Alabama Sales Tax and Use Tax
What is the Alabama sales tax?
Taxes in Alabama are destination-based, meaning the Alabama sales tax rate is based, or determined from, the destination location an item is shipped to. This complicates business for retailers who need to have the exact and up-to-date sales tax rate for every shipment they make.
To see a full breakout of Alabama sales tax rates by state, county, city and special district, use our easy Alabama sales tax calculator. After putting in any ZIP code, you can enter a retail price to calculate Alabama sales tax totals.
What is the Alabama use tax?
The Alabama state use tax rate is not the same as the state, county, city and special district sales tax rates.
If you reside in AL, use tax is due to the state on any and all transactions where sales tax has not been paid, even out-of-state internet sales.
Who has to pay Alabama sales tax or use tax?
In general, a business must collect and remit all applicable Alabama sales taxes if that business has nexus, a physical presence such as a brick-and-mortar location, within a given state. The presence of an employee or salesperson, delivery by the seller's vehicle, and storage of materials usually establishes nexus as well.
Alabama says that an out-of-state seller is required to collect tax if they can be defined as "sellers with substantial nexus". Alabama has certain additional laws establishing nexus for other reasons such as out-of-state businesses using in-state affiliates, advertisers or vendors, or businesses that make internet sales or mail catalogs.
If you are not sure if you have established nexus in Alabama, you can usually get free help by contacting the Alabama Department of Revenue. Click here for an updated listing of direct phone numbers. You could also contact a qualified certified public accountant or lawyer who specializes in tax law in Alabama. Click here for listing of recommended resources.
Special rules applying to Alabama sales tax and use taxes
- Shipping is not taxable if separately stated and other specific terms are met.
- Finance charges are exempt from sales tax, when stated separately.
- Clothing is taxed at the same rate as the general sales tax.
- Alabama Sales tax holidays are held for Energy Star items as well as some back to school items and hurricane preparedness items.
Since Alabama legislators can vote to change the Alabama sales tax and use tax rates at any time, it is very difficult for individuals to keep track of the changes. The population of AL state is also rapidly changing, which can cause frequent updates to the ZIP codes and local municipality names and complicates the job of keeping track of Alabama sales tax jurisdictions.