Get your tax IDs in Alabama

An EIN, if you need one, takes minutes online. Alabama then adds a sales tax account if you sell taxable goods, withholding if you have employees, and an unemployment account once you owe the tax. The business privilege tax is a separate yearly return for the entity itself.

What’s different in Alabama

• State sales tax is 4%, and groceries are 2%³. Local taxes sit on top, and the state does not collect every city and county tax.
• A remote seller with no Alabama location does not get a sales tax license. Past $250,000⁷ a year in sales into Alabama, it still has to register and collect. Accepted sellers in the simplified program collect a flat 8%⁶.
• A single-member LLC is not a pass-through entity for the entity-level election. It can still owe business privilege tax. Stay compliant has that return.
• New hires are due in 7²⁰ days. Independent contractors are not on that report.
• Unemployment answers on the public FAQ are not the statute. The employer FAQ says its answers are a starting point and do not have the force of law¹⁹.

Do this

1. Get an EIN from the IRS if you need one. It is free and, if approved, issued immediately²¹ online. Alabama’s tax registration asks for the legal name, street address, owners, FEIN, organization date, and NAICS code¹. The checklist names a FEIN and does not say whether a sole proprietor can use a Social Security number instead.* Don’t pay a website to apply for you.
2. Register in My Alabama Taxes for the taxes that apply. The Department of Revenue⁹ uses that system for sales tax, sellers use tax, the simplified sellers use tax, and income tax withholding, among others. Registering online is free. An account number arrives in 3 to 5 days².
3. If you sell taxable goods in Alabama, register for sales tax and look up the place of the sale. The state piece is below. Local rates vary. The state administers more than 200 city and county sales taxes and does not administer all of them. Contact each county and city where you do business and ask whether you register with them too. State-administered local taxes, and some that are not state-administered, can be filed through ONE SPOT⁴.
4. File sales tax by the 20th of the next month unless the department assigns another schedule. You may ask for quarterly filing if the prior year’s tax was under $2,400, semi-annual if it was under $1,200, or annual if it was under $600. Ask before February 20⁴ for that year. On-time state sales tax has a discount: 5 percent of the first 100 dollars of tax and 2 percent above that, capped at 400 dollars a month, if you pay on time⁵.
5. If you sell into Alabama from outside the state and you have no Alabama location, check the sales threshold before you collect anything. Alabama does not issue a sales tax license to a remote business with no Alabama location. Revenue’s rule for out-of-state sellers says that once your retail sales of goods into Alabama are more than $250,000 a year, based on the previous calendar year, you must register with the department and collect and remit the tax. You can do that through Alabama's regular use tax collection rules, the simplified sellers use tax program, or a marketplace facilitator that collects the simplified tax on your sales⁷. Count only your own retail sales: wholesale sales for resale, and sales a participating marketplace already taxes, are not in the count. Eligible sellers apply to the simplified program and must be accepted before they collect the flat 8%. That tax is due the 20th of the next month, and a timely filer may keep 2%. The same $250,000 line applies to a marketplace facilitator, which must either register to collect the simplified sellers use tax on its marketplace sellers' sales delivered into Alabama, or report those sales to Revenue and notify the customers⁶. A seller does not collect again on sales through a participating marketplace that already collected the simplified tax, but a marketplace that only reports does not take that duty off the seller⁸.
6. Register for withholding when you pay wages for work in Alabama. Withholding applies to an employer with employees working in Alabama. It also applies to Alabama residents working outside Alabama, unless you already withhold for the state where they work⁹. File Form A-6 for a month when withholding in the first or second month of the quarter exceeds 1,000 dollars. File Form A-1 by the last day of the month after the quarter. File the quarterly return even when no tax was withheld¹⁰. The annual reconciliation, Form A-3, is due the last day of January after the year being filed¹¹. The hiring guide covers the federal side.
7. Open an unemployment account when you are liable, and report new hires. The tests are in the unemployment section. Reports are due the last day of the month after the quarter¹⁹. New employees and recalls go to Workforce Alabama within 7 days. Independent contractors are not reported²⁰.

Rates and income tax

State sales and use tax, from the rates table:

• 4%³ general.
• 2%³ on food and groceries, effective September 1, 2025.
• 2%³ automotive.
• 1.5% manufacturing machinery, and 1.5%³ farm machinery.
• 8%⁶ simplified sellers use tax, for an accepted remote seller, instead of the state-plus-local stack.

Lodging is a separate state tax: 5% in the Alabama Mountain Lakes counties named on the rates page, and 4%³ in other counties. Vending and amusement rates are on that same table.

Individual income tax, for owners who report the business on their own return: for single filers, 2 percent on the first 500 dollars, 4 percent on the next 2,500, and 5 percent above 3,000. For a joint return, 2 percent on the first 1,000 dollars, 4 percent on the next 5,000, and 5 percent above 6,000¹². File by the same date as the federal return¹³.

A C corporation pays 6.5%¹⁴ and files Form 20C. For a calendar year, the return is due May 15. The extra month is for filing only. The tax is due on the original due date, without that extra month¹³. The due-dates page does not print a separate calendar day for that payment.* Read the Form 20C instructions for the year you are filing.

A partnership or multi-member LLC files Form 65. An S corporation files Form 20S. Those returns are due the same date as the federal return¹⁵. The pass-through page does not say whether Alabama requires its own S election on top of federal Form 2553.* Ask a CPA if you are making the election. This page does not pick it for you.

Nonresident owners: A partnership must file a composite return and pay for its nonresident members. The rate is 5%. An S corporation may file the composite return, or file Schedule NRA so a nonresident owner elects out¹⁵.

A partnership or S corporation may elect to pay Alabama income tax at the entity level. The rate is 5%¹⁶. For tax periods beginning on or after January 1, 2025, check the Electing PTE box on the timely Form 65 or Form 20S and also file Form EPT. That follows the statute: Section 40-18-24.4, as amended by a 2024 act, says for tax years beginning on or after January 1, 2025, the election or its revocation is made on the timely filed return, including any extension¹⁸. Revenue’s electing pass-through entity rule still says the election is made on Form PTE-E, filed through My Alabama Taxes by the 15th day of the third month after the tax year closes, or it is denied. For a 2025 or later tax year, check the box on the return. Estimated tax applies when the year’s tax is expected to be $500¹⁵ or more. A single-member LLC is not a pass-through entity for the entity-level tax election, except as an owner of one¹⁷. Whether the election helps depends on your numbers. Ask a CPA.

Unemployment and new hires

The employer FAQ says its answers are a starting point and do not have the force of law. The published tests for a non-farm employer are $1,500 of wages in a quarter, or a worker in 20 different weeks, in the current or preceding year. Domestic work uses a different test: 1,000 dollars of cash wages in a quarter for domestic workers in a private household, college club, fraternity, or sorority. A 501(c)(3) is liable only after four or more workers in each of 20 different weeks. Register after wages are paid for work in Alabama, online through eGov, or on paper if the system tells you to. The wage base is $8,000. A new employer pays 2.7% until an experience rate applies. Reports are due the last day of the month after the quarter. Late is 25 dollars or 10 percent of the tax, whichever is greater, plus 1 percent a month until paid¹⁹.

New hires and recalls: within 7 days. A miss can be fined up to $25 per violation. Employers with five or more employees must report online. Fewer than five may report online or mail a W-4 with the start date and whether the person is a new hire or a recall. Independent contractors are not reported²⁰.

What you get back

An EIN from the IRS if you applied, a My Alabama Taxes² login, and a tax account number for each tax you registered. Sales tax filing stays monthly unless you are approved for a longer period. Write down the frequency the department assigns. The business privilege tax is not this account. It has its own return.