Getting Your Alabama Sales Tax License

Sales tax can add up quickly when restocking inventory. Unless you’re using your Alabama Sales Tax License correctly, you could be paying more than necessary. Fortunately, Alabama, like many states, allows retailers to avoid sales tax on goods they plan to resell.

Steps to Purchasing Goods Tax-Free in Alabama

Whether you’re just starting your Alabama business or expanding your existing operation into retail, here’s how to get set up properly and start making tax-free purchases the right way.

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Step One: Register your Alabama business

Before you can legally sell any goods as a business, you’ll need to register with the Alabama Secretary of State. For most retailers, forming an Alabama LLC is the way to go. LLCs are flexible, easy to form and manage, and offer strong liability protections whether you’re running a boutique or a custom print shop.

Once your LLC or other business entity is official, you’ll be ready to proceed with setting up a sales tax account.

Step Two: Register with the Alabama Department of Revenue

Once your company is registered in Alabama, it’s time to get official with Alabama’s Department of Revenue through the My Alabama Taxes (MAT) portal. This is where you’ll file state tax returns, apply for your sales tax license, and view notifications from the Alabama Department of Revenue.

From the MAT home page, you’ll find the option to register a business and request a new tax account number under the business category. The system will then guide you through the process of establishing a taxpayer account.

During the process, you’ll be asked to provide key business details, including:

• Your Federal Employer Identification Number (FEIN)
• Your legal business name
• Any trade names or DBAs
• Your entity type (ex., single member LLC or Alabama corporation)
• Your incorporation date
• Your primary business address
• The nature of your business (retail, wholesale, or a combination of both)
• Your 9-digit Alabama Entity ID, issued by the Secretary of State when you formed your business
• Your NAICS code (the MAT will help you find the right one)
• Contact info for the business and the person submitting the application
• The names of all members, owners, or corporate officers

Additionally, if you’ve misplaced your 9-digit Entity ID, you can easily locate it by running an Alabama business entity search. Once you’ve completed the registration process, it typically takes three to five business days to receive your taxpayer account number in the mail, which you’ll use to apply for your sales tax license.

Step Three: Create a My Alabama Taxes (MAT) Account

With your newly granted taxpayer account number in hand, it’s time to create an account through the MAT portal and apply for your Alabama Sales Tax License.

Once logged in, you’ll move on to the Sales Tax License application. This step asks you to confirm additional details about your business and its retail activities, including the types of goods you’ll sell and the responsible party the state can contact with any questions. You should receive your Sales Tax License relatively quickly. Your license will include an account type, number, and effective date.

Step Four: Present your license number to vendors

To remove sales tax from restock purchases, you’ll provide a copy of your sales tax license to vendors when making qualified, tax-exempt purchases. After making said tax-exempt purchase, you are required to keep a copy of the receipt. Doing so consistently can save your growing business cash, and keeping records of your tax-free purchases will help avoid issues with the state in the future.

Alabama Sales Tax Exemption

In Alabama, only purchases made strictly for resale qualify for tax exemption. If you plan to use the product in your business or for yourself and don’t intend to resell it, sales tax applies.

Purchases that usually qualify for exemption include:

• Inventory resold in its original form
• Components or raw materials that are used to create a product you’ll resell
• Retail display items, so long as you eventually sell them

If you aren’t sure a purchase would be considered tax-exempt by the state, it’s best to contact the Alabama Department of Revenue directly. Using your sales tax license to avoid taxes on non-qualifying purchases can lead to audits, back taxes, and penalties, all of which can cost your business more than just money.

Alabama resale certificate vs sales tax license

In Alabama, sales tax licenses and resale certificates function differently, and the one you need depends on what kind of business you’re operating. An Alabama Sales Tax License permits you to collect and remit sales taxes to the state as a reseller. If you sell tangible goods to end customers in Alabama, you’ll need this license.

A Certificate of Exemption (Form ST: EX-A1), on the other hand, is used by wholesalers and manufacturers who sell goods directly to resellers. There’s also a separate exemption form, Form ST: EX-A1-SE, which is used by statutorily exempt organizations, such as credit unions, schools, and certain Alabama nonprofits. Alabama provides answers to frequently asked certificate of exemption questions on their website.

Alabama Certificates of Exemption must be renewed annually and require the exempt entity to file regular information reports with the Department of Revenue. Failure to follow these Certificate of Exemption filing requirements may result in a six-month suspension of exemption certificate privileges, or up to a year for repeat offenders.

Reselling Goods in Alabama

Unless you’re looking to donate to the State of Alabama, you shouldn’t be paying sales tax on inventory that’s destined to be resold to your customers. Once you’ve registered and licensed your business, you’re clear to start buying your goods tax-free. If you still have questions about what to charge or how local tax rates work, refer to our Alabama tax rate guide.