United States

Alabama: Department Reminds Out-of-State Taxpayers of New Rule Addressing when they are obligated to Collect Alabama Sales and Use Tax

Nov 09, 2015
From KPMG TaxWatch

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The Alabama Department of Revenue recently reminded taxpayers that a new regulation addressing sales tax collection obligations applies to all transactions occurring on or after January 1, 2016. Pursuant to the new rule, an out-of-state seller with a substantial economic presence in Alabama will be required to collect and remit sales tax on sales into the state, regardless of whether the seller has an Alabama physical presence.  Specifically, the rule imposes a collection obligation on out-of-state sellers that engage in one or more of the activities listed in Alabama Code Section 40-23-68 and that had $250,000 or more of retail sales into Alabama the previous year. Qualifying sellers are considered to have a “substantial economic presence” in Alabama. The types of in-state activities that, when coupled with $250,000 of receipts, will give rise to nexus are varied and include, but are not limited to, having an office or warehouse in Alabama, having a licensee or franchisee in the state, or engaging various forms of advertising and solicitation through publishers, broadcasters, cable television systems, and catalogs.

Out-of-state sellers have two options for satisfying the collection obligation. They can collect and remit under Alabama’s normal sales and use tax reporting provisions, or under the provisions of the Simplified Use Tax Remittance Act. The Act allows sellers to collect and remit an eight percent “sellers use tax” that covers both the state and local use taxes. Once collected and remitted, the purchaser and seller are not liable for any additional use taxes, regardless of whether the actual combined state and local rate is higher than eight percent. Further, qualifying sellers may keep two percent of the tax collected. For more information on the Alabama Department of Revenue’s new regulation, please contact Scott Jackson at 404-614-8688.

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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.