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Alabama: Online and Catalog Shoppers Owe Use Tax


 Shopping online this holiday season? Remember that use tax!

Shopping online, via TV shopping networks, or by catalog is not tax free. That’s the gist of a news release recently issued by the Alabama Department of Revenue.

It opens with this simple message:

“If you’re one of the many shoppers who will be using your computer to ‘click’ your way through your holiday gift list this year, don’t forget the tax.”

Some out-of-state sellers are required to collect Alabama sales tax because of the state’s Alabama DOR recognizes that many businesses selling via the Internet, television or catalog are not be required to collect sales tax in Alabama.

Nonetheless, Alabamans do owe tax on items that will be used in Alabama: use tax. “Shoppers owe a 4 percent state use tax on their out-of-state purchases if no tax has been collected by the out-of-state seller. Local taxes also apply if you live in a city or county that levies a local sales or use tax.”

Alabama shoppers who do pay sales tax to another state—either when shopping remotely or while physically shopping in another state--should keep all receipts. So long as the tax paid is equal to- or more than the tax owed to Alabama, additional Alabama tax won’t be owed. However, if the rate of tax paid was less than the rate attributed to the buyer’s address, additional sales or use tax could be owed to Alabama.

The department hastens to add that Alabama use tax is not new: “it has been a part of the Alabama tax system as long as the state sales tax.” Furthermore, it serves a purpose. “The use tax is a complimentary tax to the state sales tax and prevents Alabama merchants from being placed at an unfair competitive disadvantage to out-of-state online or catalog merchants who may not be required to collect tax on sales to Alabama residents.”

How to file use tax

It’s easy to imagine shoppers being flummoxed by consumer use tax. Merchants collect sales tax when you buy something at a store—buyers don’t need to think about it. It’s less clear what to do after you’ve purchased gifts online for all your friends and family and no sales tax has been collected.

The best tactic is to save receipts. There is a line for use tax on Alabama individual income tax returns.

Businesses

Businesses are also liable for consumer use tax. Learn about the challenges of use tax compliance.

How does your business handle consumer use tax?

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Alabama State Rates

photo credit: alles-schlumpf via photopin cc


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.