Thousands of small businesses in the state will no longer have to pay monthly estimated sales taxes to the Alabama Department of Revenue (ALDR) effective Sunday.
Instead, they’ll be required to pay based on the sales tax receipts of the previous month. Businesses must pay monthly on or before the 20th day of each month.
This is due to a law passed earlier this year removing monthly estimated sales tax requirements for businesses with less than $20,000 in average monthly sales tax liability starting on October 1.
State Rep. Danny Garrett (R-Trussville) introduced HB 77 in March. Gov. Kay Ivey signed the bill into law in June after it passed through the legislature.
A February report from the Tax Foundation found that Alabama had the fourth-highest state and local sales tax rate in the nation, behind only Louisiana, Tennessee and Arkansas. However, most of the burden came from local governments, which imposed the highest sales taxes in the nation.
The new law does not alleviate sales taxes for consumers but takes the burden of making estimated payments on monthly sales tax returns off of certain small businesses.
Before the new law was enacted, only small businesses with an average monthly tax liability of less than $5,000 could pay sales tax based on the previous month. According to a press release from Ivey’s office, increasing the threshold to $20,000 will allow over 3,000 more small businesses to do so next month.
ALDR is already evaluating sales tax returns for 2022 to identify which businesses are affected by the new law. The department will notify any affected businesses by letter.
Business owners with questions about the new law can contact ALDR’s Sales and Use Tax Division at 334-242-1490 or [email protected].
Don’t miss out! Subscribe to our newsletter and get our top stories every weekday morning.