Alabama (AL) has a state sales tax rate of 4%. Depending on local municipalities, the total tax rate can be as high as 12%.

For example, Montgomery adds a rate of 2%, and Birmingham adds a rate of 4%. Prescription drugs are exempt from sales tax. Food is taxable.

Alabama was listed in Kiplinger’s 2011 10 tax-friendly states for retirees. Sales tax is low to moderate at the state level but becasue counties and local jurisdictions can impose levies that can add up to a 10% sales tax rate in some areas, Kiplinger noted that sales tax was the only downside for retirees.

In 2011, Alabama began the process to bring their rules, regulations and laws into compliance with the Streamlined Sales Tax Agreement in order to become a member state. Currently, Alabama has over 439 cities and 151 counties. The state only administers the taxes for 200 counties and cities, leaving nearly 400 receiving and managing their own sales taxes from local businesses. This situation could be improved with Alabama’s compliance and membership.

Penalties and interest are due if returns are not filed in a timely fashion. Late returns garner a charge of 10% of the tax amount due or $50, whichever is greater.

Timely payment of sales taxes can qualify the remitting business for a percent discount. The amount of discount depends on amount of tax being paid.

All persons or businesses that sell tangible personal property or operate places of entertainment or amusement must collect sales tax and make reports and payments to the Alabama Department of Revenue using an online registration system.

How to Register

Registration is through the Alabama Business Tax Online Registration System. Alabama provides online tutorials with instructions for registration. For state and local tax rates go here.

How to File and Pay

The Alabama Department of Revenue requires e-filing for all sales and use taxes over $750. The Alabama Department of Revenue provides My Alabama Taxes (MAT) to file and pay taxes online. Alternatively, taxes can be filed using an Electronic Funds Transfer program approved by the Alabama State Department of Revenue.

Deadlines

Alabama state returns and remittances are due on or before the 20th day of the month following the quarter during which tax is accrued. (Example: Tax accrued 1st Calendar Quarter x, is due April 20th). For a detailed tax calendar go here.

Sales Tax Holidays
Even though the state identifies some specific sales tax holidays, not every municipality is required to participate. Participation is voluntary. Each year, municipalities sign up and let the state know if they will be participating in the sales tax holidays, but this information is not always available until 30 days prior to the holiday itself, making the tracking and ensuring compliance for a tax holiday difficult and time consuming. Tax holiday information can be found at http://www.revenue.alabama.gov/salestax/STholiday.htm OR you can use AvaTax Calc, Avalara’s solution for sales and use tax calculation and never have to track sales tax holidays again.

Little known fact: Alabama in one of about a dozen states that implemented the use of sales tax tokens during the early 1900s.

Avalara Sales and Use Tax Products for Alabama

AvaTax – AvaTax is a powerful, online sales tax compliance solution that provides all businesses with a level of sales tax automation that until now has been available only to Fortune 500 companies. AvaTax’s transaction-based service model and seamless integration into business applications gives you rapid access to all jurisdiction assignments and real-time sales tax calculations. Cutting-edge technologies and superior processing logic can manage even the most complicated tax issues, such as situs, nexus, tax tiers, tax holidays, exemptions, certificate management and product taxability rules.

TrustFile - Avalara TrustFile provides detailed sales tax reporting for online sellers. Allowing businesses to know exactly where, when and how much to file. Ecommerce business owners can use TrustFile to determine whether or not they are collecting the right amount of sales tax in each individual state, and then store a record of their sales tax history securely in the cloud for free.

Alabama Department of Revenue