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  • What guidance is there for vendors drop-shipping into Alabama and remote sellers?

What guidance is there for vendors drop-shipping into Alabama and remote sellers?

The State of Alabama does not issue sales tax licenses (resale certificates) to remote businesses (no business locations in Alabama). Alabama views drop-shipping as two separate transactions. The transaction between the vendor/drop-shipper and reseller is one transaction, and the transaction between the reseller and the Alabama customer is a separate transaction. It is Alabama’s stance that the vendor/drop-shipper should accept the home-state issued resale certificate when the reseller is purchasing to resell to a customer located in Alabama (drop-shipped to an Alabama address). If the sale between the remote reseller and the Alabama customer is considered taxable, the remote reseller is responsible for collecting and remitting taxes to Alabama.

Rule 810-6-1-.144.03: All buyers of retail property for resale purposes are entitled to purchase at wholesale, tax-free, the property they resell as a regular course of business when they have secured the sales tax license required by law. This rule also applies to retailers located outside Alabama when they have secured the sales tax license required by law in the state in which they are located. (Section 40-23-6, Code of Alabama 1975) (Adopted August 10, 1982, readopted through APA effective October 1, 1982)

Related FAQs in General - Sales and Use

The Internet Tax Freedom Act Amendments Act of 2007 prohibits multiple and discriminatory taxes on electronic commerce including Internet access. This act, which became Public Law 110-108, amends the Internet Tax Freedom Act to: (1) extend the moratorium on state taxation of Internet access and electronic commerce and the exemption from such moratorium for states with previously enacted Internet tax laws preserving the grandfather provisions to protect revenues in those states and local governments that currently collect those taxes until November 1, 2011; (2) restrict the authority of certain states claiming an exemption from the moratorium under the Internet Tax Nondiscrimination Act of 2004 to impose Internet access taxes after November 1, 2011; (3) expand the definition of “Internet access” to include related communication services such as e-mails and instant messaging; (4) redefine “telecommunications” to include unregulated non-utility telecommunications such as cable service; and (5) allow a specific exception to the moratorium for certain state business taxes enacted between June 20, 2005, and November 1, 2007, that do not tax Internet access.

The Internet Tax Freedom Act of 1998 enacted a moratorium on the imposition of state and local taxes on Internet access. It was extended by the Internet Tax Nondiscrimination Act and this act, extends it again through November 1, 2014.

According to the new federal legislation, the definition of “Internet access” includes:

(a) a service that enables users to connect to the Internet to access content, information, or other services offered over the Internet;

(b) the purchase, use, or sale of telecommunications by a provider of a service described in(a) to the extent those telecommunications are purchased, used, or sold to provide that service or to otherwise enable users to access content, information or other services offered over the Internet;

(c) services that are incidental to the provision of the service described in (a) when furnished to users as part of that service, such as a home page, electronic mail and instant messaging (including voice and video capable electronic mail and instant messaging), video clips, and personal electronic storage capacity; and

(d) a home page, electronic mail and instant messaging (including voice and video capable electronic mail and instant messaging), video clips, and personal electronic storage capacity, that are provided independently or not packaged with Internet access.

Internet access does not include voice, audio or video programming, or other products and services described in (a), (b), (c), or (d) that utilize Internet protocol or any successor protocol and for which there is a charge that is either separately stated or aggregated with the charge for services in (a), (b), (c), or (d).

Sections 40-21-80 and 40-21-100, Code of Alabama 1975, exempt Internet access charges from utility gross receipts tax and the utility service use tax as enacted by Alabama Act 98-654 in 1998.

The new law amends the definition of Internet access to make clear that a product or service which is delivered by the Internet is not necessarily tax free. The new definition ensures that the state and local tax base is not eroded as more services are delivered by the Internet. When an Internet service provider bundles content, information and services that might otherwise be taxable with Internet access, the new language eliminates the interpretation that the entire bundle is tax exempt.

Section 40-21-82, Code of Alabama 1975, allows providers of telephone services to combine or bundle taxable and nontaxable services on one invoice and charge the customer tax on the taxable charges.

The legislation specifically prohibits taxation of e-mail and instant messaging services that are provided independently or not packaged with Internet access. Telecommunications services such as telephone services, cellular services, paging services and facsimile services that are not used to provide access to the Internet are subject to tax.

Section 40-21-82, Code of Alabama 1975, levies a privilege or license tax against every utility furnishing telegraph or telephone services in the State of Alabama. The amount of the tax is determined by the application of rates against gross sales or gross receipts from the furnishing of such services in the State of Alabama. Alabama code provides no exemption or exclusion for telephone services provided by the Internet.

Voice over Internet Protocol (VoIP) and any other form of telephony and similar services that utilize Internet protocol are excluded from the amended definition of Internet access and are not included in the federal moratorium. These types of telephony and telecommunications services continue to be subject to the Alabama Utility telecommunications services tax.

As of November 30, 2018, the federal government updated its credit card program.  The General Services Administration (GSA) has entered into contracts with Citibank and US Bank under the program named GSA SmartPay® 3.  (www.gsa.gov/gsasmartpay)  The following information is provided to assist Alabama vendors in determining whether or not tax applies to transactions paid by GSA SmartPay® 3 cards.

The GSA SmartPay® 3 program provides four business lines (card types):  Purchase, Travel, Fleet, and Integrated (includes fleet, travel and/or purchase functionality and offers a single card for all purchases.)  These cards/accounts can be Centrally Billed Accounts (CBAs) or Individually Billed Accounts (IBAs).

Centrally Billed Accounts (CBAs) are charge card accounts in which all charges are billed directly to the federal government and paid directly by the federal government to the issuing bank.  (Sales tax is not due on credit card purchases which are centrally billed to and paid by the federal government.  Lodgings tax is not due on charges for lodgings which are centrally billed to and paid by the federal government.)

Individually Billed Accounts (IBAs) are charge card accounts in which charges are paid directly by the cardholder/federal employee to the issuing bank; the federal employee is then reimbursed by the government.  (Sales tax and lodgings tax are due on credit card transactions where the purchases or charges for lodgings are billed to and paid by federal employees, who are then reimbursed by the federal government.)

Tax Advantage Travel Accounts (CBA/IBA) are charge card accounts in which charges for rental cars and lodging are paid directly by the federal government to the issuing bank and charges for travel-related purchases such as meals and incidentals are paid directly by the cardholder/federal employee to the issuing bank; the federal employee is then reimbursed by the government.  (Sales tax and lodgings tax are due on credit card transactions where the purchases or charges are billed to and paid by federal employees, who are then reimbursed by the federal government.)

  • Purchase Cards are for purchasing general supplies and services.  All federal government GSA SmartPay® 3 Purchase cards are centrally billed.  Therefore, transactions paid for with this card are tax-exempt.
  • Fleet Cards are for purchasing fuel and supplies for government vehicles.  All federal government GSA SmartPay® 3 Fleet cards are centrally billed. Purchases of tangible personal property paid for with this card are exempt from sales taxes. However, purchases of fuel paid for by this card are not exempt from state fuel excise taxes.
  • Travel Cards are for paying travel expenses related to official government travel (airline, hotel, meals, incidentals).  Federal government GSA SmartPay® 3 Travel cards may be centrally billed or individually billed.  The Travel card uses the 6th digit of the account number to identify whether the account is a Centrally Billed Account or an Individually Billed Account.  If the sixth digit is 1, 2, 3, or 4, the transactions against the Travel card are individually billed to the federal employee, and, therefore, the transactions are subject to applicable taxes.  See the chart below.
  • Integrated Cards – Two or more business lines (card types) whose processes are integrated into one card.
    • All Fleet and Purchase type transactions on a GSA SmartPay® 3 integrated card are centrally billed. Purchases of tangible personal property paid for with this card are exempt from sales taxes. However, purchases of fuel paid for by this card are not exempt from state fuel excise taxes.
    • Travel functionality on a GSA SmartPay® 3 integrated card may be centrally billed or individually billed.  The numbering structure for Integrated Cards to differentiate between centrally and/or individually billed transactions will be specific to each agency / organization using the integrated card.  This information will be provided on the GSA SmartPay® website (www.gsa.gov/gsasmartpay) as it becomes available.

Department of the Interior:  With the exception of the purchase of meals and incidental travel expenses which are individually billed and subject to sales tax, transactions paid for with the Department of the Interior’s integrated card are centrally billed and exempt from sales and lodgings tax. Purchases of fuel paid for by this card are not exempt from state fuel excise taxes.

The Department of the Interior GSA SmartPay® 3 charge cards can be identified by their unique prefixes and account numbers, government-designed artwork, and wording that indicates that the card is for official transactions for the U. S. Government.  The Department of the Interior Integrated Card account numbers begin with 5568 26.

Purchase
Travel
Fleet
     
Prefix (1st four digits)
4614 – Visa
4715 – Visa
4716 – Visa
5565 – MasterCard
5568 – MasterCard
4614 – Visa
4615 – Visa
4716 – Visa
4486 – Visa
5565 – MasterCard
5568 – MasterCard
4614 – Visa
4486 – Visa
5563 – MasterCard
5565 – MasterCard
5568 – MasterCard
5565 – WEX
6900 – WEX
7071 – WEX
7088 – Voyager
6th Digit
NA
0
CBA
1
IBA
2 – 4
IBA
5
CBA/IBA*
6 – 9
CBA
NA

*Tax Advantage card purchases are centrally billed for lodgings and rental car expenses and individually billed for meals and incidentals.

The Bulk Upload method allows you to create a comma delimited text file for each tax type that contains your client’s return and payment information to upload to the system. These files can be created using a spreadsheet program (i.e., Excel) and saved as a comma delimited text file with either a .txt or .csv file extension. A separate file is required for each tax type using the following layouts. Note: If a header row is used during the creation of the file it should be removed prior to uploading since the system will begin importing with the first row of the file. Learn more about Bulk Filing 

Before you can enter your client’s return information using the tax return form your client must first set their account to allow third party logons. Then you must add your client’s account to your Account List by logging on to MAT and clicking the “Add Access to Another Account” link on the left side of the Home screen. Then you will need to enter your client’s tax account number, E-file Sign on ID, E-file Access Code and the third party password that your client created when setting their MAT profile to allow third party logons. Once the account is added you can access it by clicking the account number link on the accounts list.

Bulk Filing is a method for third party tax preparers to submit multiple clients’ returns in a single file upload. To receive Third Party/Bulk Filing Status, you must submit the Third Party/Bulk Filing Application. Once approved, you will receive an “Agent” account that you can use to sign on to the MAT system. With an Agent account, and your client’s approval, you will be able to file returns and submit payments on your client’s behalf using a single login. There are two options for filing and paying returns using your MAT login. You can enter the information on the return form on each of your client’s accounts or you can create text files, by tax type, that contain your client’s return and payment information for uploading to the system.