Alabama Sales Tax Nexus

Businesses with nexus in Alabama are required to register with the Alabama Department of Revenue and to charge, collect, and remit the appropriate sales tax to state and local authorities.

Generally, a businesses has nexus in Alabama when it has a physical presence in the state, such as a retail store, warehouse, inventory, or the regular presence of traveling salespeople or representatives. However, out-of-state sellers can also establish nexus in the ways described below.

Alabama nexus for out-of-state sellers

Affiliate nexus

If your business has ties to businesses in Alabama, including affiliates, it may have “remote entity nexus” under Act #2003-390According to the Alabama Department of Revenue, nexus is established when an out-of-state business and an in-state business maintaining one or more locations within Alabama are related parties, and any of the following conditions is met:

  • The out-of-state business and the in-state business use an identical or substantially similar name, trade name, trademark, or goodwill to develop, promote, or maintain sales
  • The out-of-state business and the in-state business pay for each other’s services in whole or in part contingent upon the volume or value of sales
  • The out-of-state business and the in-state business share a common business plan or substantially coordinate their business plans
  • The in-state business provides services to, or that inure to the benefit of, the out-of state business related to developing, promoting, or maintaining the in-state market

The department also explains the conditions under which an out-of-state business and an in-state business are considered related parties. Read more here.

Economic nexus

Beginning January 1, 2016, out-of-state sellers who lack a physical presence in Alabama but who make retail sales of tangible personal property into the state are considered to have substantial economic presence in Alabama for sales and use tax purposes and are required to register for a license with the Alabama Department of Revenue and collect and remit sales and use tax when the following conditions are met:

  • Seller’s retail sales of tangible personal property sold into Alabama exceed $250,000 per year based on the previous calendar year’s sales

See Alabama Statutes Section 40-23-68 and the Alabama Department of Revenue, Remote Entity Nexus.