Sales & Use Tax

 

WHAT'S NEW?

TOPIC:  Sales Tax on Sales of Insulin, Insulin Syringes and Related Items

The legislature has passed and the Governor has signed Act No. 2012-309 relating to the sale of insulin, insulin syringes, and related items to treat diabetes.

Act 2012-309 provides that in addition to any other exemption provided by law, any items used for the treatment of diabetes purchased by or on behalf of an individual pursuant to a valid prescription shall be exempt from state, county, and municipal sales and use taxes, including, but not limited to, any of the following: Insulin and insulin syringes, and any equipment, supplies, devices, chemical reagents, and any related items that may be used by a diabetic to treat diabetes or to test or monitor blood or urine. This act shall apply retroactively to all open tax periods and to all periods for which a preliminary or final tax assessment of tax could be entered. However, no refunds shall be due or issued pursuant to the exemption with respect to any period prior to the effective date of the act.

The sale of insulin is also exempt from sales tax pursuant to Section 40-23-4.1, Code of Alabama 1975, Certain drugs exempt.

Act 2012-309 becomes effective August 1, 2012. .

TOPIC:  Prepaid Wireless 9-1-1 Charge

Effective September 1, 2012, the Alabama Department of Revenue (ADOR) will begin administration of the Prepaid Wireless 9-1-1 Charge on retail sales of prepaid wireless services. All sellers making retail sales of prepaid wireless telephone service shall collect the Prepaid Wireless 9-1-1 Charge from the consumers and pay the amount collected to the Department of Revenue. The rate of the Prepaid Wireless 9-1-1 Charge is currently $.70 per retail transaction. This rate will be in effect until October 1, 2013, at which time a new rate will be imposed. The first return to be filed with the Department will be for the month of September 2012, due by October 20, 2012. A copy of the Act and other helpful information are available at:  revenue.alabama.gov/salestax/ppw.html.

TOPIC:  Severe Weather Preparedness Sales Tax Holiday

On April 26, 2012, the State Legislature passed and Governor Robert Bentley signed Act No. 2012-256 exempting certain “covered items” from the state sales and use tax during the first full weekend of July 2012 and last full weekend of February in subsequent years, commencing at 12:01 a.m. on the first Friday in July 2012 and ending at twelve midnight the following Sunday. A copy of the Act and other helpful information are available at: revenue.alabama.gov/salestax/WPSalesTaxHol.htm

TOPIC:  Beason-Hammon Alabama Taxpayer and Citizen Protection Act 2011-535

Chief United States District Judge Sharon Lovelace Blackburn issued a ruling on September 28, 2011 regarding the temporary injunction which enjoined (Act 2011-535), the Beason-Hammon Alabama Taxpayer and Citizen Protection Act, commonly referred to as the Immigration Act. Per this ruling, individuals and general partnerships are required to submit documentation proving either citizenship and/or lawful presence when conducting a business transaction with the State and/or Counties of this State. A business transaction includes, but is not limited to, applying for a business tax license. Click here for further updates regarding this Act.

TOPIC:  April Storms 2011

On May 4, 2011, Alabama Commissioner of Revenue Julie Magee issued an order to grant automatic Alabama Filing extensions to the April 2011 storm victims located in counties designated as disaster areas. Click here for information on filing Sales, Use & Business Tax returns covered by this extension.

TOPIC:  Sales Tax Escrow Programs

Escrowing for sales taxes on a daily basis is a good business practice for merchants to adopt so funds will be available to pay sales tax liability at the end of the taxing period. Merchants can escrow manually each day, but automatic sales tax escrow programs are now available for a convenient, stress-free way to pay state sales taxes on time, every time.  Click here to learn more about this program.

TOPIC:  Huntsville Taxpayer Service Center Moves to New Location

The Alabama Department of Revenue Huntsville Taxpayer Service Center, presently located at 994 Explorer Boulevard, will move to a new office location on Monday, June 28, 2010, and will re-open on Wednesday, June 30, 2010.

            The new location of the Huntsville Taxpayer Service Center will be 4920 Corporate Drive, Suite H in Huntsville.  Business hours will remain the same, Monday through Friday, from 8 a.m. until 5 p.m.

            Telephone services will be interrupted on Monday, June 28 and Tuesday, June 29, 2010, to allow for the move, but will be restored by Wednesday, June 30.  The new telephone and fax numbers for the Huntsville Taxpayer Center will be (256) 837-2319 and (256) 837-7322, respectively.  The mailing address remains unchanged, Post Office Box 11487, Huntsville, AL  35814-1487.

            “We are very pleased with the accessibility our new office space offers to taxpayers in the north Alabama area,” said Assistant Revenue Commissioner Cynthia Underwood. 

            The Huntsville Taxpayer Service Center serves individual and business taxpayers located in Cullman, Jackson, Lawrence, Limestone, Madison, and Morgan counties.  It is one of nine taxpayer service centers operated by the Alabama Department of Revenue.

 

TOPIC:  Update to Online Filing & Payment System Regarding International ACH Debit/Credit Transactions (IATs)

Effective April 1, 2010, the Paperless Filing & Payment System will be updated in regards to EFT payments.   Based on the National Automated Clearing House Association (NACHA) rule, any ACH Debit or ACH Credit payment funded by a financial institution or agency outside of the territorial jurisdiction of the United States must be treated as an International ACH Transaction (IAT).  This change will affect all EFT payments (current or delinquent) made online after April 1.  All taxpayers who are required or select to pay via EFT Debit will be required to state whether the payment transaction being submitted is an IAT and provide additional information to proceed or make the payment via ACH Credit.

Click the following links for more information:

Manual Entry Returns and Payment Only Transactions

Bulk File/Upload Method

Telephone Method

TOPIC:  International ACH Debit/Credit Transactions (IATs)

Pursuant to a new National Automated Clearing House Association (NACHA) rule, the Paperless Filing/Payment System has been updated in regards to EFT payments.  Based on the rule, any ACH Debit or ACH Credit payment funded by a financial institution or agency outside of the territorial jurisdiction of the United States must be treated as an International ACH Transaction (IAT).  Beginning October 1, 2009, all taxpayers who are required or select to pay via EFT will be required to state whether the payment transaction being submitted is an IAT.  Any taxpayer who states that the payment transaction being submitted is an IAT will be required to make the payment via ACH Credit, as the system is not processing any IATs at this time.  Upon selection by a taxpayer to pay via EFT for a return submission and for the Payment Only option, the taxpayer will be asked the payment status of the transaction via the following question: Will this payment be funded by money received from a financial institution located outside of the territorial jurisdiction of the United States? 

If Taxpayer Selects No The taxpayer will continue as usual

If Taxpayer Selects Yes For a Return Filing with Payment: The taxpayer will be sent directly to the confirmation page displaying return data only and be instructed to make the associated payment via ACH Credit.  If after receiving a filing confirmation the taxpayer realizes they selected yes in error, then the taxpayer may return to the Main Menu and submit the associated payment via the Payment Only option. 

For a Payment Only: The taxpayer will be instructed to make the payment transaction via ACH Credit.  The taxpayer will not receive a confirmation.  If the taxpayer selects yes in error, then the taxpayer may return to the Main Menu and select the Payment Only option again.   

Please Note: For return submissions, the IAT programming is currently in place for the Key & Send option only.  The programming of the Integrated Voice Recognition (IVR/telephone) and Bulk submission options will be put in place at a later date.  For these type filers, another notification regarding the update will be sent at that time.  EFT ACH CREDIT PAYMENT METHOD ACH Credit Payment Method requires pre-registration and Department approval. Although the returns must be filed electronically through the Alabama Paperless Filing and Payment System, tax payments made through this EFT method must be initiated through the taxpayer’s financial institution separate from the filing of the return. To be considered timely paid, you must initiate your ACH Credit method tax payments with your financial institution so that the payments are immediately available to the State on or before the first banking day following the due date of payment.  To request Department approval to pay using the ACH Credit Payment Method, please contact our EFT Unit by dialing 1-800-322-4106, then press 7.Additional links you may find helpful in determining if the payment is an IAT:

IAT FAQ

NACHA

TOPIC:  FEDERAL CREDIT CARD PROGRAM GSA SmartPay® 2

As of November 30, 2008, the federal government updated its credit card program.  The General Services Administration (GSA) has entered into a series of contracts with a variety of card-issuing banks under the program named GSA SmartPay® 2.  Samples of the new card designs are available at www.gsa.gov/gsasmartpay.  The following information is provided to assist Alabama vendors in determining whether or not tax applies to transactions paid by GSA SmartPay® 2 cards.      

The GSA SmartPay® 2 program provides four business lines (card types):  Purchase, Travel, Fleet, and Integrated (includes fleet, travel and/or purchase functionality and offers a single card for all purchases.)  These cards/accounts can be Centrally Billed Accounts (CBAs) or Individually Billed Accounts (IBAs). 

Centrally Billed Accounts (CBAs) are charge card accounts in which all charges are billed directly to the federal government and paid directly by the federal government to the issuing bank.  (Sales tax is not due on credit card purchases which are centrally billed to and paid by the federal government.  Lodgings tax is not due on charges for lodgings which are centrally billed to and paid by the federal government.) 

Individually Billed Accounts (IBAs) are charge card accounts in which charges are paid directly by the cardholder/federal employee to the issuing bank; the federal employee is then reimbursed by the government.  (Sales tax and lodgings tax are due on credit card transactions where the purchases or charges for lodgings are billed to and paid by federal employees, who are then reimbursed by the federal government.)        

• Purchase Cards are for purchasing general supplies and services.  All federal government GSA SmartPay® 2 Purchase cards are centrally billed.  Therefore, transactions paid for with this card are tax-exempt. 
• Fleet Cards are for purchasing fuel and supplies for government vehicles.  All federal government GSA SmartPay® 2 Fleet cards are centrally billed. Purchases of tangible personal property paid for with this card are exempt from sales taxes. However, purchases of fuel paid for by this card are not exempt from state fuel excise taxes.
• Travel Cards are for paying travel expenses related to official government travel (airline, hotel, meals, incidentals).  Federal government GSA SmartPay® 2 Travel cards may be centrally billed or individually billed.  The Travel card uses the 6th digit of the account number to identify whether the account is a Centrally Billed Account or an Individually Billed Account.  If the sixth digit is 1, 2, 3, or 4, the transactions against the Travel card are individually billed to the federal employee, and, therefore, the transactions are subject to applicable taxes.  See the chart below.   
• Integrated Cards – Two or more business lines (card types) whose processes are integrated into one card.    
• All Fleet and Purchase type transactions on a GSA SmartPay® 2 integrated card are centrally billed. Purchases of tangible personal property paid for with this card are exempt from sales taxes. However, purchases of fuel paid for by this card are not exempt from state fuel excise taxes. 
• Travel functionality on a GSA SmartPay® 2 integrated card may be centrally billed or individually billed.  The numbering structure for Integrated Cards to differentiate between centrally and/or individually billed transactions will be specific to each agency/ organization using the integrated card.  This information will be provided on the GSA SmartPay® website (www.gsa.gov/gsasmartpay) as it becomes available. 

Department of the Interior:  With the exception of the purchase of meals and incidental travel expenses which are individually billed and subject to sales tax, transactions paid for with the Department of the Interior's integrated card are centrally billed and exempt from sales and lodgings tax. Purchases of fuel paid for by this card are not exempt from state fuel excise taxes.

The Department of the Interior GSA SmartPay 2 charge cards can be identified by their unique prefixes and account numbers, government-designed artwork, and wording that indicates that the card is for official transactions for the U. S. Government.  The Department of the Interior Integrated Card account numbers begin with 5568 26.

	Purchase	Travel	Fleet	Debit/Prepaid
Prefix (1st four digits)	5568 - MasterCard 5565 - MasterCard 4716 - Visa 4614 - Visa 4486 - Visa	5568 - MasterCard 5565 - MasterCard 4486 - Visa 4614 - Visa	5565 - MasterCard 5568 - MasterCard 8699 - Voyager	5564 - MasterCard 5568 - MasterCard 5565 - MasterCard 4614 - Visa
6th Digit	NA	0 CBA 1 IBA 2 - 4 IBA 5 Reserved 6 - 9 CBA	NA	NA

TOPIC:  INTERNET TAX FREEDOM ACT

This notice is intended to provide taxpayers and the general public with information concerning the application of Alabama utility tax to Internet access. The Internet Tax Freedom Act Amendments Act of 2007 prohibits multiple and discriminatory taxes on electronic commerce including Internet access.  This act, which became Public Law 110-108, amends the Internet Tax Freedom Act to:  (1) extend the moratorium on state taxation of Internet access and electronic commerce and the exemption from such moratorium for states with previously enacted Internet tax laws preserving the grandfather provisions to protect revenues in those states and local governments that currently collect those taxes until November 1, 2011; (2) restrict the authority of certain states claiming an exemption from the moratorium under the Internet Tax Nondiscrimination Act of 2004 to impose Internet access taxes after November 1, 2011; (3) expand the definition of “Internet access” to include related communication services such as e-mails and instant messaging; (4) redefine “telecommunications” to include unregulated non-utility telecommunications such as cable service; and (5) allow a specific exception to the moratorium for certain state business taxes enacted between June 20, 2005, and November 1, 2007, that do not tax Internet access. The Internet Tax Freedom Act of 1998 enacted a moratorium on the imposition of state and local taxes on Internet access.  It was extended by the Internet Tax Nondiscrimination Act and this act, extends it again through November 1, 2014. According to the new federal legislation, the definition of “Internet access” includes:

(a) a service that enables users to connect to the Internet to access content, information, or other services offered over the Internet;

(b) the purchase, use, or sale of telecommunications by a provider of a service described in(a) to the extent those telecommunications are purchased, used, or sold to provide that service or to otherwise enable users to access content, information or other services offered over the Internet;

(c) services that are incidental to the provision of the service described in (a) when furnished to users as part of that service, such as a home page, electronic mail and instant messaging (including voice and video capable electronic mail and instant messaging), video clips, and personal electronic storage capacity; and

(d) a home page, electronic mail and instant messaging (including voice and video capable electronic mail and instant messaging), video clips, and personal electronic storage capacity, that are provided independently or not packaged with Internet access. Internet access does not include voice, audio or video programming, or other products and services (except services described in (a), (b), (c), or (d)) that utilize Internet protocol or any successor protocol and for which there is a charge that is either separately stated or aggregated with the charge for services in (a), (b), (c), or (d).

Sections 40-21-80 and 40-21-100, Code of Alabama 1975, exempt Internet access charges from utility gross receipts tax and the utility service use tax as enacted by Alabama Act 98-654 in 1998. The new law amends the definition of Internet access to make clear that a product or service which is delivered by the Internet is not necessarily tax free.  The new definition ensures that the state and local tax base is not eroded as more services are delivered by the Internet.  When an Internet service provider bundles content, information and services that might otherwise be taxable with Internet access, the new language eliminates the interpretation that the entire bundle is tax exempt. Section 40-21-82, Code of Alabama 1975, allows providers of telephone services to combine or bundle taxable and nontaxable services on one invoice and charge the customer tax on the taxable charges. The legislation specifically prohibits taxation of e-mail and instant messaging services that are provided independently or not packaged with Internet access.  Telecommunications services such as telephone services, cellular services, paging services and facsimile services that are not used to provide access to the Internet are subject to tax. Section 40-21-82, Code of Alabama 1975, levies a privilege or license tax against every utility furnishing telegraph or telephone services in the State of Alabama. The amount of the tax is determined by the application of rates against gross sales or gross receipts from the furnishing of such services in the State of Alabama.  Alabama code provides no exemption or exclusion for telephone services provided by the Internet.

Voice over Internet Protocol (VoIP) and any other form of telephony and similar services that utilize Internet protocol are excluded from the amended definition of Internet access and are not included in the federal moratorium.  These types of telephony and telecommunications services continue to be subject to the Alabama Utility telecommunications services tax.

 

TOPIC:  NEW BUSINESS WORKSHOPS

Mark your calendar and attend one of ADOR’s free workshops.   Click here for workshop locations and times. 

 

TOPIC:  ADOR OFFERS E-MAIL SUBSCRIPTION SERVICE

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TOPIC:  CURRENT LOCAL TAX RATE CHANGES

Click here to view the current local tax rate changes and to view and/or print the Local Tax Notices.

 

TOPIC:  RECENTLY AMENDED OR REPEALED OR NEWLY PROMULGATED SALES & USE TAX RULES

Click here to view the list of recently amended or repealed or newly promulgated Sales & Use Tax Rules, and to view and/or print the text of the Rules.

This page last updated August 7, 2012.