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  • Section 40-18-2, Code of Alabama 1975, imposes a tax on every nonresident individual receiving income from property owned or business transacted in Alabama. Also, Section 40-18-14 states that the taxable income of a nonresident individual includes only income from property owned or business transacted in Alabama. An installment note, held by someone who is not in the business of holding installment notes, derived from the sale of investment real property or rental real property by a nonresident individual, would be intangible property that was acquired as income from property held in this state or as a result of business done in this state. “Business income” is defined in Section 40-27-1, Code of Alabama 1975, as income arising from transactions and activities in the regular course of the taxpayer’s trade or business and includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer’s regular trade of business operations. Accordingly, interest that is attributable to the installment note in this situation is taxable for Alabama purposes. Is the interest from the installment note subject to the withholding requirements of Section 40-18-86, Code of Alabama 1975?
View All Income Tax, Withholding on Sales/Transfers of Real Property and Associated Tangible Personal Property by Nonresidents FAQs

Section 40-18-2, Code of Alabama 1975, imposes a tax on every nonresident individual receiving income from property owned or business transacted in Alabama. Also, Section 40-18-14 states that the taxable income of a nonresident individual includes only income from property owned or business transacted in Alabama. An installment note, held by someone who is not in the business of holding installment notes, derived from the sale of investment real property or rental real property by a nonresident individual, would be intangible property that was acquired as income from property held in this state or as a result of business done in this state. “Business income” is defined in Section 40-27-1, Code of Alabama 1975, as income arising from transactions and activities in the regular course of the taxpayer’s trade or business and includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer’s regular trade of business operations. Accordingly, interest that is attributable to the installment note in this situation is taxable for Alabama purposes. Is the interest from the installment note subject to the withholding requirements of Section 40-18-86, Code of Alabama 1975?

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.

Related FAQs in Income Tax, Withholding on Sales/Transfers of Real Property and Associated Tangible Personal Property by Nonresidents

Yes, once the withdrawal is made, it would be taxable on your Alabama income tax return.

The rollover is exempt from Alabama income tax.

Yes, the amount withdrawn is added back to the contributing taxpayer’s return, plus a 10 percent penalty.

No, the money is not taxable as long as the money is used to pay for higher education expenses.

Yes.

The postmark date on your contribution will be accepted as the date of the contribution, as long as it is on or before December 31.   The contribution does not have to be received by the plan on or before December 31.