Alabama Sales Tax Exemptions / Tax Free Items Alabama: Sales Tax Handbook

Alabama:

What purchases are exempt from the Alabama sales tax?

While the Alabama sales tax of 4.00% applies to most transactions, there are certain items that may be exempt from taxation. This page discusses various sales tax exemptions in Alabama.

Sales Tax Exemptions in Alabama

In Alabama, certain items may be exempt from the sales tax to all consumers, not just tax-exempt purchasers.

Some common items which are considered to be exempt are: prescription drugs, gasoline and motor oil items, seeds which are intended for planting purposes (fertilizer/insecticides/fungicides) agricultural, feed for livestock, and livestock. Also exempt are any sales made to the federal, state or local government, labor repairs, sales which were made to any non-profit agencies which have been specifically exempted by the Alabama Legislature, sales paid for by food stamps, and sales made to licensed retail merchants, jobbers, dealers, or other wholesalers for resale.

Many states have special, lowered sales tax rates for certain types of staple goods - such as groceries, clothing and medicines. Restaurant meals may also have a special sales tax rate. Here are the special category rates for Alabama:


Clothing

  4.%

Groceries

  4.%

Prepared Food

  4.%

Prescription Drugs

  EXEMPT

OTC Drugs

  4.%

These categories may have some further qualifications before the special rate applies, such as a price cap on clothing items. Groceries are generally defined as "unprepared food", while pre-prepared food may be subject to the restaurant food tax rate.

Candy and soda may be included or excluded from any preferential tax rate depending on whether or not the state considers them to be a "grocery":


Is candy taxable in Alabama? Candy IS considered a grocery in Alabama
Is soda taxable in Alabama? Soda IS considered a grocery in Alabama

Are services, shipping, installation, etc taxable in Alabama?

The taxability of transactions involving services, shipping, and installation of tangible goods can be slightly complicated with various laws applying to slightly different situations. To learn more about how these transactions, and other more complicated situations, are subject to the Alabama sales tax see the Alabama sales taxability FAQ page.


Other tax-exempt items in Alabama

This table lists a number of additional categories of goods and services that are exempt from Alabama's sales tax. For a list that also shows taxable items, see the list of taxable and nontaxable items in Alabama.

Category Exemption Status
Amazon Purchases
Products on Amazon.com EXEMPT
Manufacturing and Machinery
Raw Materials EXEMPT *
Medical Goods and Services
Medical Services EXEMPT
Occasional Sales
General Occasional Sales EXEMPT *
Motor Vehicles EXEMPT *
Optional Maintenance Contracts
General Optional Maintenance Contracts EXEMPT
Services
Janitorial Services EXEMPT
Transportation Services EXEMPT *
Software and Digital Products
Custom Software - Delivered on Tangible Media EXEMPT *
Custom Software - Downloaded EXEMPT

* See notes in category taxability page for details



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Source: http://www.salestaxhandbook.com/alabama/sales-tax-exemptions