State of  Use Tax The 2016 Alabama Use Tax

Alabama Use Tax Rate

4.00%

2016 Alabama state use tax
The AL use tax only applies to certain purchases

The Alabama use tax is a special excise tax assessed on property purchased for use in Alabama in a jurisdiction where a lower (or no) sales tax was collected on the purchase.

The Alabama use tax should be paid for items bought tax-free over the internet, bought while traveling, or transported into Alabama from a state with a lower sales tax rate.

The Alabama use tax rate is 4%, the same as the regular Alabama sales tax. Including local taxes, the Alabama use tax can be as high as 7.000%.

State of California Sales Tax What exactly is the Alabama use tax?

The Alabama Use Tax is a little-known tax that complements the regular Alabama sales tax to ensure that purchases made outside of Alabama are not exempt from the Alabama sales tax.

Instead of taxing the sale of tangible property which takes place outside of Alabama's jurisdiction (and thus cannot be taxed), the Alabama Use Tax taxes the use or consumption of tangible property bought in other jurisdictions with a lower sales tax rate and brought back into Alabama.

State of California Sales Tax How Do I Calculate How Much Use Tax I Owe?

If you made any purchases online or outside of Alabama for which you paid less then Alabama's 4% in sales tax, you are responsible for paying Alabama a use tax on those purchases equal to 4% of the total purchase price less any sales taxes already paid to other jurisductions.

Example 1: If $100 worth of books is purchased from an online retailer and no sales tax is collected, the buyer would become liable to pay Alabama a total of $100 × 4% = $4.00 in use tax.

Example 2: If a $10,000 boat is purchased tax-free and then brought into a jurisdiction with a 2% sales tax rate, the buyer would become liable to pay Alabama a total of (4% - 2%) × $10,000 = $400.00 in use tax.

Example 3: If $1,000 worth of goods are purchased in a jurisdiction with a 5% sales tax rate, no use tax is owed to Alabama because the foreign jurisdiction's sales tax rate is greater then or equal to Alabama's 4% sales tax.

State of California Sales Tax How do I pay the Alabama use tax?

In many states, an optional field for remitting use tax is included in the state income tax return. A use tax return form may also be available on the Alabama Department of Revenue website for calculating and paying use tax.

How to pay the Alabama Use Tax Above: Example use tax field on a state income tax return

Use tax is a self-assessed tax with a very low public awareness rate, and as a result states have a very hard time enforcing use tax compliance. Only about 1.6% of taxpayers pay use tax each year, remitting an average of $69 in use taxes on total purchases averaging $929. [1]

Government studies have shown that a large percentage of use tax payments are made as the result of an audit or under the threat of an audit. If unpaid use tax is discovered by a Alabama tax audit, significant underpayment fees and interest may apply.

State of California Sales Tax References

  1. Minnesota Use Tax Study - http://www.house.leg.state.mn.us/hrd/pubs/usetax.pdf
  2. Alabama Department of Revenue - http://www.ador.alabama.gov/