Taxes / State tax rules / Alabama
Selling on eBay, Poshmark or Etsy from Alabama: sales tax and 1099-K rules
In Alabama, a marketplace with more than $250,000 in Alabama retail sales collects a flat 8% Simplified Sellers Use Tax on the sales it facilitates (or reports them instead), and the Department of Revenue says an in-state seller who sells only through such a marketplace doesn't need a sales tax account but should get an exemption certificate. For Form 1099-K, Alabama has no threshold of its own: platforms that must file a 1099-K with the IRS also file a duplicate with the Alabama Department of Revenue for payees with an Alabama address.
General information, not tax advice. Check with a tax professional about your own situation.
Checked against the official pages listed below on .
Alabama in short
- General sales tax:
- Yes, 4% state rate
- Marketplace facilitator law:
- Yes: Code of Ala. 1975 § 40-23-199.2 (Act 2018-539, Section 3), since Jan 1, 2019
- When a marketplace must collect:
- more than $250,000 in retail sales in Alabama in the preceding 12 months, counting its own sales and its marketplace sellers' sales
- Form 1099-K:
- Federal test; platforms file a copy with the state
Who collects the tax on a marketplace sale
Since January 1, 2019, a marketplace facilitator over the $250,000 qualifying amount must either register to collect and remit the 8% SSUT on the sales it facilitates for delivery in Alabama, or report those sales to the department and send customer notices. The department's July 26, 2021 notice says a qualified marketplace facilitator is required to apply and register for an SSUT account.
If you sell only through marketplaces
The department says an in-state seller who sells only through a participating marketplace that collects for its third-party sellers is not required to register for a sales/use tax account, but should apply for an Alabama exemption certificate, which it needs to buy items for resale tax-free. If a marketplace elects to report sales instead of collecting, its sellers are not relieved of their own obligation on those sales.
Registration, resale certificates and what changes when you also sell direct have their own page: Alabama: seller's permit and resale certificate rules.
The law: Code of Ala. 1975 § 40-23-199.2 (Act 2018-539, Section 3), effective .
"An in-state seller who exclusively sells through a participating marketplace, where the marketplace collects and remits on behalf of its 3rd party sellers, is not required to register for a sales/use tax account"
"The collection and remittance of simplified sellers use tax relieves the marketplace facilitator, the marketplace seller, and the purchaser from any additional state or local sales and use taxes"
Sources: What are the requirements for in-state sellers who only sell on participating marketplaces?; What is the Alabama SSUT Marketplace Facilitator law?; Notice: Alabama Simplified Sellers Use Tax and Marketplace Facilitators Guidance; Act 2018-539 (HB 470), Simplified Sellers Use Tax.
Alabama's sales tax
Alabama's general state sales tax rate is 4%, and cities and counties add their own rates. A sale through a marketplace that collects Simplified Sellers Use Tax (SSUT) is taxed at a flat 8% wherever in Alabama it is delivered, and that 8% stands in for all state and local sales and use tax on the sale.
"The flat tax applies to all sales regardless of the locality shipped to in Alabama."
Sources: State Sales and Use Tax Rates; Simplified Sellers Use Tax (SSUT); Act 2018-539 (HB 470), Simplified Sellers Use Tax.
Form 1099-K: Alabama and the federal test
Alabama has no 1099-K threshold of its own. Under Rule 810-3-26-.03, payment settlement entities and third party settlement organizations that are required to file Form 1099-K with the IRS must also file a duplicate with the department (all of them, or those for payees with an Alabama address), within 30 days after the federal due date.
"This Act requires PSE’s to file Form 1099-K with the Alabama Department of Revenue for payees with an Alabama address."
Rule: Act 2017-294; Alabama Department of Revenue Rule 810-3-26-.03. Applies from: Act 2017-294, effective August 1, 2017.
The federal test, for comparison: the IRS says a payment app or online marketplace must send a Form 1099-K when payments for goods or services total over $20,000 in more than 200 transactions, and adds: "However, they may send you a Form 1099-K with lower amounts and/or transactions." (Understanding your Form 1099-K, reviewed ). The Instructions for Form 1099-K count both parts for the calendar year, through each platform separately, and say the box 1a gross amount is figured without adjustments for credits, discounts, fees, refunds or shipping, so a 1099-K figure is not the same as profit. More on the federal rule in Form 1099-K for resellers.
Sources: Form 1099-K; Rule 810-3-26-.03, Reporting Requirements of Payment Settlement Entities (PSE).
Worked examples
A $30 sale shipped to an Alabama buyer
A marketplace collecting SSUT adds 8% to the buyer's total: $30 x 8% = $2.40. That $2.40 covers state and local tax on the sale, whatever the local rate where the buyer lives, and the marketplace sends it to the department. Assumes the marketplace participates in SSUT and collects for its sellers.
When the duplicate 1099-K reaches Alabama
An Alabama seller with $21,000 of payments in 250 transactions on one marketplace in a year passes the federal test (over $20,000 and more than 200 transactions), so the marketplace must file a 1099-K with the IRS and, under Rule 810-3-26-.03, a duplicate with the department. At $15,000 in 300 transactions the federal dollar test isn't passed, and the Alabama rule ties the duplicate to a federal filing requirement.
Edge cases and details
- If a marketplace elects to report sales instead of collecting, the department's FAQ says its marketplace sellers are not relieved of their obligation to remit sales or use tax on transactions made through that non-participating marketplace.
- Sales through your own website or at a retail location in Alabama are outside the marketplace rule; the department's July 26, 2021 notice says marketplace sellers are not relieved of tax on those sales.
- A buyer in an area where the combined local rate is below 8% can request a refund of overpaid SSUT through My Alabama Taxes; the department allows one refund per taxpayer in a 12-month period.
- For an out-of-state seller's own $250,000 test, the department says sales through an SSUT-participating marketplace that collects for its sellers are left out of the count.
- Alabama doesn't issue sales tax licenses (resale certificates) to remote businesses with no Alabama location, according to the department's SSUT page; it treats a drop shipment as two separate transactions.
What to do
- Keep each marketplace's sales report showing the tax it collected on your Alabama sales, alongside your own records of what you sold and where it shipped.
- If you sell only through marketplaces that collect for you, read the department's FAQ on in-state sellers and the exemption certificate it mentions for buying inventory for resale tax-free.
- If you also sell through your own website, at shows or from a shop in Alabama, those sales are outside the marketplace rule: ask the department or a tax professional how they are handled.
- Compare any 1099-K you receive with the platform's own sales report, and check with a tax professional about how it fits your returns.
Common questions
Do I need an Alabama sales tax account if I only sell on marketplaces?
The Alabama Department of Revenue says an in-state seller who sells only through a participating marketplace that collects and remits for its third-party sellers is not required to register for a sales/use tax account, but should apply for an exemption certificate, which it needs to buy items for resale tax-free.
Why did my Alabama buyer pay 8% tax?
A marketplace collecting Simplified Sellers Use Tax charges a flat 8% on deliveries anywhere in Alabama, in place of state and local sales tax. Buyers in areas where the combined rate is lower can ask the department for a refund of the difference through My Alabama Taxes.
Does Alabama have its own 1099-K threshold?
No. Alabama's Rule 810-3-26-.03 requires a duplicate of the 1099-Ks a platform is required to file with the IRS, so the federal test (over $20,000 in more than 200 transactions) decides whether a form is filed.
Related
- Every state on one table: sales tax, marketplace facilitator laws and 1099-K rules
- Alabama: seller's permit and resale certificate rules
- Alaska: sales tax and 1099-K rules
- Form 1099-K for resellers: the federal test
- Do eBay's fees apply to the sales tax a buyer pays?
- Where each selling app keeps its sales report
General information, not tax advice
This page summarizes Alabama's own published pages and statutes as read on , and the IRS's 1099-K pages. It doesn't say what you should file, register for or pay. Rules depend on your situation and change: check with a tax professional, or with the state's revenue department.
Sources
Official pages this page is built from, with the day each was read.
- Alabama Department of Revenue: What are the requirements for in-state sellers who only sell on participating marketplaces?; read . In-state sellers who sell only through participating marketplaces need no sales/use tax account but should get an exemption certificate.
- Alabama Department of Revenue: What is the Alabama SSUT Marketplace Facilitator law?; read . Collect-or-report choice for facilitators; sellers on non-participating marketplaces keep their obligation; SSUT relieves additional state and local tax.
- Alabama Department of Revenue: Notice: Alabama Simplified Sellers Use Tax and Marketplace Facilitators Guidance, dated ; read . Statute number § 40-23-199.2, effective January 1, 2019, $250,000 qualifying amount, registration requirement, own-website and store sales.
- Alabama Department of Revenue (copy of the Act): Act 2018-539 (HB 470), Simplified Sellers Use Tax; read . Section 3: marketplace facilitator definition, $250,000 qualifying amount, collect-or-report rule from January 1, 2019, relief from additional state and local tax.
- Alabama Department of Revenue: Simplified Sellers Use Tax (SSUT); read . Flat 8% rate, refunds of overpaid SSUT, $250,000 threshold calculation, drop-shipping guidance.
- Alabama Department of Revenue: State Sales and Use Tax Rates; read . General state sales tax rate of 4%.
- Alabama Department of Revenue: Form 1099-K; read . Act 2017-294 requires 1099-K filing for payees with an Alabama address; due dates.
- Alabama Department of Revenue: Rule 810-3-26-.03, Reporting Requirements of Payment Settlement Entities (PSE); read . Duplicate of 1099-Ks required to be filed with the IRS; due 30 days after the federal due date.
- IRS: Understanding your Form 1099-K, reviewed . The federal 1099-K test.
- IRS: Instructions for Form 1099-K, reviewed . Both parts of the federal test counted for the calendar year.
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