Our Dash of SALT Blog provides the most recent developments and changes in state and local tax regulations. Here are the latest updates for Alabama.
August 24, 2026
Alabama Tribunal: Landscape Supplier Liable for Additional Sales Tax
Authored by: Penny Sweeting, CPA and Eric Wagener
On August 13, 2026, an Alabama company was responsible for an additional sales tax liability after failing to prove an indirect audit based on bank records was incorrect. The decision came from Perrin and Son Inc. v Department of Revenue, where the Alabama Tax Tribunal upheld a $390,819 sales tax assessment, including interest, after failing to provide accurate records in an indirect audit.
The Alabama Department of Revenue conducted an audit of the company for the period from April 2020 to March 2023. During the audit, an examiner found that nearly none of the invoices separately stated sales tax, with an exception for one customer. Perrin asserted that the sales tax was included in the price of the goods, and that many construction and landscaping-based customers were tax-exempt.
After finding no exemption certificates or sales tax account information to support those claims, the Department reviewed the company’s federal income tax returns, Forms 1099-K, and bank records. Based on discrepancies between reported taxable sales and those records, the Department concluded that the taxpayer’s reported sales figures were unreliable and performed an indirect audit using bank deposit information.
Following the issuance of the assessment in October 2024, the company appealed to the Alabama Tax Tribunal. The Tribunal ultimately held that the taxpayer failed to meet its burden of proving that the Department’s use of third-party records for the indirect audit was improper and affirmed the assessment.
The decision serves as a reminder that taxpayers should maintain adequate records to support exempt sales, as unsupported exemption claims and discrepancies between reported sales and financial records may lead tax authorities to rely on indirect audit methods.
If you have questions about state tax audits, please reach out to a member of the Withum SALT Team.
May 5, 2026
Alabama Temporarily Suspends State Grocery Tax
Authored by: Emilia Jarrin and Courtney Easterday, MSA
Alabama recently enacted a temporary suspension of its state sales tax on qualifying grocery items, effective May 1 through June 30, 2026. This measure is intended to provide short-term financial relief to consumers by reducing the cost of everyday purchases. Importantly, the exemption only applies to the state portion of the tax – local, city and county grocery taxes may still apply. For businesses, this creates a temporary change in taxability that may require updates to POS systems, tax coding and exemption mapping. It also serves as a reminder that temporary legislative changes can create compliance challenges if systems are not updated in a timely manner. Overall, the change highlights that even short-lived tax relief measures can have immediate sales-tax reporting implications.
If you have questions about sales tax compliance, please reach out to a member of the Withum SALT Team.
July 1, 2025
Alabama Amends Research and Experimental Expense Treatment
Authored by: Bonnie Susmano, JD, MBA and Brandon Spinella
For tax years beginning on or after January 1, 2024, research and experimental expenditures for Alabama tax purposes will not follow the provisions of IRC § 174, as amended by the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, effective 5/14/2025. Instead, taxpayers can choose to currently deduct research and experimental expenditures or treat the expenditures as deferred expenses in the same manner as provided in IRC § 174 prior to tax year 2022.
If you have any questions about the Alabama research and experimental expenditures for tax purposes, please reach out to a member of the Withum SALT Team.
June 3, 2025
Alabama Amends Research and Experimental Expense Treatment
Authored by: Brian Meier, MSA and Katie Nguyen, CPA
Effective May 14, 2025, Alabama has enacted legislation (Act 400, H163) that separates its tax treatment of research and experimental (R&E) expenditures from the federal approach introduced by the Tax Cuts and Jobs Act (TCJA). Starting with the 2024 tax year, Alabama taxpayers can either immediately deduct R&E costs or defer them, following the rules that were in place before 2022. This move rejects the TCJA’s requirement to amortize such expenses over five years (or 15 years for foreign research), allowing more flexibility for businesses conducting R&D within the state.
If you have questions about state treatment of R&D expenses, please reach out to a member of the Withum SALT Team.
June 3, 2025
Alabama Exempts Compensation for Nonresidents With 30 or Less Workdays in the State
Authored by: Bonnie Susmano, JD, MBA and Jessie Racioppi, MSA
For tax years beginning after December 31, 2025, nonresident individuals will be exempt from Alabama nonresident individual income tax under the following conditions:
- Compensation is for duties performed by the nonresident individual in Alabama in 30 or less days per calendar year;
- The nonresident individual performed employment duties in at least two states per calendar year;
- The compensation was not paid to the individual as a professional athlete, professional entertainer, or public figure;
- The nonresident individual’s home state either has a similar exclusion, does not impose individual income tax, or the individual’s income is exempt from Alabama state tax under federal laws.
If an individual meets these conditions, the employer is no longer obligated to withhold Alabama state tax.
If you have questions about nonresident personal income tax, please reach out to a member of the Withum SALT Team.
April 8, 2025
Alabama’s Senate to Consider Sales Tax Cut on Baby and Women’s Products
Authored by: Bonnie Susmano, JD, MBA and Emilia Jarrin
Alabama House Bill 152 proposes eliminating the state sales tax on baby care items, feminine hygiene products, and maternity clothing. If enacted, this bipartisan Bill will make essential products more affordable. Presently, the Alabama sales tax on the items covered by Bill 152 ranges from 4% to 11% depending on the County.
If you have questions about state sales tax exemptions, please reach out to a member of the Withum SALT Team.
Have Questions or Need Guidance?
For more information on this topic, please contact a member of our team.