The Alabama Department of Revenue (or “ALDOR”) just posted on their website a timely reminder to all companies that sell goods to Alabama customers at wholesale, or to most entities or organizations that are exempt from sales/use/rental tax under Alabama law. Recall that a few years ago the Alabama Legislature enacted a sweeping law requiring purchasers, lessees, etc., to acquire an annual “tax account license” from ALDOR in order to avoid sales/use/rental, etc. tax on their purchases or leases (if they qualify) and to protect their vendors/lessors from liability for not collecting/remitting the tax. The license covers sales, seller’s use, consumer use, rental, lodgings, and utility gross receipts taxes. The renewal process isn’t painful, but according to ALDOR, it must be done between November 1 and December 31 of each year. 

If your client is the vendor or lessor, having their Alabama customers renew their tax account license well before December 31, and provide a signed copy to your client, protects them in most cases. In our experience, since the enactment of this law, ALDOR and self-administered local governments have shown little grace to the hapless vendor or lessor who in good faith sold goods or leased equipment to a company holding an expired tax account license. Similarly, a 2022 Alabama Tax Tribunal appeal involved what should have been a tax-exempt organization (a united appeal fund) that, through an administrative oversight, failed to renew its certificate of exemption for several months after its expiration date. Its purchases during that gap period were found to be subject to sales or use tax. There was no good faith or substantial compliance defense in the parallel law, according to the Tribunal Judge. 

Please remind your clients not to wait until the last minute to renew their license or to determine if one is needed. Also, remind your clients to start pestering their (normally) wholesale or tax-exempt customers to do the same and to provide a copy of their 2024 license to the vendor/lessor as soon as the customer receives it.  

This memo offers general information only and should not be relied on as definitive guidance. If you have any questions, please contact either Will Thistle (wthistle@bradley.com) or Bruce Ely (bely@bradley.com) or ALDOR’s Sales & Use Tax Division