How to Get Alabama Sales Tax Permit | A Comprehensive Guide


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Alabama Sales Tax Permit

Have you ever wondered what a sales tax permit is in Alabama? If you don’t, then we will guide you through it. In Alabama, a sales tax permit, also known as a seller’s permit, is a legal document that allows businesses, specifically Alabama LLC, to collect and remit sales tax to the Alabama government. This permit ensures businesses operate legally and have the necessary permissions to conduct sales within a particular state. Alabama has its own rules and regulations surrounding sales tax permits. Business owners must familiarize themselves with the requirements and processes to comply with the law.

In this comprehensive guide, Webinarcare Editorial Team will walk you through everything you need to know about obtaining and maintaining Alabama Sales Tax Permit. From understanding the basics of sales tax to the intricacies of the application process, we have got you covered. You must be guided by all the factors gathered in this article.

What is a Sales Tax Permit?

A sales tax permit is Alabama-issued license that allows businesses to collect and remit sales tax on the goods and services they sell. This permit ensures Alabama businesses operate legally and have the necessary permissions to conduct sales within a particular state. In Alabama, a sales tax permit is required for businesses that sell taxable goods or services and are required to collect sales tax from their customers.

Who Needs a Sales Tax Permit?

Not all businesses need a sales tax permit. Typically, businesses that sell tangible personal property or taxable services to customers within Alabama require a sales tax permit. This includes brick-and-mortar stores, online retailers, and service providers. Alabama may also require sales tax permits for businesses that sell certain types of products or services, such as alcohol or tobacco. If you plan to start a bakery business in Alabama, you typically need a sales tax permit to collect and remit sales tax on the items you sell.

If your business operates in multiple states or forms a foreign LLC in Alabama, you may need to obtain a sales tax permit for each state with a sales tax nexus. A sales tax nexus is a connection or presence a business has within a state that requires them to collect and remit sales tax. Factors that can create a nexus include the following:

  • Physical location
  • Employees
  • Inventory within a state

Obtaining a sales tax permit in Alabama is not just about complying with regulations, but about seizing the opportunity to grow and thrive in the market. To start an LLC must be a gateway to establish a legitimate business presence and to build trust with customers. Embrace this essential step, for it paves the path towards success and prosperity.

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How to Get a Sales Tax Permit in Alabama

The process for obtaining a sales tax permit varies from state to state. Generally, Alabama businesses must apply through the Alabama Department of Revenue. The following steps provide an overview of the application process:

Step 1: Determine If You Need a Sales Tax Permit 

Before applying, determine if your Alabama business needs a sales tax permit based on the goods or services you sell and where you operate.

Most Alabama businesses that sell tangible goods or services must have a sales tax permit. This includes:

  • Retailers – businesses that sell goods directly to consumers, such as clothing stores, grocery stores, and electronics stores.
  • Service Providers – businesses that provide services, such as hair salons, auto repair shops, and landscaping companies.
  • Wholesalers – businesses that sell goods to other businesses, such as distributors and manufacturers.
  • Online Sellers – businesses that sell goods or services online, including Alabama E-commerce and online marketplaces.

Step 2: Register Your Alabama Business

Register your business in Alabama if you still need to. This may involve obtaining an Employer Identification Number (EIN) in Alabama from the Internal Revenue Service and registering your business name with the Alabama Secretary of State. 

Your Alabama business name should be unique, memorable, and reflective of your products or services. There is a complete guide on Alabama Business Name Search for a proper Alabama business name. You can also check the availability of your desired business name by searching the Alabama Secretary of State Business Entity Search‘s website.

In obtaining an EIN, it can be done through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Complete the registration for a legal Alabama business if you plan to sell tangible goods. 

Recommended: Professional services have the EIN included in their LLC formation package. We recommend using –

LegalZoom – ($0 + State Fee for LLC formation)

Step 3: Gather The Necessary Information

The next step is to collect the required information for the Alabama sales tax permit application. To obtain a sales tax permit in Alabama, you will need to gather the following necessary information:

  1. Business Details: Provide the legal name, mailing address, and contact information of your business, including your Alabama DBA (Doing Business As) names.
  2. Entity Type: Indicate whether your business is a sole proprietorship, partnership, corporation, LLC, or legal entity.
  3. EIN/SSN: Have your Employer Identification Number (EIN) or Social Security Number (SSN) ready. This identification is required to associate the sales tax permit with your business.
  4. Purpose of Permit: Explain the nature of your business activities, such as retail sales, wholesale, manufacturing, or service, to determine the appropriate sales tax category.
  5. Product/Service Description: Provide a brief description of the goods or services your business offers, including any unique details that may impact the sales tax requirements.
  6. Nexus Information: Identify if your business has a physical presence or nexus in Alabama, such as a brick-and-mortar location, employees, or inventory storage.
  7. Estimated Sales: Estimate your expected monthly or annual sales volume in Alabama to determine the appropriate tax registration and reporting requirements.
  8. Previous Registration: If you are already registered for sales tax in another state, provide details to determine if any reciprocal agreements or exemptions apply.
  9. Supporting Documents: Some states may require additional documentation, such as a copy of your business license, federal tax returns, or a certificate of authority.
  10. Fee Payment: Be prepared to pay the required fee for obtaining a sales tax permit in Alabama.

It’s important to note the exact requirements and processes in Alabama. It is recommended to visit the official website of the Alabama Department of Revenue or consult with a tax professional for accurate and up-to-date information.

Step 4: Complete The Application

Fill out the sales tax permit application form for Alabama, either online or by paper. Be prepared to answer questions about your business operations, products, and services. You can register your Alabama sales tax permit in My Alabama Taxes.

Step 5: Pay Any Required Fees

In Alabama, the state permit may charge a fee for obtaining a sales tax permit. Be prepared to pay this fee when submitting your application. Usually, it costs $0 (Free). 

Step 6: Submit The Application

Submit your completed application, along with the required fee of $0 (Free), to the Alabama Department of Revenue.

Step 7: Receive Your Permit

Once your application is approved, you will receive your sales tax permit. This may be a physical document or an electronic certificate you can print. 

How to Maintain a Sales Tax Permit

After obtaining a sales tax permit, Alabama businesses must maintain compliance with Alabama sales tax laws. This typically involves the following steps:

  • Collect Sales Tax: Collect sales tax from customers on taxable goods and services. Be sure to charge the correct sales tax rate based on your and your customer’s locations. The sales tax rate in Alabama is 4.00%. 
  • Keep Accurate Records: Maintained detailed records of all sales transactions, including the amount of sales tax collected. This information will be required when filing your sales tax returns. Hire a certified public accountant (CPA) to keep track of records. 
  • File Sales Tax Returns: File sales tax returns with Alabama, typically monthly, quarterly, or annually, depending on your sales volume and Alabama requirements. Be sure to remit the sales tax collected during the reporting period.
  • Renew your Permit: Alabama requires businesses to renew their sales tax permits periodically. Know your state’s renewal requirements and complete the necessary steps to maintain your permit.

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Penalties for Non-Compliance

Failure to obtain or maintain a sales tax permit can seriously affect a business. Penalties for non-compliance can include fines, penalties, interest charges, and even the revocation of your business license. Additionally, Alabama businesses that fail to collect and remit the Alabama sales tax may be held personally liable for the unpaid taxes.

Do I Need a Sales Tax Permit If I Only Sell Online?

You likely need a sales tax permit if you sell taxable goods or services online and have a sales tax nexus in Alabama. To have a Home-Based Business in Alabama, you must still file and maintain a sales tax permit. 

How Long Does Obtaining a Sales Tax Permit Take?

The processing time for sales tax permit applications takes time. In Alabama, they may issue permits within a few days, while others may take several weeks. Be sure to apply well in advance of when you plan to start selling taxable goods or services.

Can I Have Multiple Sales Tax Permits?

Businesses that operate in multiple states or sell different types of products may need multiple sales tax permits. Be sure to research the specific requirements for each state and product type. Having a foreign LLC is not quite easy since you still need to hire a Resident Agent, file for the Certificate of Formation of the state you wish to operate your business, and also, you need to have multiple sales tax permits. 

How Much Does a Sales Tax Permit Cost?

The costs and requirements for obtaining a sales tax permit vary depending on the state. To find accurate information about the cost of a sales tax permit in Alabama, you can visit the Alabama Department of Revenue’s website or consult with a tax professional or accountant familiar with your state’s regulations. They can provide the most up-to-date information on the costs and requirements for obtaining a sales tax permit in Alabama.

FAQs

What is a sales tax permit in Alabama?
A sales tax permit in Alabama is a certificate that allows a business to collect and remit sales tax to the state.
Who needs to obtain a sales tax permit in Alabama?
Any business that sells taxable goods or services in Alabama is required to obtain a sales tax permit.
How do I apply for a sales tax permit in Alabama?
You can apply for a sales tax permit in Alabama online through the Alabama Department of Revenue’s My Alabama Taxes system.
What information do I need to provide when applying for a sales tax permit in Alabama?
You will need to provide some basic information about yourself and your business, including your name, address, and federal tax ID number.
Is there a fee to apply for a sales tax permit in Alabama?
No, there is no fee to apply for a sales tax permit in Alabama.
How long does it take to receive a sales tax permit in Alabama?
It typically takes around 2-3 weeks to receive a sales tax permit in Alabama.
How often do I need to renew my sales tax permit in Alabama?
Sales tax permits in Alabama do not expire or need to be renewed as long as you continue to operate your business in the state.
What happens if I don’t obtain a sales tax permit in Alabama?
Failing to obtain a sales tax permit in Alabama can result in penalties and fines from the state.
Can I use my sales tax permit from another state in Alabama?
No, you must obtain a sales tax permit specific to Alabama in order to sell taxable goods or services in the state.
How do I add a new location to my existing sales tax permit in Alabama?
You can add a new location to your existing sales tax permit by logging in to the My Alabama Taxes system and selecting “Add New Location” under your account.
Can I designate someone else to apply for a sales tax permit on behalf of my business in Alabama?
Yes, you can designate someone else (such as an accountant or lawyer) to apply for a sales tax permit on behalf of your business in Alabama.
Do I need a separate sales tax permit for each county in Alabama?
No, you only need one sales tax permit for your entire business in Alabama.
What is the sales tax rate in Alabama?
The sales tax rate in Alabama varies depending on the county and city where the sale takes place, but it ranges from 4% to 11%, with an average of 8%.
How do I determine what the sales tax rate is for a particular location in Alabama?
You can look up the sales tax rate for a particular location in Alabama on the Alabama Department of Revenue’s website.
Can I apply for a sales tax permit in person in Alabama?
No, all sales tax permit applications must be completed online through the My Alabama Taxes system.
Is there a penalty for failing to collect or remit sales tax in Alabama?
Yes, there can be penalties and interest assessed for failing to collect or remit sales tax in Alabama.
How often do I need to file sales tax returns in Alabama?
Sales tax returns in Alabama must typically be filed on a monthly or quarterly basis, depending on the volume of sales.
What information do I need to report on my sales tax returns in Alabama?
You will need to report your total sales, taxable sales, and sales tax collected during the reporting period.
Can I file sales tax returns online in Alabama?
Yes, all sales tax returns must be filed online through the My Alabama Taxes system.
What happens if I file my sales tax return late in Alabama?
Late sales tax returns in Alabama can result in penalties and interest charges.
Can I claim a sales tax exemption for purchases made in Alabama?
Yes, certain purchases (such as manufacturing equipment or raw materials) may be eligible for a sales tax exemption in Alabama.
How do I claim a sales tax exemption for purchases made in Alabama?
You will need to provide the seller with a completed exemption certificate at the time of purchase.
Can I get a refund for overpaid sales tax in Alabama?
Yes, you can request a refund for overpaid sales tax in Alabama by filing a refund claim with the Alabama Department of Revenue.
How long does it take to receive a sales tax refund in Alabama?
It usually takes several weeks to several months to receive a sales tax refund in Alabama.
Can I make changes to my sales tax returns in Alabama?
Yes, you can file an amended sales tax return in Alabama if you need to make a correction or adjustment.
Can I notify the Alabama Department of Revenue if I no longer sell taxable goods or services in Alabama?
Yes, you can notify the Alabama Department of Revenue if your business is no longer selling taxable goods or services in Alabama.
What should I do if I receive a notice of audit from the Alabama Department of Revenue?
You should contact a tax professional or attorney if you receive a notice of audit from the Alabama Department of Revenue to ensure your rights are protected.
Can I get help with filing my sales tax returns in Alabama?
Yes, you can obtain assistance with filing sales tax returns in Alabama from the Alabama Department of Revenue or a tax professional.
How do I get a sales tax permit in Alabama?
You can obtain a sales tax permit online through the Alabama Department of Revenue’s website or visit one of their offices in person.
Do I need a sales tax permit if I only sell occasionally?
Yes, if you make any sales in Alabama, then you must have a valid sales tax permit regardless of the frequency of your sales.
How much does it cost to get a sales tax permit in Alabama?
It’s free to apply and obtain a sales tax permit in Alabama.
What is the process for obtaining a sales tax permit in Alabama?
To obtain a sales tax permit in Alabama, you need to fill out an application through the Alabama Department of Revenue’s website or in person at one of their offices.
Does Alabama require me to renew my sales tax permit periodically?
No, sales tax permits in Alabama do not have expiration dates, but you need to keep it up to date by always filing tax returns and reporting any changes.
How long does it take to get a sales tax permit in Alabama?
The processing time for obtaining a sales tax permit in Alabama usually takes around 15 business days.
Can I apply for a sales tax permit by mail in Alabama?
Yes, you can apply for a sales tax permit by mail in Alabama, but it’s more convenient and faster to apply online.
Can I apply for multiple sales tax permits in Alabama if I have business locations in several cities?
Yes, if you operate in more than one location in Alabama, you need to apply for a sales tax permit for each location separately.
Do I need to collect sales tax on all items I sell in Alabama?
Yes, sales tax in Alabama applies to most goods and some services.
Are there additional local sales tax rates in Alabama that I need to collect?
Yes, in addition to the statewide sales tax, there are various local sales taxes in Alabama, which vary by location.
How do I register for local taxes in Alabama?
When you initially apply for a state sales tax permit, your application is forwarded automatically to any cities that have a local tax and requires one.
Do I need to renew my sales tax license in Alabama?
Sales tax permits in Alabama do not have expiration dates, but you need to make sure that you always file tax returns and follow any changes over time.
Do I need to display my sales tax permit at my business in Alabama?
Alabama mandates that businesses show their sales tax license in an easily viewable and secure at their address.
What happens if I do not get a sales tax permit in Alabama?
Selling items in Alabama without a sales tax permit is strictly prohibited under Alabama law, and you may subject yourself to significant fines and penalties.
Can I use my sales tax permit from another state to sell products in Alabama?
No, every business operating in Alabama must establish a unique sales tax license via the application process.
What documentation do I need to provide when applying for a sales tax permit in Alabama?
You need to provide details about your business, including your business entity name, and federal identification number (FEIN), owner name and contact information when removing pencil to paper.
After completing the application for a sales tax permit in Alabama online, at what point should I expect confirmation and a permit to arrive?
You should allow 15–21 days after submission to receive confirmation. However, it may differ in some situations.
How do I know if I have to charge an address any local taxes beyond the state’s general tax rate?
Cities that require the learning above and beyond the statewide tax rates have instructional necessities provided on the Department of Revenue’s website.
If my business has a different type of permit than a sales tax permit, do I still need a sales tax permit in Alabama?
Most businesses that handle purchases must have a sales tax license even if they have other types of licenses.
Can I make my application for a sales tax license over the phone?
No, all applications for a sales tax license require the paper form available online or in-person at an Alabama Department of Revenue office.
If I have a question about the process of applying for a sales tax permit in Alabama, who can I contact?
You may call the Alabama Department of Revenue’s business registration hotline for getting your answer.
Does Alabama offer any methods to tackle stigma surrounding sales tax permit requirements for small businesses?
The state Public Accountancy team outlined an overview of its services to support smaller companies. They also have various guides available to help prepare the businesses’ owners for new applications.
If there are particular goods my business specialist in, what license or permit do we need related to this matter?
Some professions have regulatory and licensure requirements that vary, in addition to outside licenses and permits your company might need.
If I do business across several states, can I use one sales tax permit and reporting method for all locations?
No, every state needs its own independent presence, and reporting must be dealt with for a business to operate to sell in multiple regions.
In what circumstances can I not honor sales through a business outside of Alabama that doesn’t have a sales tax license?
Generally, customers in Alabama cannot participate stipulated “exempt” to comply with unfirmed surcharges given sales earlier made for transport outside of Alabama borders.
If I acquired my business and the owner before me had a valid sales tax permit, do I need a new qualification?
If the ownership has shifted directly along with the nature of the business the application will need to be amendended however, there might be situations where, under differing situations, the sales tax permit could still be during passive sales periods on a temporary basis.
What happens if we move our store or business location in Alabama?
Senate Circular No. 37 lays out the requirements for notifications on the Department of Revenue’s website, DoR when a store or business location changes.
Do I need a sales tax permit for non-profit activities that my organization hosts inside Alabama?
Non-profits that qualified to earn money in Alabama required to have a sales tax license for any sales if it breaches particular sections’ fundraiser exceptions.
Are there rebates available exclusively for first-time business owners in Alabama?
As an extra, Alabama does not offer individual credits or discounts for fledgling business owners though financing or loan banks provides programs that businesses might legitimately qualify for.

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Conclusion

Obtaining and maintaining a sales tax permit is crucial to running a compliant and successful business. By understanding the requirements and processes in Alabama, you can ensure that your business collects and remits sales tax correctly and avoids any penalties for non-compliance. Consulting with a tax professional or Alabama attorney is recommended to ensure that your Alabama business meets all necessary sales tax requirements.

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