Alabama Sales Tax Guide for SaaS and E-Commerce Businesses 2025
Alabama imposes a 4% statewide sales tax. Local city and county rates can raise the total to as high as 11% in some locations.
This guide explains Alabama's nexus rules, what's taxable, how to register, and how to simplify compliance with the state's Simplified Sellers Use Tax (SSUT) program.
The SSUT lets eligible remote sellers, including many SaaS and e-commerce businesses, collect a flat 8% statewide rate on all Alabama sales.
Last updated: November 2025
Quick Reference: Alabama Sales Tax (2025)
| Topic | Details |
|---|---|
| State base rate | 4% |
| Local rates | 0% - 9% (varies by city/county) |
| Typical combined rate | 5%–11% |
| Economic nexus threshold | $250,000 in prior-year Alabama retail sales (remote sellers). |
| SaaS / Digital goods | SaaS is not taxable. Downloaded software is taxable. |
| Remote seller option | Flat 8% SSUT instead of local rates |
| Registration portal | My Alabama Taxes |
| Tax agency | Alabama Dept. of Revenue |
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Simplified Sellers Use Tax (SSUT) – Flat 8% Rate
The Simplified Sellers Use Tax Remittance Act (Act 2015-448) lets eligible remote sellers collect a flat 8% on all Alabama sales.
Who qualifies
- Out-of-state sellers with no physical presence in Alabama
- Businesses not otherwise required to collect Alabama sales or use tax
Why it matters
- One statewide rate: no local-rate tracking
- Predictable compliance: always collect 8%
- Simplified filing: ADOR handles local distribution
How to apply
- Register via the SSUT application
- Once approved, file monthly through My Alabama Taxes
SaaS & Software Taxability in Alabama
Alabama distinguishes between downloaded software and cloud-based SaaS.
Downloaded or installed software
Under Alabama Admin. Code r. 810-6-1-.37, computer software that is transferred, downloaded, or delivered to the customer is considered tangible personal property and is taxable:
“Computer software is tangible personal property. The retail sale or licensure of computer software is subject to Sales Tax, Use Tax, or Rental Tax … regardless of its function or form of transmission to the purchaser or licensee.”
(Rule PDF)
This applies to:
- Custom or off-the-shelf software transferred electronically or physically
- Perpetual or term-based licenses involving transfer of possession or control
Cloud-based SaaS
True SaaS, where users access software remotely without receiving possession or control of the software, is not taxable. The Department of Revenue and multiple advisory rulings confirm that no taxable transfer occurs when users only access software hosted on a third-party server.
In other words:
- SaaS = not taxable
- Downloaded or installed software = taxable
This aligns with the state’s interpretation that SaaS is a service, not a sale of tangible personal property.
What’s Taxable in Alabama?
| Category | Taxable? | Notes |
|---|---|---|
| Tangible goods | Yes | General merchandise. |
| Downloaded software | Yes | Licenses to use or download are taxable. |
| SaaS / cloud access | No | Accessing hosted software remotely is not taxable. |
| Services | Some | Programming, setup, and implementation not taxable if separately stated. |
| Food & groceries | Yes | Alabama taxes groceries. |
| Shipping & delivery | Yes | Taxable when tied to taxable goods. |
Filing & Due Dates
- Standard filers: Returns due monthly by the 20th of the following month
- SSUT filers: Also due monthly by the 20th, filed via My Alabama Taxes
FAQs: Alabama Sales Tax
Is SaaS taxable in Alabama?
No. Alabama does not tax access to cloud-hosted software because it does not involve a transfer of tangible personal property.
Is downloaded or licensed software taxable?
Yes. Downloaded or installed software, or licenses that convey possession or control, are subject to sales or use tax.
Are programming or implementation services taxable?
No. Custom programming, implementation, and training are not taxable if separately stated.
What is Alabama’s economic nexus threshold?
$250,000 in Alabama retail sales in the prior calendar year.
What is the SSUT and how does it work?
A flat 8% statewide rate available to eligible remote sellers. The ADOR handles local distribution.
Official Alabama Resources
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