Alabama Sales Tax Rate & Rules (2026)

Last updated: 2026-03-27

What is the sales tax rate in Alabama?

What is taxable in Alabama?

How do you register to collect sales tax in Alabama?

What is the economic nexus threshold for Alabama?

How to register for sales tax in Alabama

Before you can collect sales tax, you need to register with the Alabama Department of Revenue. Here is the step-by-step process.

1. Apply online through My Alabama Taxes (myalabamataxes.alabama.gov) or submit Form COM:101
2. Provide your FEIN or Social Security Number, business entity type, and physical location
3. Specify each place of business — Alabama requires a separate license for each location
4. There is no fee for a state sales tax license, but local jurisdictions may require separate registration
5. Most applications are processed within 5-10 business days

How to collect sales tax in Alabama

Once registered, you are responsible for charging the correct amount of sales tax on every taxable transaction. Here is how the collection process works in Alabama.

1. Determine whether each product or service you sell is taxable in Alabama
2. Calculate the correct combined rate (state + county + city) based on the point of sale — Alabama is an origin-based state for in-state sellers
3. Charge sales tax at the point of sale and display it as a separate line item on invoices and receipts
4. Accept and verify resale certificates (Form STC) from buyers purchasing for resale
5. Keep detailed records of all taxable and exempt transactions for at least 3 years

How to file and remit sales tax in Alabama

Filing your sales tax return on time is critical to avoid penalties. Alabama requires electronic filing for most businesses.

1. Determine your filing frequency — Alabama assigns monthly, quarterly, or annual filing based on your tax liability
2. Log in to My Alabama Taxes at myalabamataxes.alabama.gov before your due date (the 20th of the following month/quarter)
3. Report gross sales, exempt sales, and net taxable sales for the filing period
4. Remit the sales tax collected electronically — Alabama requires electronic payment for most filers
5. File local returns separately if required by the city or county where you operate
6. Retain copies of all returns and supporting records for at least 3 years

What is exempt from Alabama sales tax?

Not everything is subject to sales tax. Alabama provides exemptions for certain products, buyers, and uses. Always verify the specific exemption requirements with the Alabama Department of Revenue.

• •Resale purchases with a valid Alabama resale certificate (Form STC)
• •Prescription medications and certain over-the-counter drugs
• •Agricultural equipment and supplies used in farming operations
• •Sales to the federal government and its agencies
• •Sales to qualified nonprofit organizations with an exemption certificate
• •Industrial machinery used in manufacturing (partial exemption via reduced rate)
• •Raw materials that become part of a finished product for sale

What are the highest combined sales tax rates in Alabama?

Because Alabama allows local jurisdictions to add their own sales taxes on top of the state rate, combined rates vary by location. Here are some of the highest combined rates in major Alabama cities.

What is use tax in Alabama?

If you purchase goods from out-of-state sellers who do not collect Alabama sales tax, you owe use tax at the same rate. This commonly applies to online purchases, catalog orders, and goods bought while traveling. Businesses must self-report use tax on their sales tax return. Alabama's Simplified Sellers Use Tax program allows remote sellers to remit a flat 8% rate to cover state and local obligations.

Does Alabama have marketplace facilitator rules?

Alabama requires marketplace facilitators (such as Amazon, Etsy, eBay, and Walmart Marketplace) to collect and remit sales tax on sales made through their platforms on behalf of third-party sellers. If your sales are made exclusively through a marketplace facilitator, the facilitator handles the sales tax obligation. You are still responsible for direct sales outside of marketplaces.

What are the penalties for sales tax non-compliance in Alabama?

Alabama charges interest on late payments at a rate set annually (currently around 1% per month). Late filing incurs a penalty of 10% of the tax due or $50, whichever is greater. Failure to file can result in the state estimating your tax liability and assessing additional penalties. Fraud or willful evasion can result in criminal penalties, including fines up to $10,000 and imprisonment.

This is general information, not legal or tax advice. Tax rules change frequently — always verify with the official state agency. Sources: Alabama Department of Revenue.