About Sales Tax
Sales tax is a privilege tax imposed on the retail sale of tangible personal property sold in Alabama
by businesses located in Alabama. The tax is collected by the seller from their customer and
remitted directly to the state. All sales of tangible personal property are retail sales except those
defined as wholesale sales.
Withdrawals are items purchased at wholesale which are withdrawn for use. A withdrawal would include any items that are purchased tax-free for resale, but are withdrawn from inventory and used by the owner/employees instead of being sold. Withdrawals are subject to tax and the cost of these items should be reported on the sales tax return. A withdrawal also includes the cost of items withdrawn from inventory and used by the seller and/or employees in making additions to real property.
What type of sales are made where no sales tax is due?
- Sales of Exempt Items – Some of the more common items which are exempt are: prescription drugs, gasoline and motor oil (kerosene and fuel oil are taxable), fertilizer/insecticides/fungicides when used for agricultural purposes, seeds for planting purposes, feed for livestock and poultry (not including prepared food for dogs and cats), baby chicks and poults, livestock, sales to the U.S., state of Alabama and other governmental agencies of the state of Alabama, labor to repair or install property is exempt as long as it is billed as a separate item on the customer’s invoice (labor to fabricate an item is not exempt). Note: cigarettes and beer are not exempt from sales or use tax.
- Sales to Exempt Organizations – Sales made directly to the federal government, the state of Alabama and counties and cities within the state; sales made directly to schools (not daycares) within the state; sales made to city- and county-owned and operated hospitals and nursing homes; sales made to some nonprofit agencies that have been specifically exempted by the Alabama Legislature – examples include but are not limited to Alabama Sheriffs Boys Ranch, Boy Scouts and Girl Scouts of America. Note: Not all nonprofit organizations are exempt.
- Sales Paid For With Food Stamps – The exemption applies only to items which are actually purchased with food stamps. All other purchases by food stamp program participants remain subject to sales tax.
- Wholesale Sales (Sales for Resale) – Sales made to licensed retail merchants, jobbers, dealers, or other wholesalers for resale.
Local Sales Tax
In addition to the state sales tax, local sales taxes are also due, and these rates vary. The state of Alabama administers over 200 different city and county sales taxes; however, we do not administer all county or city sales taxes. Therefore, be advised to contact all counties and municipalities in which you do business in order to determine if you should register with them to collect their local tax. The discount for local sales tax is the same as for state sales tax. However, non-state administered local taxes that may be filed through My Alabama Taxes/ONE SPOT may have a different discount rate, and My Alabama Taxes has been programmed accordingly.
Filing Frequencies and Due Date
Sales tax is due monthly, with returns and remittances to be filed on or before the 20th day of the month for the previous month’s sales. However, pursuant to Section 40-23-7, Code of Alabama 1975, you may request quarterly filing status if you have a tax liability of less than $2,400 for the preceding calendar year.
You may request bi-annual filing if you have a tax liability of less than $1,200 for the preceding calendar year. You may also request bi-annual filing if you make sales during no more than two 30-consecutive-day periods during the preceding calendar year.
You may request annual filing status if the tax liability for the entire preceding calendar year is less than $600.
You may also request annual filing if you make sales during no more than one 30-consecutive-day period during the preceding calendar year.
Changes to the filing status can only be requested each year before February 20 in order to file quarterly, bi-annually or annually for that calendar year.
Discounts apply for timely filing. Note: If paying via EFT, the EFT payment information must be transmitted by 4 p.m. (central time) on or before the due date, to be considered timely paid.
What is ONE SPOT?
ONE SPOT provides a single point of filing for all state-administered local sales, use, rental and lodgings taxes, as well as, non-state administered sales, use and rental taxes.