Alabama economic nexus threshold

Alabama's economic nexus threshold is $250,000 in sales.

Included transactions:

• Retail sales of tangible personal property delivered into Alabama
• Both taxable and non-taxable transactions made directly by the seller

Excluded transactions:

• Wholesale sales where the buyer provides a valid Alabama sales tax license or resale certificate
• Sales made through a participating SSUT marketplace facilitator collecting and remitting on the business's behalf

Affiliate nexus

Alabama recognizes affiliate nexus when a remote seller and an Alabama-based business share 50% or more common ownership — whether held directly, indirectly, or under IRS attribution rules — and the in-state affiliate performs market-maintenance activities on the remote seller's behalf. Qualifying activities include:

• Sharing a trademark or brand name
• Making payments contingent on the remote seller's Alabama sales volume
• Operating under a shared business plan
• Providing services that benefit the remote seller's Alabama customer base.

When affiliate nexus applies, the remote seller is disqualified from Alabama's Simplified Sellers Use Tax program and its flat 8% rate, and must instead collect the full state and local rate.

Physical nexus

Physical nexus in Alabama arises from the first day of in-state physical presence under Rule 810-6-2-.90.03 and Ala. Code § 40-23-67. Nexus is established by any of the following:

• Maintaining any place of business in the state, even temporarily
• Employing or retaining any representative, agent, salesperson, canvasser, or installer operating in Alabama
• Delivering goods into Alabama in a seller-owned or leased vehicle (delivery via common carrier such as UPS or FedEx does not create nexus)
• Storing inventory in an Alabama fulfillment center, including Amazon FBA warehouses.

Sellers with inventory stored at Alabama FBA warehouses are subject to standard state and local sales tax rates rather than the simplified 8% SSUT rate, because physical nexus disqualifies a seller from the SSUT program.

Trailing nexus

Alabama has not published a formal trailing nexus policy. For economic nexus, the prior calendar year evaluation produces a natural one-year trailing obligation: meeting the $250,000 threshold in Year 1 requires collection throughout all of Year 2, after which the obligation is re-evaluated. For physical nexus, the Alabama Department of Revenue has not issued written guidance specifying the duration of the collection obligation after in-state physical presence ends.

Economic Nexus Threshold:

$250,000 in sales only

Effective Date:

October 1, 2018

Evaluation Period:

Prior calendar year

Previous Threshold Rules:

The same $250,000 threshold has applied since 2015

Find out if you have nexus in Alabama Get a free nexus study

Simplify your tax workflow today.