Alabama is what we in the sales tax business call a “home rule” state - otherwise known as a pain in the neck. “Home rule” refers to a state which has locally administered sales and use taxes – meaning you typically can’t just file a single state return to report all the sales or use tax for the month. However, Alabama is unique – there are potentially four different filing options available to taxpayers as follows:
- MAT (My Alabama Tax): This online filing option allows you to file and pay the state and local sales and use tax in every taxing jurisdiction in the state of Alabama – in essence eliminating the typical home rule headache of separate returns. It is best to use the ACH Debit option for payments because the ACH Credit is not available for some jurisdictions or they may not use a standard ACH Credit format which could result in a rejection of your payment. This is a more recent option in Alabama and goes a long way to minimizing the usual compliance burden associated with home rule states.
- RDS (Revenue Discovery Systems): This third party online filing option allows you to file and pay the state sales and use tax and only those local sales and use taxes for those jurisdictions who have signed up with RDS.
- STACS (Sales Tax Auditing and Collection Services): This third party online filing option allows you to file and pay the state sales and use tax and only those local sales and use taxes for those jurisdictions who have signed up with STACS.
- Paper Returns: You can file a paper return for each jurisdiction.
Oh, and if you decide to be a good business/citizen and register to file and remit your sales taxes in every applicable city within the state – you will be the recipient of an additional tax bill in the form of a city business license or privilege license fee from every city in which you are registered and remit sales tax. Even if you only make one sale a year into a city, you will be liable for a business license fee of anywhere between $10.00 and a percentage of gross receipts within the city.
Unfortunately, in business we don’t always get to choose where our revenues originate or where we have sales tax nexus. If you find yourself with nexus and a sales tax liability in Alabama, take advantage of MAT (it’s a good system) and check the mail – another business license or privilege license fee may have just arrived.
Stay tuned for more of Jeff's EYE ON series as he blogs aboout sales and use tax State by State.