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Important Notices!
*****  Administrative Law Division Move Effective October 1st, 2014  *****
The Taxpayer Fairness Act transfers Revenue's Administrative Law Division to the newly-created Alabama Tax Tribunal; their website is now http://taxtribunal.alabama.gov/.
 
sales&useincentives

Sales & Use Tax Incentives

Alabama's Sales and Use Tax laws contain several provisions which give Alabama an advantage over other states.  The law provides for rate differentials, abatements , exemptions for specific items, and Enterprise Zone credits.  The sections of law cited below are found in the Code of Alabama 1975.

Sales & Use Tax Rate Differentials

The state sales & use tax general rate in Alabama is 4.0%.

The state sales & use tax rate for manufacturing and farm machinery is 1.5%.

In addition to state taxes, most cities and counties also levy their own sales & use taxes, which provide similar rate differentials. Click here for information on local sales & use tax rates.

Sales & Use Tax Abatements

The Tax Incentive Reform Act of 1992 (Chapter 9B, Title 40) allows qualifying industries to receive abatements of state and non-educational county and city construction-related sales and use taxes. Click here for more information on tax abatements.

Sales & Use Tax Exemptions

Pollution Control Equipment.  Equipment or materials purchased primarily for the control, reduction, or elimination of air or water pollution are exempt from sales and use tax under Alabama law (Sections 40-23-4(a)(16) and 40-23-62-(18)).

Raw Materials.  Tangible personal property used by manufacturers or compounders as an ingredient or component part of their manufacturing or compounded product are specifically exempt from sales and use tax under Alabama law (Sections 40-23-1(a)(9)b and 40-23-60(4)b).

Utility Gross Receipts Tax Exclusion. Alabama law (Sections 40-21-83 and 40-21-103) allows exclusions from the utility gross receipts tax and the utility service use tax if electricity or natural gas is used in an electrolytic or electro-thermal manufacturing or compounding process.

Other exemptions for sales and use taxes are described in the Sales & Use Tax Laws.

Sales Tax Enterprise Zone Exemption

This exemption is offered to help encourage economic growth in areas considered to have depressed economies (Section 41-23-30, Code of Alabama 1975). To qualify for this incentive, a business must meet detailed requirements concerning site location and employee qualifications.

For information please contact:

Alabama Department of Economic and Community Affairs
Enterprise Zone Coordinator
401 Adams Avenue
P.O. Box 5690
Montgomery, AL 36103-5690
334-242-5438