To file Alabama sales tax, register your business with the Alabama Department of Revenue (ADOR), then report your sales and pay what you collected through the My Alabama Taxes (MAT) portal by the 20th of the month following each filing period. Most sellers file monthly. The state rate is 4% on general merchandise, with reduced rates on a handful of categories and local city and county taxes layered on top.
Register Before You Collect
Every business making retail sales in Alabama needs a sales tax license before collecting a dollar. Registration is online through the MAT portal, and you’ll need your business name and address, your Federal Employer Identification Number, and the date you’ll start making sales.1Alabama Department of Revenue. How Do I Obtain or Register for a Sales Tax License?
After the ADOR processes your application, you’ll receive an “Online Filing Information” letter with a 10-digit account number, a Sign-On ID, and an Access Code. Those three pieces let you finish setting up your MAT account. Keep the letter until you’ve created your own password, because you need those credentials every time you log in before then.
How Often You File and When It’s Due
The ADOR assigns your filing frequency based on your total state sales tax liability from the previous calendar year. Monthly is the default, and each monthly return and payment is due by the 20th of the following month. January’s tax is due February 20.2Alabama Legislature. Alabama Code Title 40-23-7 – Taxes Due Monthly
Lower-volume sellers can request a less frequent schedule:
- Quarterly if last year’s liability was under $2,400. Returns due April 20, July 20, October 20, and January 20.
- Semi-annual if last year’s liability was under $1,200, or if you made retail sales only during two or fewer 30-day periods. Returns due July 20 and January 20.
- Annual if last year’s liability was under $600, or you sold during one 30-day period or less. Return due January 20.
To change from monthly, submit a written election to the ADOR by February 20 of the year you want the new schedule to start. Miss that date and you’re monthly for another year.2Alabama Legislature. Alabama Code Title 40-23-7 – Taxes Due Monthly
File every period, even the ones with no sales. A skipped zero-dollar return triggers the same $50 minimum penalty as a return with tax owed.3Alabama Department of Revenue. Alabama Sales and Use Tax Rules
One additional obligation applies to the largest sellers: if your average monthly state sales tax liability is $20,000 or more, you must make estimated payments on top of your regular monthly return. That threshold was raised from $5,000 in October 2023.4Alabama Department of Revenue. Increased Threshold Requirements for Monthly Estimated Sales Taxes
What Rate to Apply
Alabama’s general state rate is 4% on tangible personal property and amusements.5Alabama Department of Revenue. Sales and Use Tax Rates Several categories carry reduced state rates:
- Groceries: 2% (effective September 1, 2025)
- Automobiles: 2%
- Farm machinery: 1.5%
- Manufacturing machinery: 1.5%
- Food sold through vending machines: 3%
Those are state rates only. City and county taxes stack on top, and they vary widely across Alabama’s several hundred local taxing jurisdictions. A sale in Birmingham won’t carry the same combined rate as one in Huntsville, so you need the correct local rate for every location where you make taxable sales.
Common exemptions include sales to the State of Alabama, counties, and incorporated municipalities; sales to county and city school boards, state educational agencies, and qualifying private educational institutions; agricultural inputs such as fertilizer, seeds, insecticides, herbicides, and livestock feed; pollution control equipment; and sales for resale, provided the buyer gives you a valid resale certificate.6Alabama Legislature. Alabama Code Title 40-23-4 – Exemptions Keep exemption and resale certificates on file for every buyer who claims one. An auditor will ask.
Working Out the Numbers
Get your figures together before opening MAT. Start with your total gross sales for the period. That’s all retail sales of tangible property, amusement receipts, and the value of any inventory you took from stock for personal or business use, including transactions you believe are exempt.7Alabama Department of Revenue. Sales Tax
From gross sales, subtract your exempt sales and allowable deductions to reach taxable sales. Common deductions are sales for resale to licensed retailers, interstate sales shipped out of Alabama, and sales to exempt government and educational buyers. Multiply taxable sales by the state rate that applies (4% general, or the reduced rate for qualifying categories) to get your state tax due. Hold onto documentation for every deduction you claim.
Filing State and Local Taxes Together Through ONE SPOT
With over 200 local taxing jurisdictions in the state, filing a separate return for every city and county where you sell would be unworkable. The Optional Network Election for Single Point Online Transactions, or ONE SPOT, lets you file and remit state and state-administered local sales taxes together through MAT.8Alabama Department of Revenue. One Spot
ONE SPOT covers most localities, but some municipalities self-administer their sales tax and require a separate filing directly with the city.9Alabama Department of Revenue. ONE SPOT Filing Through My Alabama Taxes Check each locality where you sell. Missing a self-administered local return is a separate violation with its own penalties.
Submitting the Return and Paying
Log into MAT, go to the Accounts tab, select your sales tax account, and choose the filing period. The system walks you through entering gross sales, deductions, and taxable sales, then calculates the tax. Review the return before you submit. Fixing a mistake after the fact means filing an amended return.
Payment is due when you file. MAT accepts:
- ACH debit, where you enter your bank routing and account numbers in MAT and the state pulls the funds.
- ACH credit, where you instruct your bank to send the payment. This typically requires ADOR pre-approval.
- Credit or debit card, subject to possible processing fees.
Electronic payments must be transmitted by 4:00 p.m. Central time on or before the due date to count as timely.10Alabama Department of Revenue. Simplified Sellers Use Tax (SSUT) Submit at 4:01 on the 20th and you’re late.
The Discount for Filing on Time
Alabama gives on-time filers a discount that shaves a bit off each period’s tax. It’s 5% on the first $100 of tax due plus 2% on any tax above $100, capped at $400 per month.11Alabama Department of Revenue. Is the Seller Allowed a Discount for Timely Filing and Paying the Sales Tax Due? MAT calculates it automatically. The discount disappears entirely if your return or payment is even one day late. There’s no partial credit.
What It Costs to Miss a Deadline
Late filing and late payment carry separate penalties, and both can hit the same return.
- Failure to file on time: 10% of the tax due or $50, whichever is greater. That $50 floor applies to zero-dollar returns too.
- Failure to pay on time: 10% of the unpaid tax. If tax remains unpaid 30 days after the ADOR sends a notice and demand, another 10% is added to whatever is still owed.
- Interest on unpaid tax at a rate the ADOR sets quarterly.
A bounced check or failed electronic payment counts as a failure to pay, so confirm your bank information and balance before you submit.3Alabama Department of Revenue. Alabama Sales and Use Tax Rules Stacked penalties add up quickly: a $1,000 return filed late and paid late can run $200 in penalties before interest.12Alabama Department of Revenue. Is There a Penalty Imposed for Not Timely Filing and Paying the Sales Tax Due?
If You Sell Into Alabama From Out of State
Sellers located outside Alabama who exceed $250,000 in retail sales delivered to Alabama buyers over the prior 12 months must register and collect tax.13Alabama Department of Revenue. Are All Remote Sellers Required to Register in Alabama? Remote sellers without a physical presence in the state typically register under the Simplified Sellers Use Tax (SSUT) program instead of the standard sales tax. SSUT applies a flat 8% rate covering both state and local tax, so you don’t track individual local rates. Returns are due monthly by the 20th, and SSUT filers get a 2% discount on the first $400,000 of tax collected and remitted, capped at $8,000 per month.10Alabama Department of Revenue. Simplified Sellers Use Tax (SSUT)
Marketplace facilitators such as Amazon, eBay, and Etsy carry their own obligation. Once a facilitator’s total Alabama sales (including third-party seller transactions on the platform) exceed $250,000 in the preceding 12 months, the facilitator must either register to collect and remit SSUT or comply with reporting and customer notification requirements.14Alabama Legislature. Alabama Code Title 40-23-199.2 – Marketplace Facilitators If you sell through one of these platforms, the facilitator handles tax on those sales. You’re still responsible for collecting on any sales you make directly outside the marketplace.
Records You Have to Keep
Keep sales tax records (invoices, exemption and resale certificates, and filed returns) for at least three years from the return’s due date or the date you filed, whichever is later. Three years is the standard audit lookback. If the ADOR believes you underreported taxable sales by more than 25%, the window stretches to six years. If you never filed or filed fraudulently, there’s no time limit.
The ADOR’s record retention regulation incorporates Section 40-2A-7(a)(5) of the Alabama Code, meaning records must be kept until the department tells you in writing they’re no longer needed.15Alabama Department of Revenue. Model Recordkeeping and Retention Regulation Four years is a safer working practice than three.
Marketplace facilitators collecting SSUT must also keep records of all sales delivered to Alabama, including invoices showing the buyer, address, purchase amount, and tax collected, and produce them on request.14Alabama Legislature. Alabama Code Title 40-23-199.2 – Marketplace Facilitators