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.
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.
AvaRates Desktop – Comprehensive, accurate, and up to date database of sales and use tax rates and boundaries for all 50 states, U.S. territories, and possessions, as well as throughout Canada, for access by your billing system.
TrustFile Forms – TrustFile Forms helps you streamline the paper returns preparation process with a catalog of more than 1,000 state-approved forms for US States, US Possessions and Canada.