A regulation regarding local nexus that parallels the state nexus rule applies to transactions in Alabama beginning Jan. 1, 2014.
The new regulation creates seller responsibility to collect and remit local sales or use tax by imposing the same standards applicable for determining whether a seller is obligated to collect and remit state-level sales and use tax.
WHEN TO COLLECT LOCAL TAX ON DELIVERED GOODS
Under the new rule, a seller using its own delivery trucks and its own employees must collect and remit the applicable local (city and/or county) tax. Previously, retailers delivering to Alabama localities where they did not have a physical presence or other contact, only collected the state sales tax. Alabama Revenue Commissioner Julie Magee had told the Alabama Retail Association that local sales tax rates would be available via an iPhone app and on the Alabama Department of Revenue website by Jan. 1 to help retailers know the levels of sales taxes to collect for and remit to the various local jurisdictions. Because of issues with overlapping tax jurisdictions, especially in police jurisdictions, and the reliability of the resulting tax rate in the online database, the department was unable to provide on online lookup until Nov. 14, 2014. Access the online sales tax lookup link here.
WHEN NOT TO COLLECT LOCAL TAX ON DELIVERED GOODS
If the seller uses a common carrier or the U.S. mail to perform a delivery, provided the seller has “no other contact” with the destination locality, the seller has no obligation to collect and remit the local sales and use tax. The corresponding use tax may be owed by the purchaser/consumer.
EXAMPLES FROM NEW RULE
The new rule provides three examples to help retailers determine when their businesses are required to collect and remit local (county and city) sales and use taxes:
- Retailer A, a furniture store with its location in the City of Montgomery (Montgomery County), makes sales to customers in Auburn (Lee County) and delivers the furniture sold to Auburn customers into Auburn using its own delivery trucks and its own employees. Because Retailer A has a physical presence (delivery trucks and employees) in Auburn (Lee County), it is responsible for collecting and remitting the Auburn and Lee County sales taxes on its sales delivered into those localities.
- Retailer B, a sporting goods store with its location in the City of Birmingham (Jefferson County), makes sales to customers in Gulf Shores (Baldwin County) and delivers the goods sold to Gulf Shores customers into Gulf Shores via UPS, a common carrier. Retailer B has no other contact with Gulf Shores or Baldwin County. Because Retailer B lacks a physical presence in Gulf Shores (Baldwin County), it is not responsible for collecting and remitting the Gulf Shores or Baldwin County sales tax on its sales delivered into those localities. However, the customer would be responsible for remitting any applicable use tax to Gulf Shores and Baldwin County.
- Retailer C, a janitorial supply store with its location in the City of Mobile (Mobile County) and with salesmen soliciting sales in the City of Huntsville (Madison County), makes sales to Huntsville customers and delivers the supplies sold to Huntsville customers into Huntsville via UPS, a common carrier. Because Retailer C has a physical presence (salesmen) in Huntsville (Madison County), it is responsible for collecting and remitting the Huntsville and Madison County sales taxes on its sales delivered into those localities.
State sales tax would still have to be collected and remitted in all of the above examples.
ONE SPOT MAKES NEW RULE EASIER TO COMPLY WITH
Remitting sales and use taxes became much easier as of Oct. 1 when the state activated its ONE SPOT system. If you haven’t yet explored how going to ONE SPOT to remit state and local taxes can save you time and hassle, go to revenue.alabama.gov/salestax/one_spot.cfm