Alabama’s lodging tax exemption is narrow. Only four categories qualify: stays by the U.S. federal government when the charges are billed directly to and paid by the government, continuous stays of 180 days or more at the same facility, lodging at certain nonprofit-operated camps and conference centers, and foreign diplomats holding a valid U.S. Department of State tax exemption card.1Alabama Legislature. Alabama Code 40-26-1 – Tax Imposed; Exemptions; Definitions Everyone else pays. The base state rate is 4% in most counties and 5% in the 16 counties of the Alabama Mountain Lakes region, with county and municipal add-ons ranging from 0% to 13% on top.
Two groups that people commonly assume are exempt are not: Alabama state and local government agencies, and general nonprofit organizations booking rooms at commercial hotels. More on that below.
Federal Government Stays
Rooms furnished to a federal department or agency are exempt from state, county, and municipal lodging tax, but only when the charges are billed directly to and paid by the federal government with government funds.2Alabama Administrative Code. Alabama Administrative Code Rule 810-6-5-.13 – Persons, Firms, and Corporations Subject to Lodgings Tax The exemption turns on who pays the hotel, not who ultimately bears the cost.
If a federal employee pays out of pocket, uses a personal card, or uses a card billed to them individually and then seeks reimbursement, the stay is fully taxable. That remains true even when the employee is traveling on official business and the government eventually reimburses every dollar.
Reading GSA SmartPay Cards
Federal charge cards come in two flavors. Centrally Billed Accounts (CBAs) send the bill directly to the agency and qualify for the exemption. Individually Billed Accounts (IBAs) bill the employee, and those stays are not exempt in Alabama.3GSA SmartPay. Recognizing GSA SmartPay Cards/Accounts
On GSA SmartPay travel cards, the sixth digit of the card number tells you which is which. Digits 6, 7, 8, 9, or 0 mean CBA (exempt). Digits 1 through 4 mean IBA (not exempt). A digit of 5 identifies the silver “Tax Advantage Travel” card, which has its own designation. GSA Purchase, Fleet, and most Integrated cards are centrally billed by default. Front-desk staff should confirm the card type before waiving any tax.
The 180-Day Continuous Stay Rule
Anyone staying at the same lodging facility for 180 continuous days or more is exempt from state, county, and municipal lodging tax. The rule applies to individuals, businesses, and government employees alike, and no application or certificate is required.1Alabama Legislature. Alabama Code 40-26-1 – Tax Imposed; Exemptions; Definitions
The administrative code defines a “transient” as someone staying fewer than 180 continuous days, so once the guest crosses that line they fall outside the tax’s scope entirely.2Alabama Administrative Code. Alabama Administrative Code Rule 810-6-5-.13 – Persons, Firms, and Corporations Subject to Lodgings Tax The stay must be continuous and at the same property. A break, or a move to a different facility, restarts the count. This is the exemption long-term contractors and relocated workers typically use.
Nonprofit Camps and Conference Centers
Alabama exempts lodging at camps, conference centers, and similar facilities operated by nonprofit organizations when the facility primarily serves children, students, or members and guests of other nonprofit organizations in connection with recreational or educational programs.1Alabama Legislature. Alabama Code 40-26-1 – Tax Imposed; Exemptions; Definitions Privately operated camps serving those same populations exclusively also qualify. For this exemption, “children” means individuals under 21, and “nonprofit organization” means one exempt under 26 U.S.C. §501(c)(3).
This exemption is narrower than most people expect. It attaches to the facility and the population it serves, not to the nonprofit status of the guest. A charity booking rooms at a regular hotel for a fundraising event does not qualify, and neither do employees of a nonprofit attending a conference at a commercial property.4Alabama Department of Revenue. Are There Any Lodging Transactions That Are Not Subject to Lodging Taxes?
Foreign Diplomatic Personnel
Diplomats and consular officers assigned to the United States may be exempt under the Vienna Convention on Diplomatic Relations and the Vienna Convention on Consular Relations. The U.S. Department of State administers the Diplomatic Tax Exemption Program and issues cards that specify which taxes the holder is exempt from, including occupancy taxes.5United States Department of State. Diplomatic Tax Exemptions
Exemption levels vary by rank and by the country the diplomat represents, so not every card covers lodging tax. Hotels should read the card itself, verify that occupancy or lodging tax is listed, and keep a copy.
Who Does Not Qualify
Alabama state government agencies, counties, municipalities, and their employees are not exempt from lodging tax. Neither are other states’ governments or their political subdivisions. It makes no difference whether the government entity pays the hotel directly or the employee pays and gets reimbursed. Both are fully taxable.2Alabama Administrative Code. Alabama Administrative Code Rule 810-6-5-.13 – Persons, Firms, and Corporations Subject to Lodgings Tax An Alabama state university booking rooms for a visiting team owes the full lodging tax. Only the federal government receives a government-entity exemption, and only under the billing rules described above.
General nonprofit organizations at commercial hotels also do not qualify. Having 501(c)(3) status, or even holding an Alabama sales tax exemption certificate, does not waive the lodging tax on a regular hotel stay. The nonprofit lodging exemption is the camp and conference center rule and nothing more.
How to Document Each Exemption
The hotel keeps the paperwork, and missing documentation shifts liability to the hotel. Each category has its own requirements.
Federal Government
For a stay paid on a centrally billed federal charge card, the lodging provider should retain the invoice and a completed Form ST-GSA, the Alabama Department of Revenue’s exemption certification for federal charge card purchases. The cardholder fills it out to certify official federal government use and that charges will be centrally billed to and paid by the government.6Alabama Administrative Code. Alabama Administrative Code Rule 810-6-3-.15 Written documentation containing the same information also works. Federal agencies may alternatively present Standard Form 1094, the U.S. Tax Exemption Form.7Acquisition.GOV. 53.229 Taxes (SF’s 1094, 1094-A)
180-Day Stays
No certificate is required. The hotel’s own records showing the continuous stay dates are the documentation. Once the guest crosses 180 days, the exemption applies automatically.
Nonprofit Camps and Conference Centers
The operator should be prepared to show its 501(c)(3) determination letter and evidence that the facility serves the qualifying populations. Organizations pursuing a broader Alabama exemption certificate can apply on Form ST:EX-A1, the Application for Certificate of Exemption.8Alabama Department of Revenue. Application for Certificate of Exemption A general sales tax exemption certificate does not automatically extend to lodging tax.
Diplomats
The guest presents the State Department tax exemption card at check-in. The hotel verifies that occupancy or lodging tax is among the taxes listed and retains a copy for its records.
Recordkeeping and Assessments
Alabama law requires every taxpayer to keep records sufficient for the Department of Revenue to determine the correct tax.9Alabama Legislature. Alabama Code 40-2A-7 – Uniform Revenue Procedures For hotels, that means guest invoices, ST-GSA certifications or equivalent exemption documents, and payment records for every tax-exempt stay. The department can issue preliminary assessments within three years of the return due date or filing date, whichever is later, so records should be kept at least that long. Electronic records are fine if they remain legible.
Penalties When Exemptions Go Wrong
The consequences depend on what went wrong and who was responsible.
- Unpaid tax accrues interest at the underpayment rate set by the U.S. Secretary of the Treasury under 26 U.S.C. §6621, whether the shortfall came from waiving the tax improperly or from failing to remit what was collected.10Alabama Legislature. Alabama Code 40-1-44 – Interest on Delinquent Taxes and Overpayments
- A person required to collect and remit lodging tax who willfully fails to do so faces a civil penalty of up to the full amount of tax evaded, not collected, or not properly accounted for. Section 40-29-73 specifically covers the lodging tax under Section 40-26-1, and officers and employees with a duty to collect can be held personally liable.11Alabama Legislature. Alabama Code 40-29-73 – Failure to Collect and Pay Over Tax
- Willfully failing to collect, account for, and pay over tax is a felony punishable by a fine of up to $10,000, imprisonment of up to five years, or both.12Alabama Legislature. Alabama Code 40-29-111 – Failure to Collect or Truthfully Account for and Pay Over Tax
- Willfully attempting to evade or defeat any tax is a felony with fines up to $100,000 for individuals and $500,000 for corporations, plus up to five years of imprisonment. Fraudulently claiming a lodging tax exemption falls under this provision.13Alabama Legislature. Alabama Code 40-29-110 – Attempt to Evade or Defeat Tax
The gap between an honest paperwork mistake and willful evasion is wide. A hotel that accepted an incomplete certificate in good faith is in a different position than one that waived taxes without documentation across dozens of stays. Complete records for every exempt stay are the strongest defense against the harsher penalties.