Total Range for 2025
| Base state sales tax rate | 4% | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate |
| Local rate range | 0%-7% | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate |
| Total rate range | 4%-11% | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate |
| Economic sales nexus threshold | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | |
| Transactions threshold | N/A | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate |
| Sales tax return filing due date | 20th of following month | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate |
The base state sales tax rate in Alabama is 4%, but since the local rates range from 0-7% the total sales tax range is 4-11%.
How to calculate your sales tax rate
Use our online sales tax calculator to determine the combined state and local sales tax rate for each location where you have a physical or economic nexus. Just enter your state and ZIP code to get your sales tax rate.
Example of using the sales tax rate in a tax calculation:
- You sell a product for $100.
- The buyer’s location has a combined state and local sales tax rate of 8%.
- Sales tax amount = $100 (product price) x 8% (tax rate) = $8
- You would collect $8 in sales tax from the buyer and remit it to the Alabama Department of Revenue.
Nexus: Why do you need to collect sales tax in Alabama?
If you’re selling goods and services in Alabama then sales tax might apply! To determine your obligation, we need to understand “nexus,” which ties businesses to states for tax purposes.
Two types of nexus exist:
- Physical Nexus: Having a physical presence, like an office, warehouse, or employees in Alabama, triggers this type. If you do, you likely need to collect sales tax.
- Economic Nexus: This kicks in when your sales within Alabama exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.
Services
Generally, services in Alabama are not taxable. There are a few exceptions, though:
- Services directly linked to selling taxable goods (e.g., software installation).
- Repair or maintenance services for taxable personal property.
Goods
Most tangible personal property sold in Alabama is taxable. This covers most physical items you can buy or sell.
There are some exemptions, including:
- Agricultural or industrial equipment (check with the Alabama Department of Revenue for specifics).
- Prescription drugs and medical devices.
Freight/Shipping
- The cost of shipping itself usually isn’t taxable in Alabama. However, it can increase the taxable value of the shipped goods.
Clothing
- In Alabama clothes are subject to sales tax unless it is a sales tax holiday
Electronics
- All sales of electronics are taxable
SaaS
- SaaS is considered a taxable service.
Digital Products
- Retail sales of photographs, blueprints, and similar items are subject to sales or use tax.
Software
- Downloaded software might be considered taxable tangible personal property.
- Pre-installed software on a device is likely part of the device’s sale and generally not taxable separately.
How to register for sales tax in Alabama
Alabama handles sales tax registration online through their My Alabama Taxes (MAT) system. Here’s how to register:
- Visit the Alabama Department of Revenue’s Business Tax Online Registration System: https://www.revenue.alabama.gov/sales-use/business-tax-online-registration-system/
- You’ll use the MAT system to apply for a tax account number. This number is necessary for filing and paying sales tax.
- The registration process is free and takes 3-5 business days to complete.
Our top tip? Make sure you have your personal identification information (Social Security number, address) and business identification information (Employer Identification Number (EIN), address, business entity type) readily available.
How to collect sales tax in Alabama
Alabama uses a destination-based sales tax system, meaning you need to charge the sales tax rate applicable to the buyer’s location, not your own.
Here’s a breakdown of the collection process:
- Determine Buyer Location: This is crucial for calculating the correct tax rate. You can obtain the buyer’s address during checkout or ask for it if unsure.
- Identify Applicable Tax Rate: Alabama has a base state sales tax rate. However, many localities (cities and counties) add their own local sales tax rates on top of the state rate.
- Calculate and Collect Sales Tax: Multiply the sales price of the good or service by the combined state and local sales tax rate for the buyer’s location. This will give you the amount of sales tax to collect from the buyer.
How to get a sales tax permit/license in Alabama?
Start by visiting the Alabama Department of Revenue’s Business Tax Online Registration System, where you can register for a tax account number essential for filing and paying sales tax. Proceed with completing the online registration, which is free and usually takes 3-5 business days to process. Make sure to have the following information on hand: your Social Security number and address for personal identification, and your Employer Identification Number (EIN), business address, and business entity type (e.g., sole proprietorship, LLC) for business identification.
When are Alabama’s sales tax returns due?
The due date for filing Alabama sales tax returns depends on the total amount of sales tax you collected during the preceding calendar year. Here’s a breakdown:
- Monthly Filing:
- If your sales tax liability for the previous calendar year averaged less than $2,400 per month ($28,800 annually), you are required to file and remit sales tax monthly on or before the 20th day of the month following the reporting period.
- Quarterly Filing:
- Businesses with a sales tax liability of less than $2,400 per month on average for the preceding year can elect to file quarterly. You must notify the Alabama Department of Revenue in writing by February 20th to choose this option.
- Quarterly filings are due on or before the 20th day of April, July, October, and January for the preceding quarter.
- Annual Filing:
- Businesses with an annual sales tax liability of less than $10 for the preceding year can file annually. The return and remittance are due on January 20th for the previous year.
Is anyone exempt from sales tax in Alabama?
Yes, there are some exemptions from sales tax in Alabama. Here are some examples:
- Non-prepared groceries: This includes most food items intended for home preparation, but excludes prepared food and hot beverages.
- Prescription drugs and medical devices: Essential medical items used to diagnose or treat a medical condition are exempt.
- Government Entities: Sales to federal, state, and local government agencies are generally exempt.
- Non-Profit Organizations: Qualified non-profit organizations, including churches and charities, may be exempt if they meet specific criteria.
- Resale Purchases: Purchases intended for resale are exempt, provided the buyer has a valid resale certificate.
