Section 40-18-31.2, Code of Ala. 1975, creates the factor presence standard for business activity in the state to determine nexus for nonresident individuals and business entities that are doing business in this state. The section stipulates that the threshold amounts may be adjusted periodically consistent with the Consumer Price Index.

Nonresident individuals and business entities are deemed to have “substantial nexus” for the tax period in which they exceed the following thresholds for Alabama:

• For tax years January 1, 2015 – December 31, 2018:
  • $50,000 of property;
  • $50,000 of payroll;
  • $500,000 of sales; or
  • 25 percent of the total property, total payroll, or total sales.
• For tax years beginning on or after January 1, 2019:
  • $54,000 of property;
  • $54,000 of payroll;
  • $538,000 of sales; or
  • 25 percent of the total property, total payroll, or total sales.
• For tax years beginning on or after January 1, 2022:
  • $60,000 of property;
  • $60,000 of payroll;
  • $596,000 of sales; or
  • 25 percent of the total property, total payroll, or total sales.
• For tax years beginning on or after January 1, 2023:
  • $64,000 of property;
  • $64,000 of payroll;
  • $635,000 of sales; or
  • 25 percent of the total property, total payroll, or total sales.

Individuals who are residents or business entities organized in Alabama or commercially domiciled in this state have substantial nexus in Alabama.

If a business entity’s (not organized or commercially domiciled in Alabama) activities do not exceed the standard of “mere solicitation of sales” that fall under the protection of PL 86-272, the factor presence nexus standards established for tax years beginning January 1, 2015, and after will not apply.

For assistance in determining nexus and filing responsibilities of a business in Alabama, complete the Nexus Questionnaire online at My Alabama Taxes in the Businesses panel.