Alabama Sales Tax on Services, Installation, etc Alabama: Sales Tax Handbook

Alabama:

What purchases are taxable in Alabama?

The taxability of various transactions (like services and shipping) can vary from state to state, as do policies on subjects such as whether excise taxes or installation fees included in the purchase price are also subject sales tax. This reference is here to help answer your questions about what is and is not subject to the Alabama sales tax.

Section 1: Taxability of Goods and Services

What transactions are generally subject to sales tax in Alabama?

In the state of Alabama, sales tax is legally required to be collected from all tangible, physical products being sold to a consumer. Several examples of exceptions to this tax are items intended for use in agricultural pursuits or industry.

This means that someone in the state of Alabama who sells books would be required to charge sales tax, but an individual who sells agricultural equipment is not required to charge sales tax.


Are services subject to sales tax in Alabama?

The state of Alabama does not usually collect sales taxes on the vast majority of services performed. An example of taxed services would be one which manufactures or creates a product.

This means that a freelance accountant would not be required to collect sales tax, while a someone working in the creation of clothing may be required to collect sales tax.

You can find a table describing the taxability of common types of services later on this page.

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Are shipping & handling subject to sales tax in Alabama?

Alabama has slightly complicated rules when it comes to taxes on shipping. Essentially, you are not required to collect sales tax on shipping charges so long as the charge is stated separately on the invoice, as "shipping and handling", or "postage and handling". If the shipping charge is not stated separately, and the product will be delivered by utilizing a common carrier of the U.S. postal mail the seller is required to collect sales tax.

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Are drop shipments subject to sales tax in Alabama?

"Drop shipping" refers to the common business practice in which a vendor, often in a different state, makes a sale of a product which is shipped to the end-user by a third party supplier hired by the initial vendor. In Alabama, drop shipments are generally subject to state sales taxes.

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Section 2: Taxability of Various Items in Alabama

This table shows the taxability of various goods and services in Alabama. If you are interested in the sales tax on vehicle sales, see the car sales tax page instead. Scroll to view the full table, and click any category for more details.

Category Exemption Status
Amazon Purchases
Products on Amazon.com EXEMPT
Clothing
General Clothing TAXABLE
Food and Meals
Catering TAXABLE *
Grocery Food TAXABLE
Leases and Rentals
Motor Vehicles TAXABLE *
Tangible Media Property TAXABLE *
Manufacturing and Machinery
Machinery TAXABLE *
Raw Materials EXEMPT *
Utilities & Fuel TAXABLE *
Medical Goods and Services
Medical Devices TAXABLE *
Medical Services EXEMPT
Medicines TAXABLE
Newspapers and Magazines
Newspapers TAXABLE
Periodicals TAXABLE
Occasional Sales
General Occasional Sales EXEMPT *
Motor Vehicles EXEMPT *
Optional Maintenance Contracts
General Optional Maintenance Contracts EXEMPT
Parts Purchased for Use in Performing Service Under Optional Maintenance Contracts TAXABLE *
Pollution Control Equipment
General Pollution Control Equipment TAXABLE *
Services
Janitorial Services EXEMPT
Transportation Services EXEMPT *
Software and Digital Products
Canned Software - Delivered on Tangible Media TAXABLE
Canned Software - Downloaded TAXABLE
Custom Software - Delivered on Tangible Media EXEMPT *
Custom Software - Downloaded EXEMPT
Customization of Canned Software TAXABLE *
Digital Products TAXABLE
Trade-Ins
General Trade-Ins TAXABLE *
Vending Machine Sales
Food TAXABLE *
Merchandise TAXABLE

* See notes in category taxability page for details



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