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S.A.L.T. Select Developments: Alabama

Baker Donelson's S.A.L.T. Select Developments will identify important state and local tax developments from Alabama.

Overview

State and local taxes impact almost every taxpayer. S.A.L.T developments in any one jurisdiction can be frequent and sometimes confusing. Where multiple jurisdictions are involved, staying current with state and local tax developments can be overwhelming for any taxpayer.

To assist you with staying current on a periodic basis, Baker Donelson's S.A.L.T. Select Developments will identify one or more recent state and local tax developments from Alabama.

October 2020

Updates Reported – On October 7, 2020, the Alabama Department of Revenue issued Memorandum 2020-007 addressing the assigned renewal month for new International Registration Plan (IRP) registrations. The Memorandum states that in order to ensure that IRP registrations are evenly staggered throughout the registration year, all new IRP accounts will be assigned the renewal month of February and ad valorem taxes for these accounts should be collected through February 28 of each year. Further, the Memorandum noted that ad valorem tax must be collected for each IRP registered vehicle through the end of the renewal month assigned to the IRP account, and referred to Memorandum 2014-19 for more related information. According to this newly issued Memorandum, the month of February will be the default assigned renewal month for new IRP accounts during the period November 1, 2020 through October 31, 2021. The Memorandum states that if there are questions, contact may be made with the Department as set forth in the Memorandum. More information can be found here.

September 2020

Coronavirus Tax Payment and Return Filing Responsibilities (September 30) – Updates Reported: The Alabama Department of Revenue issued a Notice, dated on August 26, 2020, addressing a secondary supplemental privilege assessment to be imposed monthly for each bed in a nursing facility. According to the Notice, the Alabama Legislature passed, and the Governor signed, Act No. 2020-147, which imposes this supplemental privilege assessment at an annual rate of $327.48, or $27.29 a month, for each bed in such a facility. This amount will increase the total annual nursing facility rate from $4,429.32 to $4,756.80, or $396.40 per month per bed. This change was effective September 1, 2020. The Notice also states that the first tax return on which such changes will be applicable will be the nursing facility tax return for the month of September 2020, which is due on or before October 20, 2020. These returns are required to be filed and paid electronically using the My Alabama Taxes Filing System. According to the Notice, questions regarding this supplemental privilege assessment should be addressed to Ms. Nichelle Norris at the Alabama Department of Revenue, Sales and Use Tax Division, P.O. Box 327790, Montgomery, AL 36132-7790. More information can be found here.

August 2020

Coronavirus Tax Payment and Return Filing Responsibilities (August 20) – Updates Reported: On August 3, 2020, the Alabama Department of Revenue issued a Notice entitled Gasoline and Undyed Diesel Fuel Excise Tax Law Changes. As stated in this Notice, Governor Ivey signed on March 12, 2019 a law known as the Rebuild Alabama Act (Act). That Act contains various fuel tax rate changes and filing requirements that take place on October 1, 2020. As also referenced in the Notice, and effective October 1, the gasoline and undyed diesel excise taxes will be increased pursuant to the Act by 2¢ per gallon to 26¢ per gallon for gasoline and 27¢ per gallon for undyed diesel. Further, any wholesale distributor holding motor fuel in inventory outside of the bulk transfer/terminal system on the effective date of each tax increase under the Act will be liable for the additional excise tax. The foregoing does not include product located at a retail service station. The Notice provides that a floor-stocks tax return must be filed and the tax paid on or before the last day of the third month following the tax increase. A new floor-stocks return can be accessed on the Department's forms webpage. According to the Notice, this form must be filed manually with the Department at the address in the Notice, and the floor-stocks tax return and payment for the tax increase effective October 1 is due on or before February 1, 2021. More information can be found here.

July 2020

Coronavirus Tax Payment and Return Filing Responsibilities (July 27) – Updates Reported: The July 17, 2020 deadline as announced by the Alabama Department of Revenue in its June 9 Order for purposes of obtaining annual registration and renewal of vehicles with respect to the months of March through June 2020, where the county license plate issuing official's office was closed at any time during that period, has now been extended to July 31, 2020. That same July 31 extension also applies to motor vehicle registrations and renewals for vehicles registered pursuant to the International Registration Plan where the official's office was closed any time during that period; and, further, penalties associated with the motor vehicle registration and renewals extended to July 31, 2020 will not be charged until August 3, 2020. More information can be found here.

June 2020

Coronavirus Tax Payment and Return Filing Responsibilities (June 25) – Updates Reported: The Alabama Department of Revenue issued an order on June 9, 2020 extending the deadline until July 17, 2020 for purposes of obtaining annual registration and renewal of vehicles with respect to the months of March through June for registrants in counties where the county license plate issuing official's office was closed at any time during the month of May or June 2020 due to COVID-19. The order states that this extension includes the registration of vehicles purchased or otherwise acquired where the registration requirement imposed by Alabama law falls during the period of March 17 through July 17, 2020. Further, the order states that this extension applies to motor vehicle registrations and renewals for vehicles registered pursuant to the International Registration Plan when the ad valorem tax was due in a county where the issuing official's office was closed anytime during May or June 2020 because of the virus. Further, penalty charges associated with motor vehicle registrations and renewals extended to July 17 will not be charged until July 20, 2020; and penalty charges associated with motor vehicle property tax payments extended to July 17 will not be charged until July 20. More information can be found here.

Coronavirus Tax Payment and Return Filing Responsibilities (June 2) – Updates Reported: The Alabama Department of Revenue has announced, pursuant to an ADOR Operational Update as of May 12, 2020, that the Department will not change withholding requirements for businesses based on an employee's temporary telework location within Alabama that is necessitated by the pandemic and related federal or state measures to control the COVID-19 spread. In that regard, the Update stated that the Department will not consider temporary changes in an employee's physical work location during periods in which temporary telework requirements are in place due to the pandemic to impose nexus or alter apportionment income for any business. More information can be found here.

May 2020

Coronavirus Tax Payment and Return Filing Responsibilities (May 8) – Further Updates Reported: On May 4, 2020, the Commissioner of the Alabama Department of Revenue issued an Order extending through June 19, 2020 the time for obtaining March, April and May 2020 motor vehicle registrations and paying property taxes on vehicles. Further, the Order states that this extension includes the registration of vehicles purchased or otherwise acquired whereby the 20-day registration requirement falls during the period of March 17 through June 19, 2020. This extension also applies to motor vehicle registration and renewals for vehicles registered pursuant to the International Registration Plan. According to the Order, penalty charges associated with motor vehicle registrations and renewals and motor vehicle property tax payments extended to June 19, 2020 will not be charged until June 22, 2020. More information can be found here.

April 2020

Coronavirus Tax Payment and Return Filing Responsibilities (April 16) – Further Updates Reported: On April 10, 2020, the Alabama Department of Revenue announced that the period for certain tax relief related to income and other taxes has been updated. Taxpayers can defer state income tax payments due on or after April 1, 2020 and before July 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations, and other non-corporate tax filers.

Other taxes included in the deadline extension are corporate income tax, the Financial Institution Excise Tax (FIET), and the Business Privilege Tax (BPT).

Taxpayers do not need to file any additional forms or call the Alabama Department of Revenue to qualify for this automatic state tax filing and payment relief. Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension through the usual methods.

A copy of the updated order of the Commissioner of Revenue can be found here.

Coronavirus Tax Payment and Return Filing Responsibilities (April 3) – Further Updates Reported: In a press release updated April 1, the Alabama Department of Revenue made several announcements regarding taxpayer relief orders previously issued. For instance, the Department reiterated that it is: (i) waving state sales tax late payment penalties both for small retail businesses (monthly retail sales during the previous calendar year averaged $62,500 or less) and taxpayers currently registered with the Department as engaging in NAICS Sector 72 business activities (which includes businesses preparing meals, snacks and beverages for immediate consumption); and (ii) waiving state late payment penalties for lodgings taxes. The Department noted that this relief applies to state sales and lodging taxpayers who are unable to timely pay their February, March and April 2020 sales and lodging tax liabilities, but does not provide a waiver or extend normal filing requirements. The Department stated that these taxpayers may file their monthly sales and lodging tax returns for February, March and April 2020 reporting periods without paying the state sales and lodging taxes reported as due and late payment penalties will be waived for these taxpayers through June 1, 2020. The Department noted that this relief only applies to state sales and lodging tax liabilities, and that this relief is automatic for small retailers and Section 72 businesses who file their February, March and April 2020 sales tax returns. The Department did note, however, that similar sales tax relief may be available on a case-by-case basis to other businesses significantly impacted by COVID-19 and the preventative measures taken to prevent its spread within Alabama. The Department set forth various FAQs and other information within this updated press release. More information can be found here.

March 2020

Coronavirus Tax Payment and Return Filing Responsibilities (March 25) - Due Date Changes Reported: On March 23, 2020, the Governor of the State of Alabama signed a supplemental State of Emergency Order allowing the Alabama Department of Revenue to extend state filings until July 15, 2020. Thereafter, the Commissioner posted and later updated an Executive Order providing that any person with a state individual income tax or corporate income tax payment, a financial institution excise tax payment, or a business privilege tax payment due on April 15, 2020, or a return for any of the foregoing taxes due on April 15, such payment and return due date shall be automatically postponed to July 15. The Order further states that there is no limitation on the amount of the payment that may be so postponed. This relief is available only with respect to payments due on April 15 for the state income tax (including payments of tax on self-employment income), for estimated state income tax for the taxpayer's 2020 taxable year, for the financial institution excise tax for the 2020 form year, and for the business privilege tax for the 2020 form year, and with respect to returns due on April 15 for the foregoing taxes. The Order states that no extension is provided for the payment or deposit for any other type of state tax, or for the filing of any other state informational return. The relief granted under the Order essentially provides that there will be no interest, penalty, or additions to tax for the failure to file these identified taxes by July 15, 2020, but that interest, penalties and additions to tax will begin to accrue on July 16, 2020. More information can be found here.

Coronavirus Tax Payment and Return Filing Responsibilities (March 19) - No Broad Changes Reported: Pursuant to an Order of the Commissioner issued March 16, the Department is suspending temporarily the requirements associated with the International Registration Plan (IRP) and the International Fuel Tax Agreement (IFTA) for motor vehicles engaged in any interstate emergency relief efforts which will be traveling through the State of Alabama as a part of the emergency relief. Further, pursuant to a separate Order also issued March 16, the Commissioner stated that with respect to Alabama's motor vehicle registration laws and property tax laws regarding the annual registration and renewal of vehicles during the month of March, the registration deadline has been extended through April 15. More information can be found here and here.

Tax Relief/Flood Victims: The Alabama Department of Revenue is offering tax relief to Alabama taxpayers who have been affected by recent flooding across Alabama. The relief comes in response to the emergency declaration made by Governor Kay Ivey on February 18, 2020. ADOR will grant filing extensions to taxpayers directly affected by flooding caused by February 2020 storms. Affected Alabama taxpayers in all 67 counties have until April 30, 2020 to file tax returns due on or after February 18, 2020, and before April 30, 2020. Penalty relief will be provided during the extension period. Taxpayers seeking this Alabama tax relief should write "Flooding Relief – 2020" in red ink on any state paper return/report which relies on this filing extension relief. Affected taxpayers filing electronically should contact ADOR for filing guidance.

The Order of the Commissioner of Revenue describing these actions can be found here.

February 2020

Tax Impact from Federal Legislation: The Joint Legislative Task Force on the Tax Cuts and Jobs Act co-chaired by state Senator Daniel J. Roberts and State representative J. Daniel Garrett has issued a report dated February 18, 2020. The Task Force was charged with studying the fiscal impact of the TJCA on corporate income tax in the state. The Task Force found that multiple changes in the TJCA have the net effect of increasing corporate taxable income of Alabama businesses. Among other issues, the report specifically addresses and makes recommendations relating to the TJCA's provisions regarding limits on business interest deductions, global intangible low-taxed income, taxation of state and local economic development incentives, the state and local tax deduction cap, and the effects of the federal corporate rate changes and Alabama's federal income tax deduction. Implementing legislation was not included with the report, however, but will need to be drafted and introduced. The Joint Task Force Reports can be found here.

November 2019

Sales and Use Taxes: Alabama's Simplified Seller's Use Tax (SSUT) system has reportedly been quite successful with more than 1,900 remote sellers participating in the program. The SSUT provides remote sellers with one return for state and local jurisdictions and one overall eight percent tax rate. As of January) 1, 2019, the related Marketplace Facilitator law went into effect, which stipulated that the responsibility for collecting and remitting simplified sellers use tax, or reporting such sales, for online purchases by customers in Alabama falls on the company supporting the marketplace rather than on the individual sellers. According to the Department of Revenue's published Monthly Abstract, collections under the SSUT were approximately $203 million for the fiscal year ending September 30, 2019. For more information regarding the collections, see the following.

October 2019

Sales Tax: Under the Alabama Simplified Sellers Use Tax Remittance Act, eligible remote sellers can collect, report and remit a flat eight percent sellers use tax, regardless of the actual combined state, county and local tax rate that might otherwise be applicable. The regulations under the Simplified Sellers Use Tax have recently been amended to expand the ways a remote seller can inform a purchaser that the tax had been collected and was to be remitted on the purchaser's behalf to include confirmation by email, a notice on a seller's website or other means approved by the Department of Revenue to provide reasonable notice to the customer. Click here for more information on the foregoing amendment.

September 2019

Business Income Tax: On September 4, 2019, the Alabama Department of Revenue announced that it is providing relief from late-filing penalties for certain corporate taxpayers who are encountering difficulties meeting October state filing deadlines for Alabama corporate income tax returns while trying to also file their federal returns by the October federal deadline. The Department cited as the reason for such relief as taxpayer challenges in compliance resulting from the complexity associated with the continued implementation of the Tax Cuts and Jobs Act.

Relief is not automatic, however. Requests for relief must be submitted in writing and will be considered on a case-by-case basis. The Department will consider whether the circumstances described by taxpayers sufficiently establish reasonable cause to grant penalty relief for late filing. Affected returns must be filed by November 15, 2019. Refer to the Department's press release for more details.

August 2019

Online Filing Option for Local Fuel Excise Taxes: To help alleviate compliance burdens for local fuel excise taxes, beginning September 3, 2019, taxpayers who are required to file and remit payment for local gasoline and diesel fuel excise taxes may gain access to a new online service provided by the Alabama Department of Revenue: the voluntary Motor Fuel Single Point System. Any local gasoline and diesel fuel excise taxpayer that would like to use the voluntary system must register for a Motor Fuel Single Point account. Account registration begins in September and taxpayers will be able to use the system to file returns and remit payments beginning November 1, 2019.

July 2019

Sales Tax: The Alabama Department of Revenue announced on June 19, 2019 that it is undertaking a review of its sales tax regulations regarding the taxability of computer software in light of the recent decision of the Alabama Supreme Court in Ex parte Russell County Community Hospital, LLC, decided on May 17, 2019. This case concludes that software is taxable under the Alabama sales tax, but also states that payments for the separately stated services that may attend the sale of software are not taxable.

June 2019

Incentives: On June 6, 2019, the Alabama Incentives Modernization Act was enacted. The Act updates the existing tax incentive regime for rural portions of the state by extending benefits to rural projects generating at least five jobs and extending the investment tax credit under the Alabama Jobs Act to 15 years without qualification. The Act also allows banks and insurance companies to purchase and use tax credits created under the Alabama Jobs Act; enhances the incentives available to high-tech companies under the Alabama Jobs Act to companies creating at least five jobs and allows the investment tax credit calculation to include operating costs as well as capital costs; and provides for reductions in capital gain taxes for investments in opportunity zone funds investing predominantly in Alabama in a manner similar to federal opportunity zones.

For more information about state and local tax developments in Alabama, please contact:

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