Consumer Use

What is Consumer Use Tax?

When you shop at retail stores and many other business establishments in Alabama, the price you pay for the retail purchases you make usually includes Alabama sales taxes. This tax is calculated at the rate of 4% of the cost of the item(s) you purchased. When you make retail purchases for similar items from businesses located outside of Alabama (mail order, Internet, telephone, while on vacation, etc.), you are responsible, as the consumer, for ensuring that the Alabama sales tax (which is called a “consumer use tax”) is paid on these purchases if the business from which you made your purchase did not charge you sales tax for your purchase(s) and if the items you purchased are delivered to or brought back with you to Alabama.

What retail purchases are subject to Alabama Consumer Use Tax?

Examples of retail purchases subject to sales (or consumer use) tax:

  • Clothing
  • Books
  • Computers
  • Computer
  • Software
  • Furniture
  • Magazine
  • Subscriptions
  • Sporting Goods
  • Jewelry
  • Electronic Equipment
  • CDs, DVDs, Audio & Video Cassettes
  • Photographic Equipment
  • Musical Equipment
  • Automotive Accessories and Parts

All other retail purchases subject to Alabama sales taxes

Is there a credit for the sales taxes that are paid to the other states?

If you were charged a sales tax (other than Alabama sales tax) by the out-of-state business for the item(s) you purchased, you are allowed a credit against your Alabama consumer use tax due for the amount of the sales tax you paid with your purchase, not to exceed 4% of the purchase price.

Note: Do not compute use tax on:

  • Automobiles
  • Trailers, truck trailers, semi-trailers, travel trailers
  • Mobile homes
  • Motor boats which must be titled in Alabama

Alabama Tax Remittance

How do I amend a return?

If you discover that you have made an error on a sales tax report previously filed with RDS, you should amend the return. You can use a copy of your original return. The report form should be marked “AMENDED” and forwarded to RDS with any additional tax, penalty and interest due.
Send amended returns to the following address:
RDS
Attn: Amended Returns
600 Beacon Pkwy W
Suite 900
Birmingham, AL 35209

Are sales of goods made via the Internet taxable?

Yes. ON-LINE RETAIL SELLERS LOCATED OUTSIDE ALABAMA: The retail sale of goods made over the Internet that are delivered into Alabama from an out-of-state seller are treated the same as the retail sale of tangible personal property made through more traditional channels, with the same “nexus” rules applying to both. A retail vendor has “nexus” in Alabama if they have a physical presence in Alabama, such as a retail store, warehouse, inventory, or regular presence of traveling salespeople or agents. If the retail vendor has nexus in Alabama, the tax reporting responsibility lies with the retail vendor to register with RDS to charge, collect and remit the appropriate Sellers Use Tax to the RDS (Local sellers use taxes also apply and should also be charged, collected and remitted to the appropriate administering authorities). If the retail vendor does not have nexus with Alabama, the tax reporting responsibility passes to the consumer/purchaser and they would be responsible for self-assessing the use tax and remitting it via a consumers use tax return to the ADOR and to the appropriate administering authorities. However, please note that some retail vendors that do not have nexus in Alabama elect to register with RDS on a voluntary basis to charge, collect and remit the use tax to RDS as a convenience to their customers.

ON-LINE RETAIL SELLERS LOCATED IN ALABAMA: The retail sale of goods made over the Internet by Alabama retailers to Alabama customers are subject to Alabama Sales Tax. The tax reporting responsibility lies with the Alabama retail vendor to charge, collect and remit the Sales Tax on such sales, as these sales are treated the same as the retail sale of tangible personal property made through more traditional channels. Local sales tax or use tax also applies and should be remitted to the appropriate administering authorities.

If Alabama residents purchase items through mail order sales or other direct marketing alternatives, are these sales taxable?

Yes. Retail sales of tangible personal property delivered into Alabama from an out-of-state location are subject to Alabama use tax, regardless of the method of ordering the item – i.e. via mail-order catalogs, cable tv shopping, the Internet, by telephone, etc. If the out-of-state seller has “nexus” in Alabama, the tax reporting responsibility lies with the retail seller to register with the ADOR to charge, collect and remit the appropriate tax to RDS. (A retail vendor has “nexus” in Alabama if they have a physical presence in Alabama, such as a retail store, warehouse, inventory, or regular presence of traveling salespeople or agents.) If the retail seller does not have nexus in Alabama, the tax reporting responsibility passes to the consumer/purchaser and they would be responsible for self-assessing the use tax and remitting it to RDS via a consumers use tax return However, please note that some retail vendors that do not have nexus in Alabama elect to register with RDS on a voluntary basis to charge, collect and remit the use tax to RDS as a convenience to their customers.

SALES TAX

Sales tax is a privilege tax imposed on the retail sale of tangible personal property sold in Alabama by businesses located in Alabama. The tax is collected by the seller from their customer and remitted directly to the state. All sales of tangible personal property are retail sales except those defined as wholesale sales.

WHOLESALE SALES

Wholesale sales are sales of tangible personal property to licensed retail merchants, jobbers, dealers, or other wholesalers for resale. It does not include sales to users or consumers that are not for resale. The seller must maintain the sales tax number or exemption number for these customers.

When is the sales tax due?

The sales 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 sales. However, beginning with calendar year 1999, a taxpayer may elect to file and pay state sales tax on a calendar quarter basis when the total state sales tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year. The election to file and pay quarterly shall be made in writing to RDS no later than February 20 of each year. Also, if a taxpayer’s total local sales tax liability during the preceding calendar year is $10 or less, the taxpayer may file state sales tax on a calendar year basis.

If the 20th falls on a weekend or holiday, when is the due date?

The return must be postmarked on or before the next working day to be timely filed.

Is the seller allowed a discount for timely filing and paying the sales tax due?

Yes. A discount is allowed if the tax is paid before the 20th day of the month in which the tax is due. The sales tax discount consists of 5% on the first $100 of tax due, and 2% of all tax over $100.

WITHDRAWALS

Withdrawals are items purchased at wholesale which are withdrawn for use. A withdrawal would include any items that are purchased tax free for resale, but are withdrawn from inventory and used by the owner/employees instead of being sold. Withdrawals are subject to tax and the cost of these items should be reported on the sales tax return. A withdrawal also includes the cost of items withdrawn from inventory and used by the seller and/or employees in making additions to real property.

Section

1.5% of the net difference paid for farm machinery; this rate also applies to the gross receipts from sales of machines, parts, and attachments for machines used in manufacturing, processing, compounding, mining, and quarrying tangible personal property. 2% of the net difference paid for new and used automotive vehicles, truck trailers, semi-trailers, and manufactured homes. 3% of the retail sales price of food for human consumption sold through coin-operated vending machines. 4% of the gross receipts of sales of all tangible personal property, other than that listed previously and specifically exempted by law, and the gross receipts from places of entertainment or amusements.

SELLERS USE TAX

Sellers use tax is imposed on the retail sale of tangible personal property sold in Alabama by businesses located outside of Alabama which have no inventory located in Alabama, but are making retail sales in Alabama via sales offices, agents, or by any significant recurring contact or “nexus” with Alabama. The tax is due monthly, with returns and remittances to be filed on or before the 20th of the month for the previous month’s sales. However, beginning with calendar year 1999, a taxpayer may elect to file and pay state use tax quarterly when the total state use tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year. The election to file and pay quarterly shall be made in writing to the ADOR no later than February 20 of each year. Also, if a taxpayer’s total state use tax liability during the preceding calendar year is $10 or less, the taxpayer may file state use tax on a calendar year basis. Businesses filing timely reports are entitled to a 3% discount of the tax due.

LOCAL SELLERS USE TAX

The local sellers use 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 sales. Beginning with the calendar year 1999, a taxpayer may elect to file and pay state-administered local use tax quarterly when the total state sales tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year and the total state use tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year. The election to file and pay quarterly shall be made in writing to the ADOR no later than February 20 of each year. Also, if a taxpayer’s total state sales tax liability during the preceding calendar year is $10 or less, the taxpayer may file local use tax on a calendar year basis.

CONSUMERS USE TAX

The consumers use tax is imposed on tangible personal property brought into Alabama for storage, use, or consumption in the state when the seller did not collect seller’s use tax on the sale of the property. The tax rates due are the same rates as for sales tax. The tax is due monthly, with returns and remittances to be filed on or before the 20th day of the month following the month in which the purchase was made. However, beginning with calendar year 1999, a taxpayer may elect to file and pay state use tax quarterly when the total state use tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year. The election to file and pay quarterly shall be made in writing to the ADOR no later than February 20 of each year. Also, if a taxpayer’s total state use tax liability during the preceding calendar year is $10 or less, the taxpayer may file state use tax on a calendar year basis. No discounts apply for timely filing. The tax rates due are the same rates as for State sales tax. There may also be city and/or county consumers use tax due; these rates vary.

LOCAL CONSUMERS USE TAX

Many cities and counties have use tax requirements patterned after the State law. Purchases from in-state vendors located outside these cities and counties for use within could be subject to their use tax. These rates vary. If a local city or county sales/use tax is paid under a requirement of law, no other additional local tax is due for the subsequent use in another city or county. The local consumers use tax is due monthly, with returns and remittances to be filed on or before the 20th day of the month following the month in which the purchase was made. Beginning with the calendar year 1999, a taxpayer may elect to file and pay state-administered local use tax quarterly when the total state sales tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year and the total state use tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year. The election to file and pay quarterly shall be made in writing to the ADOR no later than February 20 of each year. Also, if a taxpayer’s total state sales tax liability during the preceding calendar year is $10 or less, the taxpayer may file local use tax on a calendar year basis. No discounts apply for timely filing.

RENTAL TAX

Rental tax is a privilege tax levied on the lessor for the leasing or renting of tangible personal property. The gross receipts, including any rental tax invoiced, from the leasing or rental of tangible personal property are subject to the State rental tax at the following rates:
Automotive vehicles ……………1.5%
Linens/Garments………………..2.0%
Other……………………………………4.0%
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) are subject to sales tax. When an operator is provided with the leased equipment the transaction is considered a service rendered and is not subject to rental tax. Rental tax returns and remittances are due monthly on or before the 20th day of the month for the previous month’s rentals. However, beginning with calendar year 1999, a taxpayer may elect to file and pay state rental tax quarterly when the total state rental tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year. The election to file and pay quarterly shall be made in writing to the ADOR no later than February 20 of each year. Also, if a taxpayer’s total state rental tax liability during the preceding calendar year is $10 or less, the taxpayer may file local rental tax on a calendar year basis. No discounts apply for timely filing. Note: If paying via EFT, the EFT payment information must be transmitted by 3:45 p.m. (Central Standard Time) one working day before the due date, to be considered timely paid.

LOCAL RENTAL TAX

Local rental tax is levied in the same manner as the State rental tax; 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, beginning with calendar year 1999, a taxpayer may elect to file and pay state-administered local rental tax quarterly when the total state rental tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year. The election to file and pay quarterly shall be made in writing to the ADOR no later than February 20 of each year. Also, if a taxpayer’s total state rental tax liability during the preceding calendar year is less than $10, the taxpayer may elect to file state rental tax on a calendar year basis. No discounts apply for timely filing. Note: If paying via EFT, the EFT payment information must be transmitted by 3:45 p.m. (Central Standard Time) one working day before the due date, to be considered timely paid.

You can now prepare, file and pay this return online. Click here for more information regarding online filing.

LODGINGS TAX

The lodgings tax is a privilege tax on persons, firms, and corporations engaged in renting or furnishing rooms, lodgings, or other accommodations to transients for periods of less than 30 days of continuous occupation and applies to all charges for providing such accommodations. This tax also applies to charges for personal property used or furnished in such rooms or lodgings. Some examples of entities subject to this tax are those entities engaged in the operation of: hotels, motels, lodges, inns, tourist courts, tourist homes, camps, trailer courts, or any other place where rooms, apartments, cabins, sleeping accommodations, house trailer parking accommodations or other accommodations are made available to travelers, tourists, or other transients. The 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 lodgings. A discount is allowed if the tax is paid before the 20th day of the month in which the tax is due. The lodgings tax discount consists of 5% on the first $100 of tax due, and 2% of all tax over $100. Note: If paying via EFT, the EFT payment information must be transmitted by 3:45 p.m. (Central Standard Time) one working day before the due date, to be considered timely paid.

LODGINGS TAX RATES

The state lodgings tax rate is 5% of the charges for accommodations in counties of the geographic region comprising the Alabama Mountain Lakes area (those being Blount, Cherokee, Colbert, Cullman, DeKalb, Etowah, Franklin, Jackson, Lauderdale, Lawrence, Limestone, Madison, Marion, Marshall, Morgan and Winston counties). In all other Alabama counties, the state lodgings tax rate is 4% of the charges for accommodations.

LOCAL LODGINGS TAX

The applicable local lodgings tax rate should be charged in addition to the State lodgings tax; these rates vary. Local lodgings 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 lodgings. The discount for local lodgings tax is the same as for the State lodgings tax. Note: If paying via EFT, the EFT payment information must be transmitted by 3:45 p.m. (Central Standard Time) one working day before the due date, to be considered timely paid. You can now prepare, file and pay this return online.

Click here for more information regarding online filing.

OVER COLLECTIONS LAW

According to Section 40-23-26(d), Code of Alabama 1975, any over collection of sales tax by a retailer from the customer must be paid to the State unless such over collection results solely from rounding the correct amount of tax upward to the nearest cent. Over collections of local sales tax must be reported and paid on your local sales tax return in the same manner as over collections are to be reported on your State sales tax return.

How do I apply or register for a sales tax number?

To apply or register for a sales tax number, you will need to complete the Combined Registration/Application/Change Form, (form COM:101). Click here to download the COM:101 form. You can also call or write the Central Registration Unit at (334) 242-1170 or Alabama Department of Revenue, Central Registration Unit, P.O. Box 327100, Montgomery, AL 36132-7100, for the required form. Mail the completed application to this address also. Other account numbers that you may need, such as Rental Tax, Lodgings Tax, Sellers Use Tax, Consumers Use Tax and Income Tax Withholding, can be applied for by completing this same form. The Combined Registration/Application/Change Form was designed to allow businesses the opportunity to complete one all-inclusive form that will satisfy many needs and eliminate filing multiple forms in an effort to simplify the registration procedures.

Am I required to register for a sales tax number if I only make wholesale sales?

No. However, you can contact the Sales and Use Tax Administration Section, or any local Taxpayer Service Center to determine if a Certificate of Exemption, Consumer’s Use Tax number, or other registration is required.

Do I need to file a sales and/or sellers use tax return for a month in which I had no sales?

Yes. Once an account has been established for your business, no matter what type of tax account you have, a tax return must be filed for each month even though no tax is due.

Are non-profit organizations exempt from sales and use taxes?

No. Charitable and nonprofit organizations and institutions, per se, have no special exemption from the sales and use taxes. However, some non-profit and charitable organizations may be exempt from sales and/or use taxes by special Acts passed by the legislature. (See Rule 810-6-3-.07.05)

Are churches exempt from sales and use taxes?

No. Religious organizations and institutions, including churches, church hospitals, etc., are not exempt from the payment of sales and use taxes.

If I have several locations in Alabama, do I need separate sales tax numbers for each location?

No. If the legal ownership of the locations is the same, only one sales tax number will be assigned. Sales should be combined and reported on one return.

What type of sales are made where no tax is due?

Sales of Exempt Items: Some of the more common items which are exempt are: lubricating oil, gasoline, feed for livestock (does not include dog or cat food), fertilizer when used for agricultural purposes, insecticides when used for agricultural purposes or by persons who are properly permitted for structural pest control work. Labor to repair or install property is exempt as long as it is billed as a separate item on the customers invoice. (Labor to fabricate an item is not exempt.) Note: Cigarettes and beer are NOT exempt from sales tax or use tax.

Sales to Exempt Organizations: Sales made directly to the federal government, the State of Alabama and counties and cities within the State; sales made directly to Schools (not daycares) within the State; sales made to City and County owned and operated hospitals and nursing homes; sales made to some non-profit agencies that have been specifically exempted by the Alabama Legislature – examples include but are not limited to Alabama Sheriffs Boys Ranch, Boy Scouts & Girl Scouts of America. Note: Not all non-profit organizations are exempt.

Sales Paid For With Food Stamps: The exemption applies only to items which are actually purchased with food stamps. All other purchases by food stamp program participants remain subject to sales tax.

Wholesale Sales (Sales for Resale): Sales made to licensed retail merchants, jobbers, dealers, or other wholesalers for resale.

If I change the name of my business will my tax number change?

If you are changing the trade name or “doing business as” name of your business, your sales tax number will not change. However, if the change is deemed to be a change in legal entity, new numbers will be assigned. For instance, if you change from a proprietorship to a partnership or a corporation, this is a change in legal entity. A new Application (i.e. Combined Registration/Application/Change Form, form COM:101) will be required and a new sales tax number will be assigned.

If I change my mailing address will my sales tax number change?

Sales tax numbers are designed to correspond to the county in which a business is located. Changing your mailing address will not change your sales tax number unless: (1) you open an additional location in a different county and change the mailing address in order to receive your coupons at the new location, or (2) you change your mailing address to an out of state mailing address.

Are freight charges taxable?

According to Rule 810-6-1-.178, if delivery is made in the sellers own vehicle, or in equipment leased by him, the transportation charges are subject to sales or use tax. If delivery is made by common carrier or the U.S. Postal Service, the transportation charges shall not be subject to sales or use tax if billed as a separate item and paid directly or indirectly by the purchaser. To be excluded from the measure of tax, these transportation charges must be separate and identifiable from other charges.

Who do I contact to obtain an abatement?

Abatements are authorized to be granted by the governing body of a: (A) municipality for private use industrial property located within the corporate limits of the municipality or within the police jurisdiction of the municipality; (B) county for private use industrial property located in the county and not within a municipality or its police jurisdiction, unless consented to by resolution of the governing body of the municipality; or (C) a public industrial authority for private use industrial property located within the jurisdiction of the public industrial authority.

Once an abatement of sales and use taxes has been granted, what is the next step?

The private user should send a copy of the executed abatement agreement, a certified resolution by the public body, the combined application for abatement (Form CO:CAA) and the certificate of exemption application form (Form ST:EX-A2) to the Department of Revenue at the following address within 90 days after the abatement is granted: Alabama Department of Revenue, Commissioner’s Office, ATTN: Abatement Program Director, P.O. Box 327001, Montgomery, AL 36132-7001.

What qualifies as a major addition for abatement purposes?

Any addition to a qualifying existing industrial development property where the amount to be invested equals or exceeds 30% of the original cost of the existing land, building and equipment or $2,000,000.