Alabama sales tax for online sellers: nexus, permit and filing

What is the Alabama sales tax rate?

The state rate is 4%. Cities and counties add their own taxes, so combined rates in the larger cities are around 9% to 10%, and many localities administer their own tax, which makes standard collection demanding. Remote sellers in the Simplified Sellers Use Tax program, known as SSUT, instead collect a single flat 8% on all Alabama sales, covering both state and local tax.

When does an online seller have to collect in Alabama?

You must collect if you have a physical presence in Alabama, such as staff, an office or inventory, or if your retail sales of goods delivered into Alabama were more than $250,000 in the previous calendar year. A seller who passes the threshold during a year starts collecting from January 1 of the next year. There is no transaction-count test. Wholesale sales are left out, and most guidance also leaves out sales made through a marketplace that collects the tax, though a few sources count them, so check if you are close to the line.

How nexus works in general is covered in physical vs economic nexus and economic nexus explained.

What if you sell on Amazon, eBay or Etsy?

Alabama requires marketplace facilitators to collect and remit sales tax on the sales they facilitate, so you do not collect on those orders. Your own website and other direct channels remain your responsibility. See marketplace facilitator laws.

How do you register?

Register online through My Alabama Taxes, the Department of Revenue's portal. A seller with no physical presence in Alabama applies for a Simplified Sellers Use Tax account; a seller with a physical presence registers for standard sales tax and deals with local rates. A seller below the threshold can also join SSUT voluntarily.

What are the steps once you have nexus?

1. Confirm nexus

   Check your presence and your sales into Alabama against its threshold.

2. Register before collecting

   With the Alabama tax agency, as set out above.

3. Set up your store

   Charge the correct combined rate for each delivery address and product.

4. File and pay

   On the schedule Alabama assigns, including zero returns where required.

How are returns filed?

SSUT returns are filed monthly through My Alabama Taxes, due by the 20th of the following month, with one return and one payment covering the whole state. A small discount is allowed for filing and paying on time. Standard sales tax accounts file monthly, quarterly or annually depending on the tax due, and may need separate returns for self-administered localities.

See how to file a sales tax return.

Should you use SSUT or standard collection?

For most remote sellers SSUT is far simpler, even though 8% is sometimes below and sometimes above the true local rate. Inventory stored in an Alabama fulfillment center is a physical presence and rules SSUT out. The program has been challenged by some Alabama cities, so confirm its current terms when you register. See sales tax for Amazon FBA sellers.

What else should sellers know?

• Sellers outside the US: the same rules apply wherever the business is based. See selling on Amazon US as a non-resident.
• Late registration: tax you should have collected becomes your own debt. See voluntary disclosure agreements and collected but not remitted.
• Records: keep sales by delivery address, tax collected and any certificates. See exemption certificates and sales tax audits.
• Stopping: returns stay due until the account is closed. See filing frequency and cancelling a sales tax permit.
• Store settings: switch on collection only once you are registered. See Shopify sales tax setup.

This guide is general information. It is not tax or legal advice for your situation.