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Important Notices!
 
ADOR - Sales & Use Tax - What's New

 

WHAT'S NEW?

TOPIC:  Sales of Automotive Vehicles to Nonresidents (Acts 2015-503 and 2015-551)

With the passage of Acts 2015-503 and 2015-551, sales of automobiles, motorcycles, trucks, truck trailers, or semitrailers, excluding motor homes and travel trailers, that will be registered or titled outside Alabama, that are exported or removed from Alabama within 72 hours by the purchaser or his or her agent for first use outside Alabama, are subject to the Alabama sales tax in an amount equal to the state automotive sales tax rate of two percent (2%), unless the sales tax laws of the state in which the purchaser will title or register the vehicle, allows an Alabama resident to purchase a motor vehicle for first titling and registering in Alabama without the payment of tax to that state. However, in no case will the amount of Alabama sales tax due on a motor vehicle that will be registered or titled for use in another state exceed the amount of sales tax that would have otherwise been due in the state where the vehicle will be registered or titled for first use.

In order to take advantage of the drive-out provision, a properly executed Automotive Vehicle Drive-Out Certificate for Nonresidents (Form DOC-1) must be completed and secured by the seller, regardless of the tax laws of the state in which the vehicle will be titled or registered for first use. The properly executed Automotive Vehicle Drive-Out Certificate for Nonresidents (Form DOC-1) will be required as documentation from the seller to substantiate the amount of tax collected on the sale. In the absence of Form DOC-1, Alabama state and applicable local sales and use tax will be due.

Under the new law which takes effect January 1, 2016, residents of Arizona, California, Florida, Indiana, Massachusetts, Michigan, and South Carolina will be required to pay 2% to the State of Alabama when those residents purchase a vehicle in Alabama. Dealers will not be required to collect any city or county taxes on these sales if they properly complete Form DOC-1. In addition, in no case can the amount of Alabama state sales tax collected on these sales exceed the amount of sales tax that would otherwise have been due in the state where the vehicle will be registered or titled for first use. (South Carolina residents will not be required to pay more than the $300 sales tax that would have been due on a vehicle purchased in that state.)

Example 1: Vehicle that will be titled or registered for first use in Florida is sold at Mobile, Alabama dealership, purchaser takes possession at Mobile, Alabama dealership and purchaser and dealer do not complete Form DOC-1: Alabama dealer collects state, city, and county sales taxes.

Example 2: Vehicle that will be titled or registered for first use in Florida is sold at Mobile, Alabama dealership, purchaser takes possession at Mobile, Alabama dealership and purchaser and seller complete Form DOC-1: Alabama dealer collects the 2% State of Alabama sales tax but does not collect City of Mobile and Mobile County sales taxes by completing Form DOC-1 if the vehicle is removed from the State of Alabama within 72 hours. The State of Florida will give the purchaser credit for the 2% sales tax paid to the State of Alabama.

Click the following link for additional information or to download Form DOC-1: http://revenue.alabama.gov/salestax/stforms.cfm

 

TOPIC:  Making retail sales of tangible personal property or furnishing lodgings accommodations to tax-exempt entities in Alabama (Act 2015-534)

The Legislature has passed and the Governor has signed Legislative Act 2015-534 requiring all persons or companies, other than governmental entities, having a statutory exemption from the payment of Alabama sales, use or lodgings tax to annually obtain a certificate of exemption, Form STE-1, from the Department of Revenue. A certificate of exemption must be presented to the seller for the sale to be exempt from tax.

For purposes of this Act, the term “governmental entity” means the Federal Government, the State of Alabama, Alabama public schools, Alabama public universities, healthcare authorities, Alabama counties and municipalities, and public corporations incorporated under any of the provisions of Chapter 50 of Title 11, Chapter 50A of Title 11, Chapter 5 of Title 37, or Chapter 7 of Title 39. These entities are not required to obtain a certificate of exemption but may do so for ease of tax-free purchasing.

Act 2015-534 was effective as of August 19, 2015, and becomes operative for all applicable exempt persons or companies on January 1, 2016. On this date, vendors will be required to have the certificate on file in order to make tax-exempt sales or lodgings to companies or entities subject to the provisions of the Act.

Certificates of exemption shall be valid for one year from the date of issuance and shall be renewed annually each subsequent year before the end of the month in which the certificate expires. Any person or company who fails to obtain a certificate prior to January 1, 2016, or who fails to renew a certificate of exemption prior to its expiration will no longer be allowed to make tax exempt purchases or rent tax exempt accommodations until such time as a certificate of exemption is obtained or renewed.

Sales of tangible personal property to any person, firm, or corporation not required to have a sales tax license are subject to sales or use tax until the contrary is established. The burden of proof that a sale is exempt is upon the person making the sale unless the seller takes from the purchaser a properly executed Form STE-1. Any such sale for which an exemption has been claimed but which is not supported by a Form STE-1 may be deemed a sale at retail by the Department and the seller held liable for the tax thereon. Further, In accordance with Code of Alabama 1975, Section 40-23-120, and Sales and Use Tax Rule 810-6-1-.184. Seller Sells Tax Free at the Seller’s Risk, sellers are liable for sales or use tax on any sales for which the seller fails to collect the appropriate sales or use tax due. However, a seller, who acts in good faith and reasonably believes a tax exempt purchase is legal, is not liable for sales or use tax later determined to be due on a sale for which the purchaser provides the seller with a State Sales and Use Tax Certificate of Exemption (Form STE-1).

TOPIC:  Act 2015-361 - Police Jurisdictions

The Legislature has passed and the Governor has signed Act No. 2015-361, relating to certain notification requirements for actions affecting areas within the police jurisdictions of municipalities and towns. This Act provides that, in addition to the notice requirements under Section 11-45-8 of the Code of Alabama 1975, certain notices shall be submitted to the Atlas Alabama state website or any successor state-operated website providing information to businesses, as long as that service is available at no cost to the municipality or town.

Atlas is an initiative of the Alabama Small Business Commission. It is designed to be a web portal for small businesses to access information that is critical to the economic growth of small businesses. Atlas was not designed to be a data repository. Accordingly, receiving submitted notices, as provided in Act 2015-361, would not be feasible without incurring costs that would be passed on to the municipalities and towns. However, since the Act also allows for the submission through any successor state-operated website, the Department of Revenue (DOR) will be responsible for receiving notices that are submitted by municipalities and towns and coordinating updates on the DOR website, once the site is updated. Since these submissions to DOR will allow us to more effectively fulfill our duties regarding various tax collections, there will be no cost to the municipalities and towns for these submissions.

It is projected that the Department’s website update will be completed sometime in the year 2016. Once the update occurs, the Department will notify the Alabama League of Municipalities that municipalities and towns may begin submitting notices relating to changes affecting police jurisdictions to the Department’s Sales and Use Tax Division. At that point, Atlas will link to DOR’s website for easy access to submitted notices. Please note that submissions sent prior to DOR’s website update cannot be accepted.

TOPIC:  Tax Guidance for Sellers Making Retail Sales of Consumable Vapor Products

The Legislature has passed and the Governor has signed Act No. 2015-535, relating to the distribution of funds collected on consumable vapor products. Effective January 1, 2016, the tax remitted from the sales of consumable vapor products shall be distributed to the General Fund.

Accordingly, on all state sales tax returns (S&U:2100 and S&U:2105) submitted beginning January 1, 2016, regardless of the period in which the tax accrued, sales of consumable vapor products must be separately reported in the newly added Column D—"Consumable Vapor Products 4%." Sellers making retail sales of consumable vapor products reporting on a monthly, quarterly or annual filing frequency must comply with this new reporting requirement beginning with the report due January 1, 2016.

Retail sales of consumable vapor products, vapor products, etc., are subject to the sales and use tax levies found in Code of Alabama 1975, Sections 40-23-2 and 40-23-61, respectively, as sales of tangible personal property. Act 2015-535 defines "consumable vapor products" and "vapor products" and specifically changes the distribution of the sales tax received on "consumable vapor products," thus requiring sales of these products to be separately stated on the sales tax returns beginning January 1, 2016. Consumable vapor products are, "any nicotine liquid solution or other material containing nicotine that is depleted as a vapor product." Other vapor products, and consumable vapor products that do not contain nicotine, will continue to be reported in the "All Other 4%" column on the appropriate sales and use tax returns.

TOPIC:  Tax Guidance for Nursing Facilities Required to Pay the Nursing Facility Privilege Tax

The Legislature has passed and the Governor has signed Act No. 2015-536, which imposes a secondary supplemental privilege assessment at an annual rate of $401.28 or $33.44 a month for each bed in the nursing facility. This amount will increase the total annual nursing facility rate from $4,028.04 to $4,429.32 or $369.11 per month per bed. This change will be effective on October 1, 2015.

Accordingly, the first tax return on which the changes will be applicable is the nursing facility tax return for the month of October 2015, which is due on or before November 20, 2015. Returns are required to be filed and paid electronically using the My Alabama Taxes Filing system. For more information, read the department's notice.

TOPIC:  Tax Guidance for Providers of Pharmaceutical Services

Please be advised that effective September 1, 2015, a supplemental privilege tax at the rate of 15 cents for each prescription filled or refilled for a citizen of Alabama has been imposed for collection in fiscal years 2016 and 2017. The supplemental privilege tax imposed is in addition to all other taxes of any kind now imposed by law, including without limitation, the privilege taxes provided for under Article 1, Chapter 26B of Title 40, Code of Alabama 1975. Therefore, the new rate for each prescription filled or refilled will be a total of 25 cents effective September 1, 2015.

Please note that this rate increase will be reflected on the September 2015 tax return which is due on or before October 20, 2015. If you have any questions regarding the new legislation passed regarding the rate increase in the Pharmaceutical Providers Tax, please contact the Sales and Use Tax Division: (334) 242-1490.

TOPIC:  Tax Guidance for Entities Having a Statutory Exemption from the Payment of Sales, Use, and Lodgings Taxes

Legislative Act 2015-534 requires all persons or companies, including but not limited to those cited in Title 40, Chapter 9, other than governmental entities, which have a statutory exemption from the payment of Alabama sales, use or lodgings tax to annually obtain a certificate of exemption, Form STE-1, from the Department of Revenue, regardless of the type of transaction or whether the tangible personal property is subject to sales and use tax or whether the accommodations are subject to lodgings tax.

Act 2015-534 was effective as of August 19, 2015, and becomes operative for all applicable exempt persons or companies on January 1, 2016. Those persons or companies subject to the provisions of this act may apply now for, and secure, a certificate of exemption so that their exemption is properly documented on January 1, 2016. On this date, vendors will be required to have the certificate on file in order to make tax-exempt sales or lodgings to companies or entities subject to the provisions of the Act.

Certificates of exemption shall be valid for one year from the date of issuance and shall be renewed annually each subsequent year before the end of the month in which the certificate expires. Any person or company who fails to obtain a certificate prior to January 1, 2016, or who fails to renew a certificate of exemption prior to its expiration will no longer be allowed to make tax exempt purchases or rent tax exempt accommodations, until such time as a certificate is obtained or renewed.

All persons or companies required to obtain a certificate of exemption under the provisions of Act 2015-534 may be required to file an annual informational report with the Department in a manner prescribed by the Tax Exemption Advisory Council established by Executive Order 12, issued by the Governor on August 19, 2015. For more information, read the department's notice and read the law. Required companies can fill out the application for a certificate of exemption.

TOPIC:  Guidance and Application for Simplified Seller Use Tax Remittance

Effective October 1, 2015, for tax returns which are due on or before November 20, 2015, Legislative Act No. 2015-448, entitled the "Simplified Seller Use Tax Remittance Act," allows eligible sellers to participate in a program to collect, report and remit a flat eight percent (8 %) seller use tax on all sales made into Alabama. An eligible seller is one that sells tangible personal property or a service into the state of Alabama from an inventory or location outside the state but does not have a physical presence in the state, and who is not otherwise required by Sections 41-4-116 or 40-23-190, Code of Alabama 1975, to collect tax on sales made into the state. For more information, read the department's notice and read the law. Eligible sellers can fill out the application.

TOPIC:  Tax Guidance for Contractors, Subcontractors and Alabama Governmental Entities Regarding Construction-related Contracts

NOTE:  Exemption Certificates will be issued as of the project start date or the received date of the application. If, upon receipt of the application, the project has already commenced, the certificate will be issued as of the received date of the application. Any purchases made prior to the issuance of a certificate will not be exempt.

TOPIC:  Tax Guidance for Contractors, Subcontractors and Alabama Governmental Entities Regarding Construction-related Contracts

Legislative Act 2013-205 requires the Department of Revenue to issue Form STC-1, Sales and Use Tax Certificate of Exemption for Government Entity Projects, to all contractors and subcontractors working on qualifying governmental entity projects once the Form ST: EXC-01 is approved.

Each exempt entity, contractor and subcontractor must make application for qualification of the exemption using Form ST: EXC-01 for each tax-exempt project. The application is available on the department’s website at http://revenue.alabama.gov/salestax/ST-EXC-01.pdf. Applications should be submitted directly to the Sales and Use Tax Division Central Office, P.O Box 327710, Montgomery, AL 36132-7710.

The sales and use tax exemption provided for in Act 2013-205 applies to the purchase of building materials, construction materials and supplies, and other tangible personal property that become part of the structure pursuant to a qualifying contract entered into on or after January 1, 2014. Qualifying projects and contracts are those generally entered into with the following governmental entities, unless otherwise noted: the State of Alabama, a county or incorporated municipality of Alabama, an Alabama public school, or an Alabama industrial or economic development board or authority already exempt from sales and use taxes. Please note that contracts entered into with the federal government and contracts pertaining to highway, road, or bridge construction or repair do not qualify for the exemption provided for in Act 2013-205. [Reference: Sales and Use Tax Division Administrative Rule 810-6-3-.77 Exemption for Certain Purchases by Contractors and Subcontractors in Conjunction with Construction Contracts with Certain Governmental Entities.]

The Alabama Department of Revenue will assign each contractor and sub-contractor a consumers use tax account, if one is currently not in place, at the time the Form STC-1, Sales and Use Tax Certificate of Exemption for Government Entity Projects, is issued.

Contractors and sub-contractors for qualifying projects will be required to file monthly consumers use tax returns and report all exempt purchases for ongoing projects, as well as all taxable purchases on one return. These returns are required to be filed through the department’s online tax return filing and payment portal, My Alabama Taxes (https://myalabamataxes.alabama.gov).

As another option for these types of contracts, as well as with other contracts entered into with other types of exempt entities, the Form ST:PAA1, Purchasing Agent Appointment, may be used. However, please be advised that the use of the Form ST:PAA1 option will require the exempt entity to be invoiced directly and pay for directly from their funds any construction and building material and supply purchases.

General questions regarding the exemption for government entity projects may be directed to the Sales and Use Tax Division at 1-866-576-6531. For more detailed information or questions regarding problems that may arise, please contact Brandy Harrison at 334-353-9475 or LaShayla Jackson at 334-242-1262.

TOPIC:  Sale of Certain Durable Medical Equipment, Prosthetics and Orthotics Devices and Medical Supplies

Act No. 2014-453, effective August 1, 2014, amends Section 40-9-30, Code of Alabama 1975 to add rental tax to the durable medical equipment exemption passed during the 2013 legislative session. This act strikes the word “participating” previously included to determine providers in Section 40-9-30(c), dealing with the exemption for leasing oxygen and durable medical equipment. Section 40-9-30(d) was added to exempt any items used for the treatment of illness or injury or to replace all or part of a limb or internal body part purchased by or on behalf of an individual pursuant to a valid prescription and covered by and billed to Medicaid, Medicare, or a health benefit plan from state, county, and municipal sales, use and rental and leasing taxes including, but not limited to, any of the following: durable medical equipment, including repair parts and the disposable or single patient use supplies required for the use of the equipment; medical oxygen and related equipment and supplies; prosthetic and orthotic devices; and medical supplies, as defined and covered under the Medicare program, including, but not limited to, items such as catheters, catheter supplies, ostomy bags and supplies related to ostomy care, specialized wound care products, and similar items that are covered by and billed to Medicare, Medicaid, or a health benefit plan. Section 1 of Act 2013-443, codified as Section 40-9-39.1 was repealed.

TOPIC:  Estimated Sales Tax Requirement Increase

Effective August 1, 2014, the guidelines used to determine if a taxpayer is required to make an estimated payment on their monthly state sales tax return has changed. Legislative Act No. 2014-316, also known as the Small Business Tax Relief Act of 2014, amends Section 40-23-7, Code of Alabama 1975, to increase the average monthly tax liability for a taxpayer to be required to make estimated state sales tax payments from $1,000 or greater to $2,500 or greater. All persons, firms and corporations filing a sales tax return affected by Act No. 2014-316 will be notified by direct letter.

TOPIC:  Prepaid Wireless 9-1-1 Service Charge Rate Change

On April 23, 2014, the Alabama Statewide 911 Board adopted the flat rate of $1.75 as the rate for the 9-1-1 service charge in Alabama effective August 1, 2014. Pursuant to Section 11-98-5.3(b), Code of Alabama 1975, as amended, the 9-1-1 service charge on each prepaid transaction increases to $1.75 effective August 1, 2014. Please note that this rate increase will be reflected on the August 2014 tax return, which is due on September 22, 2014. Click here for more information:  revenue.alabama.gov/salestax/ppw.html.

TOPIC:  FEDERAL CREDIT CARD PROGRAM GSA SmartPay® 2

As of November 30, 2008, the federal government updated its credit card program.  The General Services Administration (GSA) has entered into a series of contracts with a variety of card-issuing banks under the program named GSA SmartPay® 2.  Samples of the new card designs are available at www.gsa.gov/gsasmartpay.  The following information is provided to assist Alabama vendors in determining whether or not tax applies to transactions paid by GSA SmartPay® 2 cards.      

The GSA SmartPay® 2 program provides four business lines (card types):  Purchase, Travel, Fleet, and Integrated (includes fleet, travel and/or purchase functionality and offers a single card for all purchases.)  These cards/accounts can be Centrally Billed Accounts (CBAs) or Individually Billed Accounts (IBAs). 

Centrally Billed Accounts (CBAs) are charge card accounts in which all charges are billed directly to the federal government and paid directly by the federal government to the issuing bank.  (Sales tax is not due on credit card purchases which are centrally billed to and paid by the federal government.  Lodgings tax is not due on charges for lodgings which are centrally billed to and paid by the federal government.) 

Individually Billed Accounts (IBAs) are charge card accounts in which charges are paid directly by the cardholder/federal employee to the issuing bank; the federal employee is then reimbursed by the government.  (Sales tax and lodgings tax are due on credit card transactions where the purchases or charges for lodgings are billed to and paid by federal employees, who are then reimbursed by the federal government.)        

  • Purchase Cards are for purchasing general supplies and services.  All federal government GSA SmartPay® 2 Purchase cards are centrally billed.  Therefore, transactions paid for with this card are tax-exempt. 
  • Fleet Cards are for purchasing fuel and supplies for government vehicles.  All federal government GSA SmartPay® 2 Fleet cards are centrally billed. Purchases of tangible personal property paid for with this card are exempt from sales taxes. However, purchases of fuel paid for by this card are not exempt from state fuel excise taxes.
  • Travel Cards are for paying travel expenses related to official government travel (airline, hotel, meals, incidentals).  Federal government GSA SmartPay® 2 Travel cards may be centrally billed or individually billed.  The Travel card uses the 6th digit of the account number to identify whether the account is a Centrally Billed Account or an Individually Billed Account.  If the sixth digit is 1, 2, 3, or 4, the transactions against the Travel card are individually billed to the federal employee, and, therefore, the transactions are subject to applicable taxes.  See the chart below.   
  • Integrated Cards – Two or more business lines (card types) whose processes are integrated into one card.    
    • All Fleet and Purchase type transactions on a GSA SmartPay® 2 integrated card are centrally billed. Purchases of tangible personal property paid for with this card are exempt from sales taxes. However, purchases of fuel paid for by this card are not exempt from state fuel excise taxes. 
    • Travel functionality on a GSA SmartPay® 2 integrated card may be centrally billed or individually billed.  The numbering structure for Integrated Cards to differentiate between centrally and/or individually billed transactions will be specific to each agency/ organization using the integrated card.  This information will be provided on the GSA SmartPay® website (www.gsa.gov/gsasmartpay) as it becomes available. 

Department of the Interior:  With the exception of the purchase of meals and incidental travel expenses which are individually billed and subject to sales tax, transactions paid for with the Department of the Interior's integrated card are centrally billed and exempt from sales and lodgings tax. Purchases of fuel paid for by this card are not exempt from state fuel excise taxes.

The Department of the Interior GSA SmartPay 2 charge cards can be identified by their unique prefixes and account numbers, government-designed artwork, and wording that indicates that the card is for official transactions for the U. S. Government.  The Department of the Interior Integrated Card account numbers begin with 5568 26.

 
Purchase
Travel
Fleet
Debit/Prepaid
Prefix (1st four digits)
5568 - MasterCard 5565 - MasterCard 4716 - Visa 4614 - Visa 4486 - Visa 5568 - MasterCard 5565 - MasterCard 4486 - Visa 4614 - Visa 5565 - MasterCard 5568 - MasterCard 8699 - Voyager 5564 - MasterCard 5568 - MasterCard 5565 - MasterCard 4614 - Visa
6th Digit
NA
0
CBA
1
IBA
2 - 4
IBA
5
Reserved
6 - 9
CBA
NA NA

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TOPIC:  CURRENT LOCAL TAX RATE CHANGES

Click here to view the current local tax rate changes and to view and/or print the Local Tax Notices.

 

TOPIC:  RECENTLY AMENDED OR REPEALED OR NEWLY PROMULGATED SALES & USE TAX RULES

Click here to view the list of recently amended or repealed or newly promulgated Sales & Use Tax Rules, and to view and/or print the text of the Rules.

This page last updated April 19, 2016.