Alabama — Sales & Use Tax

Alabama imposes a 4% state sales tax on persons engaged in the business of selling tangible personal property at retail within the state. The tax is characterized as a privilege or license tax levied against the seller, measured by gross sales or gross receipts. The 4% general rate applies to most retail sales of tangible personal property, including merchandise and commodities of every kind and character, though certain items such as bonds and other securities are excluded.

Reduced rate for food

Effective September 1, 2025, Alabama taxes retail sales of food at a reduced state rate of 2%, down from the prior 3% rate. The reduction was enacted by Act 2025-305 and represents the second phase of a two-step reduction from the original 4% rate (the first 1% reduction took effect September 1, 2023, under Act 2023-554). The 2% rate applies to "food" as defined in 7 U.S.C. § 2012 for purposes of the federal Supplemental Nutrition Assistance Program (SNAP). This definition generally includes any food or food product for home consumption, except alcoholic beverages, tobacco, hot foods, or hot food products ready for immediate consumption. Cold groceries purchased for home preparation qualify for the 2% rate; prepared hot foods and restaurant meals remain subject to the full 4% state rate.

Other reduced rates

Alabama taxes retail sales of automotive vehicles, truck trailers, semitrailers, house trailers, and mobile home setup materials and supplies at 2%, and retail sales of certain industrial machinery used in mining, quarrying, compounding, processing, and manufacturing at 1.5%.

Local sales taxes

Local jurisdictions impose additional sales taxes on top of the state rate, resulting in combined rates that vary by location. Local rates apply to both the 4% general category and the 2% food category, though some local jurisdictions have elected to reduce or eliminate their local tax on food.

Source: Ala. Code § 40-23-2; ADOR Notice: State Sales and Use Tax Rate Reduced on Food Beginning September 1, 2025

Alabama requires out-of-state sellers without physical presence to register and collect sales or use tax when their retail sales of tangible personal property into Alabama exceed $250,000 per year based on the previous calendar year's sales. This threshold applies prospectively; enforcement began October 1, 2018 following the U.S. Supreme Court's decision in South Dakota v. Wayfair. Alabama does not impose a transaction-count threshold—only a dollar-volume test.

The $250,000 calculation includes both taxable and non-taxable retail sales made directly by the seller, but excludes wholesale sales for resale (where the buyer presents a valid Alabama sales tax license or resale certificate) and sales made through a marketplace facilitator that is already collecting Alabama tax on the seller's behalf. Remote sellers who exceed the threshold can comply by either registering under Alabama's traditional sales and use tax system or by enrolling in the Simplified Sellers Use Tax (SSUT) program, which allows collection at a flat 8% rate statewide.

Source: Ala. Admin. Code r. 810-6-2-.90.03; ADOR Sales & Use Tax Guidance for Online Sellers (July 3, 2018); Simplified Sellers Use Tax program

Alabama imposes an excise tax on the storage, use, or other consumption of tangible personal property purchased at retail. The use tax is complementary to the sales tax and applies when sales tax has not been collected. Every person storing, using, or otherwise consuming tangible personal property purchased at retail is liable for the tax, and the liability is not extinguished until the tax has been paid to the state; however, a receipt from a retailer maintaining a place of business in Alabama (or authorized by the Department of Revenue to collect the tax) relieves the purchaser from further liability for that transaction.

General rate

Ala. Code § 40-23-61(a) imposes use tax on tangible personal property at the rate of 4% of the sales price (or the amount of tax collected by the seller, whichever is greater). This is the general rate that applies to most tangible personal property subject to use tax.

Reduced rate for food

Ala. Code § 40-23-61(d) imposes use tax on the storage, use, or consumption of food at a reduced rate. Effective September 1, 2025, the food use tax rate is 2%, down from 3% (the prior rate from September 1, 2023, through August 31, 2025), and down from the original 4% rate. The reduction to 2% was enacted by Act 2025-305. "Food" is defined as food as defined in 7 U.S.C. § 2012 for purposes of the federal Supplemental Nutrition Assistance Program (SNAP), regardless of where or by what means food is sold. SNAP-eligible food items generally include any food or food product for home consumption, except alcoholic beverages, tobacco, hot foods, or hot food products ready for immediate consumption.

Industrial machinery

Ala. Code § 40-23-61(b) imposes use tax at the rate of 1.5% of the sales price on machines used in mining, quarrying, compounding, processing, and manufacturing of tangible personal property. The statute defines "machine" to include machinery used for those purposes, and the parts, attachments, and replacements made or manufactured for use on or in the operation of such machinery.

Automotive vehicles

Ala. Code § 40-23-61(c) imposes use tax at the rate of 2% on automotive vehicles, truck trailers, semitrailers, house trailers, and certain mobile home setup materials and supplies. (Automotive vehicles that are subject to state registration requirements are addressed in a separate statutory scheme at Ala. Code §§ 40-23-101 through 40-23-111.)

Source: Ala. Code § 40-23-61; ADOR Notice: State Sales and Use Tax Rate Reduced on Food Beginning September 1, 2025

Alabama requires marketplace facilitators with more than $250,000 in retail sales of tangible personal property delivered into Alabama during the preceding 12 months to register and collect simplified sellers use tax (SSUT) on sales made through their marketplace by or on behalf of third-party sellers. The $250,000 threshold includes both sales made directly by the facilitator and sales made by marketplace sellers through the facilitator's marketplace. This requirement took effect January 1, 2019. When a facilitator collects and remits SSUT on a transaction, the facilitator, the marketplace seller, and the purchaser are relieved from any additional state or local sales and use taxes on that transaction.

Source: Ala. Code § 40-23-199.2; Ala. Admin. Code r. 810-6-2-.90.04

Alabama sales tax is due monthly by the 20th day of the month following the month in which the tax accrues. Taxpayers may elect to file quarterly if their prior-year state sales tax liability was below $2,400; semi-annually if below $1,200 or they made retail sales during no more than two 30-day periods; or annually if below $600 or they made retail sales during no more than one 30-day period. Quarterly returns are due the 20th of the month following quarter-end; semi-annual returns are due July 20 and January 20; annual returns are due January 20. The election must be made in writing by February 20 of each year and filed with the Department of Revenue.

Source: Ala. Code § 40-23-7

Alabama exempts sales of tangible personal property made by wholesalers to licensed retail merchants, jobbers, dealers, or other wholesalers for resale from the sales tax. The statute defines "wholesale sale" to exclude sales by wholesalers to users or consumers not for resale—the exemption applies only when the buyer purchases for the purpose of reselling the property. This exemption is foundational to sales tax administration because it prevents tax pyramiding and ensures that sales tax is collected once, at the final retail sale to the consumer.

Certificate of exemption (Form STE-1)

To claim the resale exemption, the purchasing dealer must provide the selling dealer with a State Sales and Use Tax Certificate of Exemption, Form STE-1. Alabama law requires retailers who make purchases for resale to hold an active Alabama sales tax license. When making a tax-exempt purchase for resale, the buyer presents a copy of their sales tax license or a completed Form STE-1 to the vendor. The certificate must include the buyer's and seller's names, the exemption reason, the buyer's tax registration or business license number, a signature, the date, and a description of the merchandise being purchased. Incomplete certificates are invalid and do not relieve the seller from liability for uncollected tax.

Blanket certificates and validity period

Alabama permits the use of blanket resale certificates. Once a valid certificate is on file with a vendor, it may be reused for all subsequent exempt purchases from that vendor without requiring a new certificate for each transaction. The certificate remains valid until revoked in writing or until the information it contains becomes inaccurate. Sellers should periodically verify that the purchaser's license remains active and that the certificate information is current, particularly during audits.

In-state license requirement for Alabama resale exemptions

Alabama only recognizes resale certificates from dealers holding an Alabama sales tax license. Out-of-state resale certificates are not valid for purchases of tangible personal property in Alabama unless the out-of-state buyer also holds an Alabama license. This rule is significant in drop-shipment scenarios: if an out-of-state retailer directs an Alabama supplier to ship goods to an Alabama customer, the supplier must collect Alabama sales tax unless the out-of-state retailer presents an Alabama sales tax license or Alabama-issued Form STE-1. The Alabama Department of Revenue has clarified that retailers buying or selling for resale need an Alabama sales tax license, not merely a certificate of exemption; the license itself serves as proof of eligibility for resale purchases.

Seller reliance and liability

Sellers who accept a resale certificate in good faith and reasonably believe the purchase is for resale are protected from liability if the transaction is later determined to be taxable. However, if the seller cannot produce a valid certificate during an audit, the seller is liable for the uncollected tax, plus interest and penalties. Intentional misuse of a resale certificate by a purchaser may result in civil penalties and suspension of the exemption privilege.

Source: Ala. Code § 40-23-1(a)(9)a; ADOR: How to Apply for a Sales Tax Certificate of Exemption; Ala. Admin. Code r. 810-6-5-.02.01

Alabama exempts specific categories of tangible personal property from sales and use tax beyond the resale exemption. The exemptions are enumerated primarily in Ala. Code § 40-23-4 and § 40-23-4.1, with parallel use tax exemptions in § 40-23-62. The following are the most frequently applied exemptions.

Prescription drugs and medicines

Alabama exempts prescription drugs from sales and use tax under two separate provisions. Ala. Code § 40-23-4.1(a) defines "drugs" to include "any medicine prescribed by physicians when the prescription is filled by a licensed pharmacist, or sold to the patient by a physician." Section 40-23-4.1(b) extends the exemption to medicines prescribed by physicians for human consumption or intake that are purchased by hospitals, infirmaries, sanitariums, nursing homes, medical clinics, and physicians for use or consumption in rendering medical services to patients. The exemption applies regardless of whether the medicines are diagnostic in nature or used in preventing, treating, or mitigating diseases.

Additionally, Ala. Code § 40-23-4(a)(31) provides a narrower exemption for "all medicines prescribed by physicians for persons who are 65 years of age or older, and when the prescriptions are filled by licensed pharmacists." This exemption applies under both state and local sales tax laws.

Over-the-counter drugs and non-prescription medications are not exempt and remain subject to the full sales tax rate.

Agricultural inputs

Alabama exempts a range of agricultural inputs to support farming, livestock, and poultry production:

• Feed for livestock and poultry is exempt. Ala. Code § 40-23-4(a)(4) exempts "feed for livestock and poultry, but not including prepared food for dogs and cats."

• Insecticides and fungicides used for agricultural purposes are exempt under § 40-23-4(a)(4). The exemption also extends to insecticides and fungicides used by persons properly permitted by the Department of Agriculture and Industries for structural pest control work.

• Herbicides for agricultural uses are exempt under § 40-23-4(a)(25). The statute defines "herbicides" to mean "any substance or mixture of substances intended to prevent, destroy, repel, or retard the growth of weeds or plants," including preemergence, postemergence, lay-by, pasture, defoliant, and desiccant herbicides.

• Seedlings, plants, shoots, and slips used for planting vegetable gardens, truck farms, and other agricultural purposes are exempt under § 40-23-4(a)(22). The statute expressly provides that the exemption does not extend to "plants, seedlings, nursery stock, or floral products" sold for ornamental or non-agricultural purposes.

• Drugs, medicines, vitamins, and other nutrients for use in the production and growing of fish, livestock, and poultry are exempt under § 40-23-4(a)(30). The exemption covers antibiotics, hormones, hormone preparations, drugs, medicines, other medications including serums and vaccines, vitamins, minerals, and other nutrients "by whomsoever sold."

• Feed ingredients used in mixing and preparing feed for fish raised to be sold on a commercial basis, livestock, and poultry are exempt under § 40-23-4(a)(21), including antibiotics, hormones, drugs, medicines, vitamins, minerals, and other nutrients when used as ingredients in commercial feed.

Manufacturing and industrial machinery

Alabama does not provide a full exemption for manufacturing machinery. Instead, Alabama taxes manufacturing machinery at a reduced rate of 1.5% under Ala. Code § 40-23-2(a)(3), which applies to "machines used in mining, quarrying, compounding, processing, and manufacturing of tangible personal property." This reduced-rate treatment is covered in the "State sales tax rate and imposition" section of this guide. Repair parts and consumables (such as lubricants) used in connection with qualifying production machinery also qualify for the 1.5% rate.

Sales to governmental entities

Ala. Code § 40-23-4(a)(11) exempts "the gross proceeds of sales of tangible personal property to the State of Alabama, to the counties within the state and to incorporated cities and towns of the state." This exemption applies to direct sales to qualifying governmental entities. Sales to contractors who are constructing public works for a governmental entity are generally not exempt—the contractor is treated as the retail purchaser subject to sales tax on materials unless a specific statutory exception applies.

Utilities subject to regulation

Ala. Code § 40-23-4(a)(8) exempts "the gross proceeds of sales or gross receipts of or by any person, firm, or corporation, from the sale of transportation, gas, water, or electricity, of the kinds and natures, the rates and charges for which, when sold by a public utility, are fixed and regulated by law or by some governmental agency." This exemption applies when the rates are subject to regulatory oversight, such as by the Alabama Public Service Commission.

Sales of food via SNAP (food stamps)

Ala. Code § 40-23-4.2 exempts from sales and use tax "the gross proceeds of the sales of food eligible to be purchased with food stamps" when purchased with Supplemental Nutrition Assistance Program (SNAP) benefits. This exemption does not apply to the same food when purchased with cash or credit.

Source: Ala. Code § 40-23-4; Ala. Code § 40-23-4.1; Ala. Code § 40-23-4.2; Ala. Code § 40-23-2

Alabama sales tax applies principally to the sale of tangible personal property and not generally to the provision of services. Ala. Code § 40-23-2(1) imposes the 4% state sales tax on retail sales of tangible personal property; services are exempt unless expressly enumerated otherwise. Most professional, personal, and business services such as legal, accounting, consulting, personal grooming, and cleaning services are not subject to Alabama sales tax when provided as standalone services with no transfer of tangible personal property.

Separately stated labor charges and repair/installation services Labor and installation charges are exempt if separately stated on the invoice, according to Ala. Admin. Code r. 810-6-1-.08. However, labor for fabrication or creation of new tangible property is taxable, regardless of whether separately stated. Service transactions that include the transfer of tangible personal property may be subject to tax depending on the nature and invoicing of the transaction; for example, custom upholstery work is generally taxable, while repairs billed separately may be exempt.

Special update: Merchant-imposed credit card transaction fees—exclusion beginning September 1, 2026 Effective September 1, 2026, Alabama will exclude merchant‑charged credit card transaction fees from the sales and use tax base, as provided by Act 2026-587 (SB 221). Prior to this effective date, such fees—when charged to and paid by the customer as part of the sales transaction—were generally included in gross receipts and subject to tax (per longstanding ADOR guidance).

The exclusion applies to “any credit card processing fee, service fee, or similar merchant-imposed fee that is charged to the purchaser and stated separately from the sales price of taxable tangible personal property on the invoice or receipt.” Both state and local sales (and use) taxes are affected by this amendment. Sellers must ensure such fees are distinctly itemized on receipts to qualify for exclusion. This does not affect other service charges that are not specifically excluded by statute.

No general list of taxable services Alabama continues not to publish a statutory list of taxable services. Unless there is a transfer of tangible personal property or a statutory provision imposing tax on a specifically enumerated service, the transaction is generally not taxable. Computer software remains subject to tax as tangible personal property (see Ala. Admin. Code r. 810-6-1-.92).

Practitioner note: For transactions occurring before September 1, 2026, merchant-imposed credit card fees are taxable if included in the gross charge. From September 1, 2026 forward, these fees are excluded if separately stated—practitioners should confirm invoicing and tax calculation systems are updated accordingly.

Source: Ala. Code § 40-23-2 Source: Ala. Admin. Code r. 810-6-1-.08 Source: Ala. Admin. Code r. 810-6-1-.92 Source: Alabama Act 2026-587 (SB 221)

Alabama enables both counties and municipalities to levy local sales and use taxes in addition to the state rate, with statutory framework and key limitations established by state law. The rules diverge for counties versus municipalities, and authority is not entirely uniform across localities or categories of goods.

County authority and the 2% statutory cap

Under Ala. Code § 11-3-11.2, Alabama counties may levy a county sales and use tax at a rate "not in excess of two percent" of the retail sales price. However, the statute includes a crucial grandfathering provision: a county that, prior to July 1, 1997, had authority to impose a higher rate (by local act or otherwise) may maintain that higher rate. The exact language provides: “No county may levy or collect any county sales or use tax at a rate in excess of two percent except as otherwise authorized by law, nor may any law enacted after July 1, 1997, authorize a county sales or use tax rate in excess of two percent.” Some counties—under pre-existing local laws—retain authority for rates above 2% (as reflected in ADOR’s published rate chart).

Municipal authority—no uniform maximum

For cities and towns, Ala. Code § 11-51-200 et seq. authorizes municipalities to levy their own local sales and use taxes. Unlike counties, these statutes do not impose a maximum rate. Municipalities may set their rates by local ordinance, with some cities (notably Birmingham, classified by statute as the state’s only "Class 1" city under Ala. Code § 11-40-12) and others enacting rates over 2%. The absence of a statutory maximum means municipal rates vary considerably; for verification, the Alabama Department of Revenue’s Combined Rate Chart lists rates by jurisdiction, including examples exceeding 2% (e.g., Birmingham at 4%).

Differential taxation of goods (e.g., food)

Localities have discretion to tax groceries and other categories of goods at different rates from general sales. Many cities and counties apply their general local rate to groceries, while a minority have reduced or eliminated local tax on SNAP-eligible food items. There is no statutory requirement of uniformity for local taxation of food versus other goods, so treatment depends on local ordinance. The ADOR Combined Rate Chart and lookup tool offer product-category-specific rates for each jurisdiction, serving as the authoritative reference.

Official rate lookup and combined chart

The Alabama Department of Revenue maintains an official online portal for current state and local sales and use tax rates by jurisdiction, including product-specific rates, effective dates of changes, and notices. The "Sales, Use, & Rental Tax Rates" page at the ADOR website provides a downloadable Combined State and Local Rate Chart (updated monthly) and the ONE SPOT Rate Lookup Tool, which allows practitioners to search for the correct rates by address or locality and verify taxability for various goods. These tools are the official source for up-to-date combined rates and product category applicability across Alabama’s 400+ local taxing jurisdictions.

Source: Ala. Code § 11-3-11.2; Ala. Code § 11-51-200; ADOR: Sales, Use, & Rental Tax Rates (Combined Rate Chart & Lookup Tool)

Alabama sales and use tax applies to the entire charge for a bundled transaction—including both taxable tangible personal property and nontaxable services—if the service charges are not separately stated on the invoice. Under Ala. Admin. Code r. 810-6-1-.84, labor or service charges that are incidental to the sale of tangible personal property are taxable when included in a single, combined price. Only when a nontaxable service charge is separately stated and is not incidental to the sale does it escape tax. If a retailer issues a single invoice with one total price combining goods and services, the full amount—including the value of any embedded services—is subject to sales tax. This treatment applies regardless of how much value is attributable to the nontaxable service component or whether the "true object" of the transaction is goods or services.

Alabama does not use a "true object" test or allow allocation methodologies for mixed transactions; there is no authority in Alabama law or regulation for exempting a portion of a bundled charge unless it is distinctly itemized. The regulation is explicit: “Labor, installation and service charges not separately stated on the invoice to the customer are taxable.”

This rule was upheld by the Alabama Tax Tribunal in a 2023 final order, involving a taxpayer who bundled nontaxable maintenance services with sales of tangible goods in a single line-item invoice. Because the labor charges were not separately itemized from the sale of tangible personal property, the Department of Revenue assessed sales tax on the full gross proceeds. The Tribunal affirmed this, citing both Ala. Code § 40-23-1(a)(6) and Admin. Code r. 810-6-1-.84 as controlling authority for including all charges in the taxable base when not separately stated.

In summary, practitioners must separately state charges for nontaxable services on invoices to preserve their exempt status. If any part of a bundled sale is not separately itemized, Alabama will tax the entire amount—practitioners should ensure billing and sales systems reflect this rule.

Source: Ala. Admin. Code r. 810-6-1-.84 Source: Ala. Code § 40-23-1(a)(6) Source: Alabama Tax Tribunal Final Order (May 2023)

Human confirmation status: Not yet human confirmed.

Alabama sellers must handle exemption documentation differently depending on the category of the purchaser—governmental entities, statutorily exempt charitable/nonprofit entities, or contractors purchasing for exempt projects. The Alabama Administrative Code and Department of Revenue (ADOR) guidance dictate what certificates, applications, or reports are required in each scenario.

Governmental entities (federal, state, local, public agencies) Direct sales to government entities identified in Ala. Admin. Code r. 810-6-5-.02.01—such as federal, state, or local governments, public schools, state universities, and some public corporations—are exempt from Alabama sales and use tax. These purchasers are not required to provide a State Sales and Use Tax Certificate of Exemption (Form STE-1) to the seller. The exemption attaches by statute to purchases made directly by the agency. However, if a governmental entity appoints an agent or purchasing company to act on its behalf, or if purchases are made through contract arrangements, sellers may be required to substantiate the exemption with additional documentation (see Ala. Admin. Code r. 810-6-3-.69.02). Source: Ala. Admin. Code r. 810-6-5-.02.01

Statutorily exempt charitable or nonprofit entities Nonprofit or charitable status alone does not confer exemption in Alabama. Only entities specifically listed in statute or regulation (per Ala. Admin. Code r. 810-6-5-.02.02 and DOR-published lists) qualify for sales and use tax exemption. Eligible organizations must apply to the Department of Revenue for a State Sales and Use Tax Certificate of Exemption (Form STE-1) by submitting Form ST: EX-A1-SE. The certificate must be renewed every year, and the entity must file an annual informational report with the ADOR to maintain exemption. Sales to nonprofits that are not on the statutory exemption list remain taxable, regardless of IRS 501(c)(3) status. Source: Ala. Admin. Code r. 810-6-5-.02.02 Source: Alabama DOR FAQ: Nonprofit Exemption

Contractors purchasing for exempt projects When a contractor or subcontractor purchases materials to be incorporated into real property under a contract with an exempt governmental or statutorily exempt entity, the contractor must obtain a project-specific exemption certificate from ADOR. Contractors must apply through My Alabama Taxes or by submitting the required form (often Form ST: EXC-01 for construction projects), and each participating contractor or subcontractor must secure a separate exemption certificate for the project. The statutory agent/purchasing agent rules in Ala. Admin. Code r. 810-6-3-.69.02 may require further documentation in these arrangements. Source: Ala. Admin. Code r. 810-6-3-.69.02 Source: Alabama DOR FAQ: Contractor Exemption

Summary table:

• Governmental entities: No certificate required for direct purchases; additional documents may be needed for agent/contract arrangements.
• Statutorily exempt nonprofits/charities: Must have annually renewed STE-1 and file annual informational report; exemption limited to specifically listed entities.
• Contractors for exempt projects: Must obtain project- and contractor-specific exemption certificates; documentation requirements vary by project role/structure.

Table summarizes general requirements; details or processes may vary depending on purchaser arrangements, statutory changes, or future rule amendments. Source: Alabama DOR: Tax Exempt Entities

Not yet human confirmed.

Alabama’s statewide sales and use tax rate of 4% on tangible personal property has remained in place since its establishment in 1937 with the original enactment of Ala. Code § 40-23-2. The 4% general rate has not changed for most property since inception; there have been no statewide increases or decreases in the general sales and use tax rate for over eighty years. However, Alabama has made significant changes to reduced rates for specific items—most notably food—through recent legislation.

Major historic rate milestones:

• 1937: Alabama enacts the state sales and use tax at a general rate of 2% (Ala. Act No. 86, 1937 Regular Session).
• 1959: General rate increased from 2% to 3% (Ala. Act No. 100, 1959 Regular Session).
• 1963: General rate increased from 3% to 4% (Ala. Act No. 406, 1963 Regular Session), codified at Ala. Code § 40-23-2. This 4% rate remains the basic statewide rate to date.
• 2023: Enactment of a reduction in the state rate on retail sales of qualifying food with phased effective dates. The rate on food was reduced from 4% to 3% effective September 1, 2023 (Act 2023-554), then scheduled for a further reduction to 2% on September 1, 2025 (Act 2025-305), leaving the general rate unchanged for other property.

No general statewide rate changes have been enacted since 1963 for regular tangible personal property. Local sales and use tax rates are set by counties and municipalities and have changed frequently, but there is no comprehensive published statutory table of historic local rates—current and prior local rates are available month-by-month via the Alabama Department of Revenue’s Combined State and Local Rate Chart publication and lookup tool on their website.

Summary table: | Effective Date | Affected Items | State Rate | |-------------------|----------------------------------------|:----------:| | July 1, 1937 | Tangible personal property | 2% | | Oct. 1, 1959 | Tangible personal property | 3% | | July 1, 1963 | Tangible personal property | 4% | | Sept. 1, 2023 | Food for home consumption (SNAP def.) | 3% | | Sept. 1, 2025 | Food for home consumption (SNAP def.) | 2% |

Historic local rate changes must be confirmed via archived copies of the ADOR Combined Rate Chart or prior rate notices (not available as a single comprehensive historic schedule in statute or regulation).

Source: Ala. Code § 40-23-2 Source: Alabama Act No. 86, 1937 Regular Session Source: Alabama Act No. 100, 1959 Regular Session Source: Alabama Act No. 406, 1963 Regular Session Source: ADOR: Sales, Use, & Rental Tax Rates (Combined Rate Chart) Source: Act 2023-554, Act 2025-305

Not yet human confirmed.

Alabama imposes local sales and use taxes in addition to state sales tax, and the collection responsibility for these local taxes diverges depending on whether the remote seller participates in the Simplified Sellers Use Tax (SSUT) program.

Local tax collection by remote sellers (not in SSUT): Remote sellers that exceed Alabama’s $250,000 economic nexus threshold and choose to register through the traditional sales and use tax system must collect and remit not just the state tax but also all county and municipal taxes applicable to the delivery address. The applicable local rate depends on the jurisdiction in which the goods are delivered, as determined by the Alabama Department of Revenue's rate lookup tools and Combined Rate Chart. This means remote sellers outside the SSUT program are functionally treated the same as in-state sellers as to the full stack of local taxes due.

Local tax obligations under SSUT: Remote sellers that opt into Alabama’s SSUT program collect and remit SSUT at a flat 8% rate (covering both state and local liability) on all retail sales of tangible personal property delivered into Alabama. Under Ala. Code § 40-23-193(a), the SSUT replaces all other state and local sales and use tax obligations for such transactions. Neither the remote seller nor the customer owes any additional local (or state) sales or use tax on sales for which SSUT was properly collected and remitted, regardless of local rate differentials. This simplifies compliance, but the 8% flat rate is mandatory for all Alabama destinations under SSUT.

No local rate adjustment — special cases: There are no situations in which a remote seller enrolled in SSUT must also collect additional local sales or use tax, or in which local tax is calculated differently for SSUT participants, regardless of the statutory local rate in a specific locality. Transactions reported under SSUT are fully satisfied by the 8% remittance (except for sales types expressly excluded from the SSUT program under statute or ADOR guidance).

Authority:

• Ala. Code § 40-23-193(a): “A remote seller or marketplace facilitator properly collecting and remitting simplified sellers use tax … shall be granted relief from any additional state or local sales and use taxes on the transaction for which simplified sellers use tax was properly collected and remitted.”
• Ala. Admin. Code r. 810-6-2-.90.03 clarifies that SSUT replaces all state and local sales/use tax for eligible transactions.
• Official ADOR guidance reiterates these rules and designates the SSUT as the only required tax on remote sales for SSUT program participants.

Source: Ala. Code § 40-23-193 Source: Ala. Admin. Code r. 810-6-2-.90.03 Source: ADOR: Simplified Sellers Use Tax (SSUT) Program

Alabama treats computer software—whether delivered by tangible medium, download, or electronic license—as tangible personal property, with retail sales and licenses subject to Alabama sales and use tax. Ala. Admin. Code r. 810-6-1-.37(4) expressly defines 'computer software' to include system and application programs delivered electronically or on physical media, stating: "The retail sale or licensure of computer software is subject to Sales Tax, Use Tax, or Rental Tax... regardless of its... form of transmission to the purchaser or licensee." Licensing software is classified as a retail sale and is taxable accordingly.

Separately stated custom programming: The regulation (r. 810-6-1-.37(5)) provides that "software programming," meaning the design, development, or modification of application software to a customer's specification, is not subject to tax if the programming service charge is separately stated on the invoice. Historically, Alabama DOR followed this distinction in practice.

Judicial limitation — all software as tangible personal property: However, the Alabama Supreme Court, in Ex parte Russell County Community Hospital (May 17, 2019), held that all software—prewritten or custom—is tangible personal property for tax purposes, and that only truly distinct services (not the provision of software itself, regardless of custom work) are eligible for exclusion. This ruling calls into question the continuing validity of the regulatory carve-out for custom programming when it results in a deliverable software product. Taxpayers claiming exemption for separated programming services should closely review invoice structure and seek Alabama-specific legal review for current Department policy.

Digital goods, SaaS, streaming, e-books: As of June 22, 2026, there is no controlling Alabama statute, regulation, or published DOR/Tax Tribunal decision specifically addressing the sales or use tax treatment of SaaS (software as a service), streaming audio/video, or e-books. Alabama law does not define "digital goods" as a taxable category apart from the tangible personal property rule for software. In the absence of primary authority, the taxability of SaaS and similar subscription-based, access-only or streaming products is unresolved.

Source: Ala. Admin. Code r. 810-6-1-.37 Source: Ex parte Russell County Community Hospital, 295 So.3d 53 (Ala. 2019)

Not yet human confirmed. The intersection of the Court's holding and the regulation remains an unsettled area. Practitioners should monitor ADOR guidance for evolution in Department policy.

Alabama allows sellers to claim a deduction or credit for "bad debts"—i.e., sales or use tax previously remitted on retail transactions that become wholly or partially uncollectible—subject to statutory and procedural requirements.

Authority and scope Section 40-23-10 of the Alabama Code, as interpreted by regulation Ala. Admin. Code r. 810-6-4-.05, allows retailers to take a deduction for bad debts on their sales tax returns. The bad debt deduction applies only to debts that have been charged off as worthless in the seller’s books and that were eligible for a bad debt deduction for federal income tax purposes. The deduction cannot exceed the amount of taxable sales on which tax was previously remitted to Alabama and cannot include amounts for returned merchandise or repossessions unless the taxpayer is unable to recover any part of the debt.

Procedural requirements

• The bad debt deduction must be claimed on the sales tax return for the period in which the debt is written off as worthless and charged against the seller's accrued reserves, provided this occurs within three years from the date of the taxable sale and the debt is definitively uncollectible.
• Sellers must maintain detailed records substantiating the deduction, including the identity of the debtor, amount of the original sale, amount of the bad debt, date of the original sale, account charge-off date, evidence of charge-off for federal tax, and documentation of reasonable collection efforts.
• If a seller later collects all or part of the previously charged-off account, the recovered amount must be reported as taxable in the return for the period when collected.

Refunds as alternative relief A retailer who has overpaid sales or use tax due to bad debts but did not take a deduction on the original return may file a refund claim within three years from the date tax was paid. The same evidentiary standards apply to refunds as to return-period deductions.

Statute of limitations The deduction or refund must be claimed within three years from the date the relevant tax was paid, in accordance with Ala. Code § 40-2A-7(b)(1). Late claims are not allowed.

Key exclusions

• No deduction is allowed for: sales tax paid on returned goods (unless buyer fails to return the property and makes no payment); repossessions where value is recovered; checks returned for insufficient funds where the taxpayer subsequently recovers the funds; and sales made to a known related party where the bad debt was not a bona fide loss.

Source: Ala. Code § 40-23-10 Source: Ala. Admin. Code r. 810-6-4-.05 Source: Ala. Code § 40-2A-7(b)(1)