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Alabama Considers New Local Sales and Use Tax Obligation

  • May 14, 2013 | Gail Cole

 Advertise by mail in Alabama? You may soon need to collect and remit Alabama local sales and use taxes.

Alabama courts and tax experts have long relied on Ala. Admin. Code r. 810-6-3-.51 to determine whether or not a seller must collect and remit sales and use tax in a local jurisdiction. However, the ADOR Tax Policy and Research Division notes that "the rule does not adequately describe the circumstances under which a seller would be required to collect and pay local taxes."

As a result, ADOR is proposing to repeal Ala. Admin. Code r. 810-6-3-.51 "in its entirety" and replace it with proposed new Rule 810-6-5-.04.02. Under the proposed rule, the definition of "minimum contacts," which determines a sellers' requirement to collect sales tax, would be expanded to include "when the seller has … purposefully directed business activities toward the consumers of that jurisdiction."

Expanding the Sales Tax Collection Net

The Alabama Department of Revenue has released a notice explaining the new rule: Seller's Responsibility to Collect County and Municipal Sales and Use Taxes. Having "minimum contacts" now includes, but is not limited to:

  • Having a physical presence in the local jurisdiction (office, warehouse, etc);
  • Having permanent or temporary employees, representatives, salespersons, canvassers, etc "inside the taxing limits of the local jurisdiction for any purpose…;"
  • Delivering merchandise to customers in the local jurisdiction, including delivery by carriers;
  • Distributing catalogs or other advertising materials, "and by reason thereof" receiving and accepting orders from consumers in the local jurisdiction;
  • Advertising in the local jurisdiction;
  • Soliciting sales orders in the local jurisdiction by mail;
  • Repairing or arranging maintenance work (on items previously sold by the seller) inside the local jurisdiction;
  • Participating in conventions, trade shows, workshops, etc,  while in the taxing limits of the local jurisdiction; and
  • Engaging "in any other activity to purposefully avail itself of the benefits of the economic markets in the local jurisdiction."

As of this writing, this is still "intended action." The old law has not been repealed; the new law has not replaced it.

Interested in weighing in on this issue? ADOR is holding a public hearing on Tuesday, June 11, 2013, at 10:00 a.m. Written comments will also be accepted until the 11th.

Marketplace Fairness Act

This is a timely matter, as federal lawmakers are currently grappling with the Marketplace Fairness Act of 2013. Alabama is already one of a handful of states that will likely need more than 180 days to implement the federal legislation if it passes. The proposed Alabama rule could further hamper implementation, should implementation become a goal.

Tired of grappling with fickle local sales and use tax laws? It may be time to automate your sales tax collection process.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.