Sales Tax Obligations of Sellers in Alabama

April 13, 2006

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Alabama imposes various requirements on sellers doing business in the state. We recommend that you go through the items below to help you with the most frequently asked questions concerning sellers and sales and use tax issues.

Procedure for accepting resale certificates. A sale is exempt if a seller receives in good faith from a purchaser an Alabama resale or exemption certificate (Form STE-1). In Alabama, Form STE-1 is the only exemption certificate that relieves the seller, when acting in good faith and exercising reasonable care, of liability for any sales or use tax.

Procedure for accepting blanket certificates. Certificate holders regularly engaged in making tax-exempt purchases may furnish a certificate to the seller specifying that all tangible personal property subsequently purchased will be for the purpose shown on the certificate. This blanket certificate will relieve the burden of executing a separate certificate for each individual tax-exempt purchase as long as there is no significant change in the operations. A blanket certificate describes the general nature of the property purchased for resale and remains in force until revoked in writing.

Sales and use tax liability for out-of-state mail order and catalogue retailers. Alabama has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Alabama. To determine if you have physical presence, ask yourself the following:

Do I have retail facilities, a warehouse or any office space in Alabama? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
Do my employees or I enter Alabama for purposes of taking and transmitting orders from Alabama? If your employee or independent contractor goes into Alabama to take or transmit orders your business may have physical presence in Alabama. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
Do my delivery vehicles frequently enter Alabama for purposes of delivering property? Frequent deliveries in Alabama by your trucks will give you physical presence in Alabama.

Sales tax "bracket system". Several tax brackets have been issued by the Alabama Department of Revenue. These should be provided to you when you are registered to collect sales and use tax in the state of Alabama.

Absorbing the tax — using a "no sales tax" advertising strategy to drum up business. In Alabama it is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.