions which result in no taxable income do not require withholding. Please see Form NR-AF2.
Section 40-18-86, Code of Alabama 1975, generally requires that 3 or 4 percent of the purchase price be withheld. However, if the gain recognized on the sale is less than the purchase price, and the seller provides the buyer with an Affidavit of Seller’s Gain (see Form NR-AF2), then the buyer may withhold 3 or 4 percent of the amount of the gain. If the amount to be withheld, as based on the purchase price or the gain, is greater than the net proceeds of the transfer, then only the net proceeds need be withheld and remitted by the purchaser. Generally, the net proceeds of the sale are the net payments to the transferor as shown on the closing statement, but “net proceeds ” may be calculated as the amount of money and other consideration received by the seller after deducting mortgage or other secured debt, ad valorem taxes, sales commissions, title premiums, survey expense, costs for environmental and other reports, and all other closing costs and expenses.
Yes. In general, income from the sale of Alabama property is required to be reported on an Alabama income tax return. Once the nonresident return is completed and filed by the due date of the return, including extensions, the actual tax liability will be determined, and the taxpayer either claims a refund for any overpayment, or pays the amount of any underpayment, the same as with any other income tax return.
No, this is neither a sales tax nor a real estate transfer tax. It is income tax withholding. The principle is similar to income tax withholding by employers. The buyer withholds Alabama income tax from the payment to the nonresident seller. The buyer is responsible for providing the seller with a copy of Form WNR and Form WNR-V. The seller will attach a copy of Form WNR to the appropriate Alabama income tax return to claim credit for the taxes paid. The taxes withheld and remitted by the buyer to the Alabama Department of Revenue will be considered as an estimated tax payment made on behalf of the seller.
Once the lien has arisen, it will continue until the liability for the amount assessed is satisfied, released or becomes unenforceable by reason of lapse of time (i.e. 10 years from the date the lien is filed) (Code Sections 40-1-2, 40-29-20, and 49-29-21).
The fee does not apply to projects performed outside the state of Alabama or to licensed contractors who receive five percent or less of their primary business from construction services described in either NAICS Code 237 or 238. Contractors will need to allocate the wages of a covered employee who is working on projects both in Alabama and outside Alabama during a quarter.
No, the fee applies only to the wages paid for the skilled labor of payroll workers of the employer directly engaged in construction operations at the location of any construction or maintenance site in Alabama.
No, the fee does not apply to employees of a manufacturer, engineering firm or fabricator unless directly working on a construction or maintenance site performing installation or other services and who are at or below the working foreman level.
Yes, all licensed contractors will pay the fee on the quarterly gross wages of all covered construction employees performing skilled labor in the field.
No, the Act excludes wages paid for labor or service performed by clerical, management, owners, or supervisory employees above the working foreman level or payments to independent contractors. Wages included are those paid to full or part-time skilled craftsmen in the field as well as those of an apprentice or laborer working on the jobsite, whether based on an hourly rate, salary, or otherwise.
No, this is not a tax on the individual employee or independent contractor but is a fee paid by the contractor-employer based on the total gross quarterly wages paid to covered construction employees for labor or services performed on a construction or maintenance site located in Alabama.
No, the fee must not be paid with or included on a payroll withholding tax form. This fee is owed by the employer and should not be confused with payroll tax withholdings from employees.
No, all licensed contractors paying employees for the performance of skilled labor under a construction contract or job located in this state of any amount will be subject to the Fee under this Act.
No, this fee does not apply to Home Builders and Licensed Residential Home Builders contracting for home building as defined in Chapter 14A of Title 34 of the Code of Alabama 1975, or those specifically exempt under Chapter 14A of Title 34 of the Code of Alabama 1975 including their subcontractors working on any single family residential projects in Alabama.
Covered employees include all payroll workers at or below the working foreman level who are performing labor or services for a covered employer at any construction or maintenance site in Alabama.
This fee is due on or before the last day of the month following the end of the quarter. For example: the return and fee for the quarter ending March 31 is due on or before April 30, the quarter ending June 30 is due on or before July 31, the quarter ending Sept. 30 is due on or before Oct. 31 and the quarter ending December 31 is due on or before Jan. 31 of the subsequent year.
This fee is to be paid electronically through the department’s website. Upon sign in, contractors will be asked to enter their total gross wages paid to covered construction employees for the quarter. The system will compute the amount of fee due and you will enter your banking information to submit your payment electronically. NOTE: If you have debit block on your bank account, please provide the following information to your bank so that your bank will allow the fee payment(s) to be processed without rejecting: 1522077581 (Company ID #) for Alabama Department of Revenue Payments.
The fee is calculated by taking the total gross wages (before deductions) paid during a calendar quarter to covered employees working on a construction or maintenance site in Alabama and multiplying these wages by the fee rate of .0015. As an example, an employer would owe a fee of $150 per $100,000 of covered wages.
This is a fee paid by licensed contractors (both general and subcontractors) based on the total gross wages paid quarterly to covered employees for the performance of skilled labor under a construction or maintenance contract or job located in Alabama.
The fee is intended to fund a program for the recruitment and training of new construction craft trade workers in Alabama.
No. However, the cigarette tax stamp ordering system is not tied to consignment balances. Therefore, state consignment customers must be aware of their available consignment balance and place orders within their bond limit. Failure to do so will result in the stamp order being modified to accommodate the available balance.
The person or persons authorized by you to access MAT/submit your stamp order will receive a confirmation when they click on the “submit” button that the stamp order has been submitted to the Tobacco Tax Section. Once the order has been fulfilled, the invoice associated with the order will be available in MAT for viewing and payment, if applicable.
No, the system uses the system date that the order was created. Therefore, orders dated for the future are unavailable. If multiple orders are submitted on the same day before the 1 p.m. cut off, they will be processed for shipment that day; the related invoices would all have the same invoice and due dates.
We use FedEx shipping. There is an area on your order form where you can choose whether you want pickup, overnight or 2-day delivery. Please use this feature to let our staff know the preferred shipping method. If the FedEx account number is incorrect please make the necessary changes.
Once a “new line item” – your stamp type and quantity – has been saved to an order it can be edited by entering the correct count. You can also choose a new type from the drop down if you select the incorrect one.
This system operates in “real time”. Therefore, once an order has been submitted our staff is being notified within the system that a new order has been received and is ready to be fulfilled. The quickest and most effective way to contact us would be to call 334-242-9627 immediately so that we can cancel the order. Because this system operates in “real time”, please review your order thoroughly – specifically the stamp type and quantity – before submitting it to us.
Both state tobacco stamps (consignment and cash/EFT orders) and county tobacco stamps (cash/EFT only) administered by the Department may be ordered via MAT.
Effective May 18, 2017, you will be able to submit state and county cigarette tax stamp orders through our My Alabama Taxes (MAT) portal.
Manufacturers or retailers that violate any of the provisions of Title 28, Chapter 11, may be subject to a five hundred dollar ($500) fine per offense. This fine may be imposed for failure to submit the initial certification and application fee by the due date.
The annual renewal application and annual renewal application fee must be received by the department during the annual renewal period of March 1 – April 30 to be considered timely. If the manufacturer’s certification expires, the manufacturer must remit the initial application fee with the required application and associated penalty, if applicable, to be re-certified and have its products certified/approved for sale and placed back on the Directory.
The Directory will be available beginning May 1, 2022.
No. It is not subject to the withholding requirements of Section 40-18-86. However, if the buyer and seller agree, the buyer may withhold on the interest.
Beginning March 1, 2022, the certification application and application fee should be submitted between March 1 and April 30 of each year.
An installment sale made by a nonresident is subject to the requirements of Section 40-18-86. The initial payment of the withholding is calculated based on the purchase price less the installment note. If the seller wishes to base the withholding on the gain, the withholding is calculated on the gain that would be recognized as a result of the proceeds received at the time of the closing. The provisions of the law regarding the percentage to be withheld and the due date to file the payment voucher and make the withholding payment to the Alabama Department of Revenue apply to installment sales in the same manner as applicable to any other sale subject to withholding under Section 40-18-86. For subsequent payments, the withholding is calculated by applying 3 or 4 percent of the principal amount included in each payment, or if the gain is used to calculate withholding, by applying 3 or 4 percent of the amount of each principal payment which represents gain. The payment voucher must be filed and the payment remitted to the Department on or before the last day of the calendar month following the calendar month within which the cumulative amount withheld for the year, less any payments already made for the year, exceeds $100. If the cumulative amount withheld for the year, less any payments already made, does not exceed $100 for the calendar year, the buyer will file the payment voucher and remit the payment to the Department on or before the last day of the month following the end of the calendar year within which the tax was withheld.
The initial application fee due from every certifying e-liquid manufacturer and manufacturer of alternative nicotine products is two thousand dollars ($2,000). The annual renewal application fee thereafter is five hundred dollars ($500).
Beginning March 1, 2022, each manufacturer must electronically submit to the department an initial certification application along with the initial application fee through the department’s online portal. Failure to submit the required fee will result in a denial of the application.
Any e-liquid manufacturer or manufacturer of alternative nicotine products that submits a certification or renewal as required in § 28-11-17.1, Code of Ala. 1975.
The Directory will show a listing of certifying e-liquid manufacturers and manufacturers of alternative nicotine products along with a listing of the certified and approved products for sale in Alabama.
Some state-administered counties levy a tax on rolling papers. The tax rates range from $0.05 to $0.25 per package. See the tax return for appropriate rates.
Yes, state-administered county cigarette tax is collected by purchasing the stamp from the Alabama Department of Revenue. Some self-administered counties also collect and administer their taxes by using revenue stamps.
The tax on cigars differs between counties. Standard cigars for state-administered counties are all taxed per cigar, or each, and the rates range from $0.02 to $0.12. Little cigars are taxed by the pack or per each little cigar. The rate per pack of little cigars ranges from $0.04 to $0.12. The rate per each cigar ranges from $0.02 to $0.05. See County Tax Rates
These items are commonly referred to as other tobacco products (OTP). Most of the counties impose a tax on these items. The tax rates vary according to each county Act. See County Tax Rates
The county tax rates on cigarettes are based on a per package basis. County cigarette tax rates vary from county to county according to the language of each Act. County cigarette tax rates range from a low of $0.01 to a high of $0.25 per package. See County Tax Rates
Questions relating to county tobacco taxes not administered by the Alabama Department of Revenue must be directed to the appropriate county commission.
State-administered county tobacco taxes are paid on cigarettes by purchasing the county revenue stamp from the Alabama Department of Revenue and affixing the stamp to the cigarette package prior to distribution. All cigarette products placed in retail facilities must have the appropriate county stamp affixed; otherwise, the product is subject to confiscation. Consumers receiving untaxed cigarettes and manufacturers distributing promotional cigarettes are to remit the county tax to the Department by filing a monthly tax return. Taxes on tobacco products other than cigarettes (OTP) are paid by all distributors and consumers by filing a monthly tax return. See Form Search
State stamps may be ordered by permitted wholesalers by logging into their MAT account and placing an order. See FAQs below on Ordering Stamps through MAT.
No. Since the revenue stamp is not affixed to individual sticks of cigarettes, there would be no evidence of tax payment. Section 40-25-2(f), Code of Alabama 1975, states that stamps in the amount of the tax shall be affixed to the box or container from which the tobacco product is sold at retail. In the case of cigarettes, the stamp shall be affixed to the individual package of cigarettes. Taxable tobacco products offered for sale at wholesale or retail without the appropriate revenue stamp affixed in the above manner is subject to confiscation by the Alabama Department of Revenue.
There is not a state tax on rolling papers. However, some counties do levy a tax on rolling papers. The tax rates range from $0.05 to $0.25 per package.
The taxpayer must provide the Tobacco Tax Section written documentation concerning their effective out-of-business date. To receive a refund for unused stamps, the taxpayer must return the stamps to the Department along with a copy of the purchase invoice to substantiate the stamp sale. If the taxpayer purchased the stamps, and they returned them within the statute of limitations, a refund is issued to the taxpayer for the tax originally paid.
Alabama Code Section 40-25-2 states that in addition to all other taxes of every kind imposed by law, every person, firm, corporation, club or association, within the State of Alabama who sells or stores or receives for the purpose of distribution to any person, firm, corporation, club or association, within the State of Alabama, cigars, cheroots, stogies . . . or any substitute therefor, shall pay to the State of Alabama a license or privilege tax. The distributor is responsible for filing a monthly state tobacco tax return and remitting the state tax on all untaxed cigars received for distribution. If the distributor wants to distribute tobacco products into another state, Alabama tax free, they must apply and qualify for a tobacco stamping permit (40-25-16) to become a qualified wholesaler. According to the provisions of Section 40-25-15, only a qualified wholesaler may sell tobacco products exempt from Alabama’s tobacco tax. Also, if the distributor distributes the cigars into a state-administered county, they must file a monthly county tobacco tax return, and pay the county tax for each county in which there was activity. Both returns and tax payments are collected by the Department of Revenue and are due by the twentieth of the month. (Section 40-25-15 provides for a nontaxable sale by a qualified wholesaler or jobber if the sale is to another state, the United States or any instrumentality of the United States, or ships engaged in foreign commerce or coastwise shipping between points in this state and points outside this state. However, the product may be taxable in the state into which it is distributed.)
There is not a stamp for these products, which are referred to as “other tobacco products” (OTP). The state tax rates vary, and taxes are paid by filing a monthly state tobacco tax return that is due by the twentieth of the month for the previous calendar month’s activity. The tax for regular cigars is based on the number of cigars received, whereas the tax for little cigars, snuff, chewing tobacco and smoking tobacco is based on weight.
State tax on cigarettes is paid by purchasing revenue stamps and affixing the stamp to the package of cigarettes. Distributors can only purchase stamps from the Alabama Department of Revenue. Consumers who purchase cigarettes for which the tax has not been paid are required to remit the tax on cigarettes by return. State taxes on tobacco products other than cigarettes are paid by tax return. Tobacco wholesalers normally pay the taxes. However, if a retailer or consumer receives untaxed products, it is their responsibility to remit the tax to the Department.
Alabama’s tax rate on cigarettes is 33.75 mills for each cigarette. This converts to $0.03375 for one stick, $0.675 for a package of 20 cigarettes and $0.84375 for a package of 25 cigarettes. Alabama’s tax rates on tobacco products other than cigarettes (snuff, smoking tobacco, chewing tobacco, and cigars) vary based on weight and the number of cigars received. View the State Tobacco Tax Rates
The severance tax does not apply to severed materials stockpiled, transported or used in any other way by the producer until the materials are sold.
Materials sold for use outside the State of Alabama are subject to the severance tax unless the materials are never transported on Alabama roads. To qualify for the exemption, the materials must be loaded into a non-road conveyance (railroad car or barge) at the producer’s site.
Only lime and limestone used for agricultural purposes are exempt. Producers and purchasers qualifying for the exemption must be registered with the Department of Agriculture and Industries.
Only lime and limestone used for pollution control or abatement purposes are tax exempt; provided they meet the requirements for sales tax exemption in the State of Alabama.
