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  • Does our corporation have Nexus in Alabama?.

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.

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

To report changes made by the IRS, a corporation must file an amended Form 20C for the specific tax period. The following information MUST be included with the amended return (see Regulation 810-3-40-.01(4)):

If the corporation files as a separate entity:

A complete copy of the revenue agent’s report (RAR) provided by the IRS to include, but not limited to, Form 4549-A, 4549-B and Form 870,
A copy of the Form 20C as originally filed, and
Federal Form 1120 as originally filed and/or amended.

If the corporation is part of a consolidated group, the following information is required along with the above information:

A listing of the IRS adjustments made to each company in the consolidated group,
A copy of the Federal Form 851, Affiliations Schedule,
A copy of the income statement spread for every company, and
A copy of the consolidated Federal 1120 as originally filed and/or amended.
If the IRS audit results in a refund, the request for refund must be made within one year from the date of final determination of the IRS audit. If the audit results in additional tax due, the department can assess the additional tax within one year after the Department has been notified.

For tax years beginning January 1, 2001, the tax rate is 6.5%. For tax years prior to 2001, the tax rate was 5%.

For tax years beginning on or after January 1, 2016, Corporate Income Tax began following the federal due dates for corporate returns.

Corporations on a calendar year and a fiscal year, other than June 30, the original due date is the 15th day of the 4th month after the end of the tax year.
Corporations with a fiscal year ending on June 30, the original due date is the 15th day of the 3rd month following the end of its tax year.

Schedule BC. The Alabama Department of Revenue now requires the use of Schedule BC – Business Credits, when claiming business tax credits. The schedule allows the taxpayer to compute the total amount of tax credits allowable. The amounts entered on the Schedule BC will carry over to the Form 20C, page 1. Many credits now must be claimed on the taxpayer’s MAT account in order to receive the credit and the Schedule BC attached to the return. For more information on credits, please visit ADOR’s Tax Incentives page and see instructions for Schedule BC.

If the payment is $750 or more, payments must be made electronically. For more information, visit ADOR’s Make A Payment Page or call the EFT unit at 1-877-256-2447 or (334)353-7659.

New taxpayers, who have recently created a corporate income tax account, will receive an Online Filing Information letter. The Online Filing Information letter is for information purposes only and provides the taxpayer with the account number, Sign-on ID, and Access Code which will allow the taxpayer to create an account at My Alabama Taxes (MAT).

NOTE: Corporate income tax returns cannot be filed on MAT.

Electronic Payment Options Available:

ACH Debit– Taxpayers making e-payments via ACH Debit must have a Sign On ID and Access Code to login to My Alabama Taxes (MAT) . Pre-registration is not necessary to make a payment on an invoice or assessment.
ACH Credit– Taxpayers making e-payments via ACH Credit must be pre-approved by ADOR. To register, complete and submit Form EFT: EFT Authorization Agreement Form .
Alabama Interactive– The Department will accept e-payments for estimated and automatic extension payments through Alabama Interactive. Visit Tax Estimation or Tax Extension .
Official Payments– The Department will accept credit card payments through Official Payments Corporation. Visit Official Payments Corporation . There is a convenience fee for credit card payments. The fee is based on the amount of the tax payment and is paid directly to Official Payments Corporation.
Value Payment Systems– The Department will accept credit card payments through Value Payment Systems. You may choose to use your Discover/Novus, MasterCard or Visa card. Value Payment Systems does not accept the American Express card but has a program called BillMeLater. Visit Pay AL Tax . There is a convenience fee for this service. The fee is based on the amount of the tax payment and is paid directly to Value Payment Systems.

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.