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Rental or Leasing Tax

  • Rental or Leasing Tax

Rental or leasing tax is a privilege tax levied on the lessor for renting or leasing of tangible personal property. The gross receipts, including any rental tax invoiced, from the rental or leasing of tangible personal property are subject to the state rental tax.

This tax is due on true leases (those leases in which the title to the property is retained by the lessor at the end of the lease agreement or when the lessee has an option to purchase the item at the end of the lease agreement for the fair market value of the item).

Conditional sales leases (those in which the title of the property is transferred to the lessee at the end of the lease agreement or when the lessee has an option to purchase the item at the end of the lease agreement for $1 or a nominal amount with no option to return the leased item without purchasing) are subject to sales tax. When equipment is under the control of and operated by employee of lessor, then the transaction is considered a service rendered and is not subject to rental tax.

Local Rental Tax

Local rental tax is levied in the same manner as the state rental tax and these rates vary. Local rental 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 rentals. 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 biannual filing if you have a tax liability of less than $1,200 for the preceding calendar year.  You may also request biannual filing if you make rentals 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 rentals 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, biannually or annually for that calendar year.   No discounts apply for timely filing. Note: If paying electronically, the EFT payment information must be transmitted by 4:00 p.m. (central time) on or before the due date, to be considered timely paid.