United States

Alabama: Proposed Rule Addresses When Out-of-State Sellers are Required to Collect

Aug 10, 2015
From KPMG TaxWatch

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A recently proposed rule in Alabama addresses the sales and use tax collection requirements for out-of-state sellers making significant sales into Alabama. Per the proposed rule, effective for all transactions occurring after January 1, 2016, sellers that lack an Alabama physical presence, but that make over $250,000 of retail sales into the state and conduct certain other activities listed in Alabama Code Sec. 40-23-68, are deemed to have a substantial economic presence in Alabama. Per the rule, such sellers are required to register, collect, and remit Alabama sales taxes. The proposed rule provides sellers two options for doing so- they can collect and remit under Alabama’s normal sales and use tax reporting provisions, or they can remit under the Simplified Use Tax Remittance Act.

The Act, which became law earlier this year, allows participating sellers to collect, report, and remit an eight percent simplified sellers use tax on sales of tangible personal property delivered to Alabama purchasers. The eight percent use tax covers both state and local taxes. If simplified sellers use tax is collected, the purchaser and the seller are not liable for any additional use taxes on the transaction, regardless of whether the actual combined local and state rate in the jurisdiction to which the transaction is sourced, is higher than eight percent. Participating sellers may deduct and retain two percent of the simplified sellers use tax collected. Eligible sellers participating in the program will also be granted amnesty for any uncollected remote use taxes due on sales made to Alabama purchasers for the twelve-month period before the seller joins the program. Please stay tuned to TWIST for updates on the proposed rule.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.