Law: May 1, threshold doubles before you have to prepay monthly sales taxes; as of Oct. 1, 2023, 75% of businesses exempt from business personal property taxes

Small Business Relief and Revitalization Act
Act No. 2022-53
by Rep. Danny Garrett, R-Trussville, and Sen. Garlan Gudger, R-Cullman

Almost 2,500 businesses that collect sales taxes will no longer have to make monthly estimated payments, starting in May, and an estimated 75% of Alabama businesses will be exempt from business personal property taxes in 2023, under legislation the governor signed into law Feb. 28.

Estimated payment of sales taxes
Under Act No. 2022-53, only those with $1.5 million or more in sales in 2021 (previous calendar year) will have to prepay sales taxes monthly, starting May 1, according to the Alabama Revenue Department.

The law increases the threshold for submitting estimated monthly sales tax payments from $2,500 in average monthly state sales tax liability to those with a monthly average of $5,000. Alabama Revenue Commissioner Vernon Barnett said the $2,500 threshold in prior law only affected businesses with $750,000 or less in annual sales. Raising the threshold to $5,000 means an estimated 2,467 sales tax licensees will not have to remit sales taxes in advance each month based on sales in the preceding calendar year, according to the legislation’s fiscal note. Rep. Danny Garrett, R-Trussville, the law’s primary author, said the change cuts the number of businesses involved by half. The sellers still must collect and remit based on actual sales tax receipts. This portion of the law is effective May 1.

Taxpayers will be notified May 25 by letter, if their state sales tax account is impacted by the state sales tax estimated payment provisions of Act No. 2022-53. … If it is determined that the taxpayer’s average monthly state sales tax liability is less than $5,000, … the taxpayer should take credit for the estimated payment remitted with the April 2022 return and not make an estimated payment for May 2022,” the department said in an April 25 notice.

Business personal property taxes
Beginning Oct. 1, 2023, Act No. 2022-53 also allows an exemption of up to $40,000 of the market value of business tangible personal property from state property taxes. Counties and municipalities may also adopt, by ordinance or resolution, the same exemption.

Garrett and several lawmakers who are also small business owners said creating an exemption for personal property taxes has been the No. 1 small business priority for years. “This is a monster deal for all small businesses,” Sen. Dan Roberts, R-Birmingham, said.

Other provisions
The law also:

  • effective immediately, gives Alabama corporate income and financial institution excise taxpayers a one-month reprieve on their tax return due date starting with this year’s returns (2021 tax year). The Alabama Revenue Department expects better Alabama returns with the 30-day extension for filing state returns. Currently, federal and state returns are due on the same day. The bill also allows the Revenue Department to grant a one-month extension for the 2020 tax year.
  • allows any new or sales-tax delinquent beer, wine and tobacco retailer to put up cash instead of a surety bond to get a sales tax license, starting May 1. “Businesses have to hire lawyers and accountants to put up a surety bond. This bill allows them to deposit cash in lieu of the surety bond,” said Garrett.
  • ensures that any relief funding from the American Rescue Plan Act received by qualifying disadvantaged minority farmers is immediately exempt from state income tax.

The Alabama Revenue Department is to develop rules to implement and administer the act.

The Small Business Relief and Revitalization Act (also known as HB82 / SB189 ) was a part of the House Republican’s 2022 legislative agenda and a part of the Small Business Commission’s legislative package.

Final action posted 10:30 a.m. Feb. 28, 2022


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