Stay compliant in Alabama

Alabama’s recurring dates are the business privilege tax, income tax in the spring, sales tax due by the 20th of the next month⁹, and employer accounts if you have people on the payroll. There is no Secretary of State annual report to put on the calendar.

What’s different in Alabama

• The yearly entity filing goes to the Department of Revenue, not the Secretary of State. Corporations no longer file an annual report with the Secretary of State¹. The privilege tax forms are titled Business Privilege Tax Return and Annual Report³.
• A small privilege tax means no filing. For tax years beginning after December 31, 2023, a calculated tax of 100 dollars or less is exempt and no return is required³. Section 40-14A-22 of the Code sets that exemption.
• Corporate income tax is filed a month after the federal return, and the payment does not get that extra month.
• Workers’ compensation starts at five employees, with a construction exception. There is no state minimum wage, and a city or county cannot set one.

Do this

1. Do not wait for a Secretary of State annual report. Corporations no longer file an annual report with the Secretary of State¹. A professional association is the exception on the fee schedule, at $100² a year. Everyone else uses the privilege tax.
2. Check whether the first privilege tax return is required. It covers every corporation, limited liability entity, and disregarded entity organized in Alabama or doing business here. For tax years beginning after December 31, 2023, a calculated tax of 100 dollars or less is exempt and no return is required. The 2026 initial return says to stop and not submit Form BPT-IN when the calculated tax is at or below that threshold. Otherwise, the first form is due within two and one-half months after you incorporate, organize, qualify, or start doing business. There is no extension for Form BPT-IN, and an extension to file does not extend the payment³. The tax obligation continues until the entity is dissolved or withdrawn, subject to the exemption.
3. Then file the annual privilege tax, unless the small-tax rule says you do not. Form CPT for C corporations and some others, and Form PPT for S corporations, limited liability entities, and disregarded entities. An S corporation files by the 15th day of the 3rd month. A limited liability entity files by the 15th day of the 3rd month. A calendar-year C corporation files by the 15th day of the 4th month after the tax year begins. A disregarded entity, including a single-member LLC, files no later than when the owner files the corresponding federal return⁸. For tax years beginning after December 31, 2023, a calculated tax of 100 dollars or less is exempt and no return is required³. That is the statute: Section 40-14A-22, as amended by Act 2022-252, says for taxable years beginning after December 31, 2023, a taxpayer who would otherwise owe the minimum tax is exempt from the privilege tax and from its filing requirement. The 2026 PPT and CPT instructions say a taxpayer who would owe the 100 dollar minimum does not have a filing requirement⁶. Revenue’s older privilege tax overview still prints a 100 dollar minimum tax, cut to 50 dollars for the taxable year beginning after December 31, 2022, plus a 10 dollar Secretary of State annual report fee for corporations⁴. None of that applies now. The act set the reduced minimum for the taxable year beginning after December 31, 2022¹⁷ only, the exemption covers the years after it, and a 2024 act repealed the section that required corporations to file an annual report with the Secretary of State, effective October 1, 2024¹⁸.
4. If you do owe it, the rate follows Alabama net worth and apportioned federal taxable income. The low band is 25 cents per 1,000 dollars when apportioned federal taxable income is under 1 dollar. The high band is 1.75 dollars per 1,000 dollars when that income is at least 2,500,000 dollars. Bands between those two are on the privilege tax page. The cap is $15,000 for most entities, $500 for an electing family limited liability entity, and $3,000,000⁴ for financial institutions and insurance companies. This page does not calculate your tax.
5. File income tax. People: the same date as the federal return. The brackets are 2 percent on the first 500 dollars, 4 percent on the next 2,500, and 5 percent above 3,000 for a single filer, and 2 percent on the first 1,000 dollars, 4 percent on the next 5,000, and 5 percent above 6,000²⁰ for a joint return. C corporations: Form 20C by May 15 for a calendar year, at 6.5%²¹. The extra month is for filing only. The tax is due on the original due date, without that extra month⁸. Pass-through entities: Form 65 or Form 20S by the same date as the federal return. Nonresident composite tax is 5%. A partnership must file a composite return and pay for its nonresident members. An electing entity pays 5%²². 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 EPT¹⁰. Get your tax IDs has the statute behind that.
6. File sales tax by the 20th of the next month⁹ if you are registered, unless you were approved for a longer period. Rates and the local split are on Get your tax IDs.
7. If you have employees, keep the employer accounts current. 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 withheld¹¹. Unemployment reports are due the last day of the month after the quarter to Workforce Alabama, on the first $8,000 of wages, at 2.7% until an experience rate applies. Late unemployment tax is 25 dollars or 10 percent of the tax, whichever is greater¹². Report new hires and recalls within 7 days. Independent contractors are not reported¹³.
8. Renew the local license and any trade license on their own dates. A state or county business license, where one is required, is due October 31²³: Licenses and permits. A contractor license, a home builder license, a food permit, and an alcohol license each renew on the agency’s schedule.
9. Keep a registered agent who can actually be handed papers. Section 10A-1-5.31 says the company must keep an agent and an Alabama office continuously. The agent cannot work only through a virtual office or a mail-forwarding service, and the office cannot be only a mailbox or a telephone answering service. Changing the agent is $100. A resignation is no fee².

Employer rules

Workers’ compensation: not required when you regularly employ fewer than five people, counting corporate officers, except for work constructing or helping on site to construct new single-family detached houses. Domestic employees, farm laborers, and casual employees are not required to be covered, and the employer can choose coverage¹⁴. The insurance page says you choose how to insure and lists a commercial carrier, a group self-insurance fund, and individual self-insurance for an employer that qualifies. It does not describe a state fund you buy from the department.

Minimum wage: No state minimum wage law. $7.25¹⁵ an hour applies to employers the federal wage law covers. Some workers are outside that federal law. Check the table. A city or county cannot set a higher wage. Section 25-7-41 of the Code, from the 2016 Alabama Uniform Minimum Wage and Right-to-Work Act, says a county, city, or other local government may not require an employer to pay a wage, or give leave, a work schedule, or another benefit, that state or federal law does not require. The act does not reach a local rule that relates specifically to public employees, or to the employees or independent contractors of that county or city¹⁹.

Unemployment: liable at $1,500 in a quarter or 20 weeks, with other tests for domestic work and for a 501(c)(3). The employer FAQ says its answers are a starting point and do not have the force of law. A new employer’s rate is 2.7% on the first $8,000¹².

What you get back

A filed privilege tax return, or a year when the instructions say you do not file because the tax is small. Filed income and sales tax returns, and current employer accounts. If the entity is dissolved, the privilege tax page says the tax continues until the Secretary of State shows the dissolution or withdrawal.