City of Montgomery, AL Sales Tax: Rates, Filing, and Use Tax

The sales tax in Montgomery, Alabama is 10% on most retail purchases. That combined rate stacks three layers: 4% to the state of Alabama, 2.5% to Montgomery County, and 3.5% to the city of Montgomery.¹² Sellers collect the full amount at the register and remit it; buyers never calculate the layers separately.

The Three Layers of the 10% Rate

State of Alabama: 4% on most retail sales of tangible personal property.¹
Montgomery County: a general 2.5% sales and use tax, plus a separate 1% education tax that can push the county portion higher on some transactions.²
City of Montgomery: 3.5% municipal sales tax.

That is the figure a shopper sees on a typical retail receipt in the city limits.

Lower Rates for Groceries, Vehicles, and Machinery

Not every purchase is taxed at 10%. Alabama applies reduced state rates to several categories, and the county reduces its portion as well.

Groceries carry a reduced state rate. Alabama cut the state tax on food from 4% to 3% in September 2023 and down to 2% in September 2025.¹ The Montgomery County and city portions still apply at their standard rates on top of that 2%.

Automotive vehicles are taxed at a 2% state rate rather than 4%, and manufacturing and mining machinery is taxed at 1.5%.¹ Montgomery County charges 0.333% on automotive, agricultural, and manufacturing sales instead of its usual 2.5%.²

What Else Is Taxable

The sales tax reaches beyond physical goods on a shelf. Admission charges for entertainment venues and sporting events are taxable at the same 4% state rate as general merchandise.¹ Hotel and short-term rental stays are handled separately: Montgomery County charges $2.25 per room per day for transient lodging.²

One point surprises many people, especially those who have run organizations in other states: Alabama does not exempt nonprofits from sales tax. Churches, charities, and other 501(c)(3) entities pay sales tax on their purchases, and when they sell tangible goods they must collect and remit it like any other seller.³

The Back-to-School Sales Tax Holiday

Each July, Alabama runs a three-day sales tax holiday, and Montgomery waives its local portion along with the state exemption.⁴ The 2026 holiday runs from 12:01 a.m. on Friday, July 17 through midnight on Sunday, July 19.⁵

Only certain categories qualify, with per-item price caps:

Clothing priced at $156 or less per article. Covers everyday apparel like shirts, pants, shoes, and coats. Accessories, protective gear, and sports equipment do not qualify.
Computers and software priced at $1,173 or less per single purchase. Laptops and complete desktop packages qualify; individual components sold separately do not.
School and art supplies priced at $78 or less per item, including binders, calculators, notebooks, pencils, and paints.
Textbooks priced at $47 or less per book, with an ISBN required.

The thresholds are per item, not per receipt. A $200 jacket does not qualify even if the rest of the cart is tax-exempt.⁵

If You’re Selling in Montgomery: Register, File, and Pay

Before collecting any sales tax, you need an account with the Alabama Department of Revenue. Registration happens online through the My Alabama Taxes portal and generally takes three to five business days. You will need a Federal Employer Identification Number (sole proprietors without employees may use a Social Security number), your legal business name as registered with the Alabama Secretary of State, a physical business address, and a NAICS code describing your activity.⁶⁷

Returns are filed monthly through the same portal. You report the prior month’s gross receipts, calculate tax at each applicable rate, and pay electronically. Both the return and the payment are due by the 20th of the following month, so January sales must be reported and paid by February 20.⁸ Payment runs through ACH debit or a credit or debit card inside the portal.⁹

Penalties for Late Filing

Missing the deadline triggers a penalty of 10% of the tax due or $50, whichever is greater.¹⁰ The $50 floor matters: a business owing $30 in tax that files late still owes a $50 penalty on top. Late payments also accrue interest at the federal underpayment rate under 26 U.S.C. § 6621, which adjusts quarterly.¹¹

Record Retention

Keep all records tied to sales tax transactions for at least six years from the date the return was filed.¹² That means invoices, register tapes, bank statements, and exemption certificates. Shorter retention is one of the fastest ways to lose an audit.

Selling into Montgomery from Out of State

Out-of-state sellers with more than $250,000 in annual Alabama sales have economic nexus and must collect sales tax on those transactions.¹³ Marketplace facilitators like Amazon and Etsy must collect on behalf of their third-party sellers once they cross that threshold.

Instead of tracking every city and county rate, eligible remote sellers can opt into the Simplified Sellers Use Tax program and collect a flat 8% on all Alabama sales. That flat rate covers both the state and local portions, so there is no separate calculation for Montgomery’s 10%. Returns are due monthly by the 20th, and sellers who remit on time keep a 2% discount on the first $400,000 in tax collected per year, capped at $8,000 per month.¹⁴

Consumer Use Tax on Untaxed Online Purchases

When you buy something from an out-of-state seller that does not charge Alabama tax and have it shipped to Montgomery, you owe consumer use tax on that purchase. The state portion is 4% (2% for groceries), and local rates apply on top. If the seller charged their own state’s sales tax, you get a credit up to the Alabama amount.

This comes up less often than it used to. Economic nexus rules and marketplace facilitator requirements mean most large online retailers now collect Alabama tax automatically. But if you buy from a smaller out-of-state vendor that does not collect, self-reporting the use tax is your responsibility.

1
Alabama Legislature. Alabama Code Title 40 Chapter 23 Article 1 Division 1 Section 40-23-2 – Tax Levied on Gross Receipts
2
Montgomery County, AL. Sales Tax and Audit
3
Alabama Department of Revenue. Statutorily Tax Exempt Entities
4
Alabama Department of Revenue. Back-to-School Sales Tax Holiday – Participating Localities
5
Alabama Department of Revenue. 2026 Back-to-School Sales Tax Holiday Fact Sheet
6
Alabama Department of Revenue. Business Tax Online Registration System
7
Alabama Department of Revenue. Register an Entity
8
Alabama Department of Revenue. When Is the Sales Tax Due
9
Alabama Department of Revenue. Make a Payment
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Alabama Department of Revenue. Is There a Penalty Imposed for Not Timely Filing and Paying the Sales Tax Due
11
Alabama Department of Revenue. Due Date Calendar for Taxes
12
Alabama Administrative Code. Alabama Administrative Code 810-27-1-7-.01
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Alabama Department of Revenue. Are All Remote Sellers Required to Register in Alabama
14
Alabama Department of Revenue. Simplified Sellers Use Tax (SSUT)