Alabama Sales Tax Guide for SaaS and E-Commerce Businesses 2025
Alabama imposes a 4% statewide sales tax. Local city and county rates can push the total 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: August 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). See ADOR FAQ and SSUT pages. |
| SaaS / Digital products | Yes (taxable) — Software licenses are taxable “regardless of … form of transmission.” Services like programming can be exempt if separately stated. |
| 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 distribution to localities.
How to apply
- Register via the SSUT application.
- Once approved, file monthly through My Alabama Taxes.
SaaS & Software Taxability in Alabama
Alabama has one of the clearest pro-taxation stances on software.
-
Alabama Admin. Code r. 810-6-1-.37(4):
“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) -
Alabama Supreme Court (2019), Ex parte Russell County Community Hospital:
“We hold that all software, including custom software created for a particular user, is ‘tangible personal property’ for purposes of Alabama sales tax.”
(Opinion)
What this means for SaaS
-
A SaaS subscription is a license to use software delivered via the cloud.
-
Because Alabama taxes licenses “regardless of … form of transmission,” SaaS is taxable.
-
Programming, configuration, or implementation services can still be exempt if billed separately.
-
Programming carve-out (same rule):
“The term ‘software programming’ includes services for the development and modification of software applications specific to the needs of the customer. … When separately stated, the software programming is not subject to tax … since the charge … is a separately stated charge for professional services.”
(Rule PDF)
What’s Taxable in Alabama?
| Category | Taxable? | Notes |
|---|---|---|
| Tangible goods | Yes | General merchandise. |
| SaaS / software access | Yes | Licenses taxable “regardless of … form of transmission.” |
| Services | Some | Programming, implementation, training not taxable if separately stated. |
| Food & groceries | Yes | Alabama taxes groceries (unlike most states). |
| Shipping & delivery | Yes | Taxable when tied to taxable items. |
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?
- Yes. Alabama treats all software (including custom) as tangible property and taxes licenses “regardless of … form of transmission.” SaaS falls under this rule.
What about programming or implementation services?
- No. Services like programming, installation, or training are not taxable if separately stated on the invoice.
What is Alabama’s economic nexus threshold?
- $250,000 in Alabama retail sales in the previous calendar year for remote sellers.
What is the SSUT and how does it work?
- A flat 8% statewide rate for eligible remote sellers; ADOR distributes to localities.
Official Alabama Resources
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