Alabama Sales Tax Guide

Alabama Sales Tax Quick Facts

Do You Need to Collect and Remit Sales Tax in Alabama? 

You must collect and remit Alabama sales tax if you have nexus in the state, (meaning a connection or presence there). Businesses that operate or have physical location in Alabama already have nexus; for out-of-state sellers, nexus is determined by exceeding a gross threshold of Alabama sales.

Alabama Sales Tax Exemptions

Some products and services are exempt from Alabama’s sales tax, including:

• Prescription drugs 
• Gasoline and motor oil, (kerosene and fuel oil are taxable) 
• Livestock and animal feed
• Labor to repair or install property 
• Sales paid with food stamps 
• Wholesale/resale transactions

Alabama Sales Tax Rates

Statewide Tax Rates

• General Sales: 4.00%
• Food/Grocery: 2.00%
• Automotive Sales: 2.00%
• Manufacturing & Farm: 1.50%
• Vending (Food Products): 3.00%
• Vending (All Others): 4.00%

Local (City & County) Rates

In addition to the above rates, local jurisdictions impose their own sales taxes.

Combined rates often range from 8% to 11%, depending on location.

To find a specific rate, use the Alabama Local Tax Lookup Tool.

Do You Have Sales Tax Nexus in Alabama?

Physical Nexus

You have physical nexus in Alabama if your business has a tangible presence in the state. Examples include:

• An office, store, or warehouse in Alabama
• Inventory stored in the state
• Employees, agents, or representatives working in Alabama

Economic Nexus

Out-of-state sellers must register and collect Alabama sales tax if their sales exceed $250,000 of Alabama sales in the previous calendar year. This applies to all retail sales of tangible personal property shipped into Alabama from online, catalog, and remote sellers.

Are Marketplace Facilitators Required to Collect and Remit Sales Tax in Alabama? 

Since January 1, 2019, Alabama implemented the Marketplace Facilitator Law, which requires marketplace facilitators exceeding the economic nexus threshold to collect and remit sales tax on behalf of sellers. If you sell exclusively through a registered marketplace, you do not need your own Alabama sales tax license. 

Common Marketplace Facilitators 

1. Amazon  
2. Ebay  
3. Etsy  
4. Walmart (online)  

Not sure what defines a marketplace facilitator? In short, marketplace facilitators are companies that provide a platform or service for third-party sellers (you) to sell their products or services to customers. The facilitator collects payment from the customer, processes the transaction, and may also handle shipping and returns. 

Filing Alabama Sales Tax

To file Alabama sales tax, you will first need to register with the Alabama Department of Revenue (ADOR) through the My Alabama Taxes (MAT) system.

Depending on your business model, you’ll need to register for one of the following accounts:

1. Sales Tax Account – For Alabama-based businesses selling tangible goods in-state.
2. Seller’s Use Tax (SUT) – For out-of-state sellers which have no physical presence in Alabama.
3. Simplified Seller’s Use Tax (SSUT) – A flat-rate program for remote sellers that simplifies compliance and qualifies for a 2% discount if filed before the due date. Marketplace facilitators are required to apply for this type of account, but it is optional for other out-of-state sellers. 

After registering and being approved, you can file your tax returns through your account. It is important to note that Alabama requires all business taxpayers to file their taxes electronically.  

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When Are Sales Tax Returns Due in Alabama? 

Sales tax returns are generally due monthly, on or before the 20th of the following month. However, smaller sellers may qualify for less frequent filing.

Requests for changes to filing frequency must be submitted before February 20 each year.