Alabama Taxes and Tax Incentives

The Alabama Department of Revenue administers a variety of taxes that affect companies based inside and outside of Alabama.

Alabama Business Privilege Tax:

This tax applies to all corporations and limited liability entities, including disregarded entities,which do business in Alabama or are organized under the laws of Alabama. The tax base is the taxpayer’s net worth apportioned to Alabama.

Sales and Use Tax:

Sales tax is a privilege tax imposed on the retail sale (a sale made to the end-user) of all tangible property sold in Alabama by businesses located in Alabama. The use tax is complimentary to the sales tax.

Sales and Use Tax Abatements and Exemptions:

Qualifying industries may abate all state and the local non-educational portion of construction related transaction (sales and use) tax associated with constructing and equipping a project. For state purposes, the general sales tax of four percent and the state manufacturing machinery and equipment tax of 1 and 1/2 percent can be abated to qualifying industries. Please note that the local granting authority must grant the abatement for the qualifying project before the abatement can be used. There are also provisions for raw materials, pollution control equipment, and utility gross receipts tax exemptions.

Property Tax Abatements:

For qualifying industries, it is possible to abate the non-educational portion of property tax. The abatements are valid for a maximum period of ten years and must be granted by the local granting authority prior to placing the project in service.

Property Tax:

Property tax is levied on the owners of real and personal property within Alabama. The initial appraisal is based on a fair and reasonable market value..

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