Do you need to collect and remit sales tax in Alabama?
Businesses selling in Alabama must collect and remit sales tax if they 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. We explore more information about nexus below.
Note: Like many states, Alabama exempts certain sales and services from taxation. A few examples of these are:
- Prescription drugs
- Gasoline and motor oil, (kerosene and fuel oil are taxable)
- Feed for livestock and poultry
- Labor to repair or install property
- Sales paid for with food stamps
- Sales for resale (wholesale sales)
Do you have sales tax nexus in Alabama?
There are two types of nexuses: physical and economic. Businesses with physical nexus have tangible presence in Alabama, such as a physical location, employees, or inventory stored in-state. Economic nexus, on the other hand, refers to a connection to Alabama based on economic activity.
Physical sales tax nexus in Alabama
Examples of physical sales tax nexus in Alabama are:
- Retail stores
- Inventory storage
- Regularly traveling salespeople
- Regularly traveling representatives
Economic sales tax nexus in Alabama
The only qualification for having economic nexus in Alabama is if a retailer’s Alabama sales in the previous calendar year exceeded $250,000.
Are marketplace facilitators required to collect and remit sales tax in Alabama?
On January 1st, 2019, Alabama implemented the Marketplace Facilitator Law, which requires marketplace facilitators exceeding the economic nexus threshold to apply and register for a Simplified Sellers Use Tax (SSUT) account. If you sell through one of these marketplace facilitators, you do not have to obtain an Alabama sales tax license as the marketplace will collect and remit on your behalf.
What platforms are marketplace facilitators?
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
So, you’ve decided you need to start filing Alabama sales and use tax returns: how do you start? First, businesses must register for a My Alabama Taxes (MAT) account. There are three different types of sales tax imposed on different types of businesses, and whichever one applies to your business is the type of account you will need:
- Sales Tax – Businesses located within Alabama, who are selling tangible personal property into the state, must register for a Sales Tax Account and collect and remit sales tax.
- Seller’s Use Tax (SUT) – Seller’s Use Tax is imposed on the retail sale of tangible personal property sold in Alabama by businesses located outside the state. This only applies to businesses which have no inventory in Alabama but are making retail sales via sales offices or agents. If this describes your business, you will register for a Seller’s Use Tax Account and collect and remit seller’s use tax to Alabama.
- Simplified Seller’s Use Tax (SSUT) – Out-of-state sellers who want to collect and remit sales tax at a flat rate of 8% have the option to register for a Simplified Seller’s Use Tax (SSUT) Account. This type of tax collection relieves the marketplace facilitator, sellers, and purchasers from added state or local sales and use tax. Additionally, sellers approved for this account can deduct a 2% discount from their tax return if filed before the due date. While marketplace facilitators are required to apply for this type of account, it is optional for other out-of-state sellers.
After registering and being approved, you can file your tax returns through your account. Note that as of November 2003 the Alabama Department of Revenue implemented a paperless filing program, requiring all business taxpayers to file their taxes electronically, which is still in effect today.
Let us file for you!
If filing sales tax returns is too overwhelming or time-consuming, you’re not alone. Running a business is demanding work and filing tax returns is a nuisance. We at SalesTaxSolutions are here to make things easier! As a company, we help businesses like yours deal with the many state-by-state regulations and file your sales tax returns for you. We’ve got 20 plus years of knowledge and experience to help you get back to saving time and making money as soon as possible. Message, email or call us at 888-544-7730 for a free quote today!
When are sales tax returns due in Alabama?
Sales Tax, SUT, and SSUT returns are due monthly on or before the 20th for the previous month’s sales. Some conditions may allow you to request a different filing status:
- If you have a tax liability of less than $2,400 in the previous calendar year, you can request a quarterly filing status.
- If you have a tax liability of less than $1,200 or if you make sales during no more than two 30-consecutive-day periods in the previous calendar year, you may request a bi-annual filing status.
- If you have a tax liability of less than $600 or if you make sales during no more than one 30-consecutive-day period in the previous calendar year, you may request an annual filing status.
Changes to filing status can only be requested before February 20th of each year.