Are Software and Digital Products subject to sales tax?
While Alabama's sales tax generally applies to most transactions, certain items have special treatment in many states when it comes to sales taxes. This page describes the taxability of software and digital products in Alabama, including canned software - delivered on tangible media, canned software - downloaded, custom software - delivered on tangible media, custom software - downloaded, customization of canned software and digital products. To learn more, see a full list of taxable and tax-exempt items in Alabama.
Canned Software - Delivered on Tangible Media
Sales of canned software - delivered on tangible media are subject to sales tax in Alabama.
Canned Software - Downloaded
Sales of canned software - downloaded are subject to sales tax in Alabama.
Custom Software - Delivered on Tangible Media
In the state of Alabama, the majority of tangible medium is utilized to transfer the custom software programming to the buyer is considered to be taxable.
Custom Software - Downloaded
Sales of custom software - downloaded are exempt from the sales tax in Alabama.
Customization of Canned Software
In the state of Alabama, any separately stated charges for any modifications any sorts of to canned software which was prepared specifically for a certain customer is considered to be exempt, although only to extent of the modification.
Sales of digital products are subject to sales tax in Alabama.
Back to Alabama Sales Tax Handbook