An Alabama Sales Tax Certificate of Exemption shall be used by persons, firms, or corporations coming under the provisions of the Alabama Sales Tax Act who are not required to have a Sales Tax License. Please complete each line applicable to your entity.
Common Exempt Items
Some of the more common items which are exempt are: prescription drugs, gasoline and motor oil (kerosene and fuel oil are taxable), fertilizer/insecticides/fungicides when used for agricultural purposes, seeds for planting purposes, feed for livestock and poultry (not including prepared food for human consumption).
Exemptions for Specific Groups and Organizations
- If over 65, permanently disabled, or blind, exempt from state portion of property tax. County taxes may still apply.
- Nonprofits used for tax-exempt purposes are exempt from property taxes. If not used for mission, can be liable for property taxes.
- Retailers with nexus must register for an Alabama sales tax license. Nexus includes physical presence, inventory, or salespeople.
- Most nonprofits will not be exempt from paying state sales and use tax.
Obtaining 501(c)(3) Status
To obtain 501(c)(3) status:
- Form an Alabama nonprofit corporation
- Obtain a federal tax ID number
- Apply for 501(c3) status with the IRS
- Register with Alabama as a charitable organization
501(c)(3)s are generally exempt from paying Alabama sales tax based on federal tax-exempt status.
Tax Responsibilities
State Taxes
Even with tax-exempt status, your Alabama Nonprofit Corporation may still be responsible for certain state taxes, such as sales tax permits on goods and services sold by your organization. Consult the Alabama Department of Revenue’s website for more information on state tax requirements.
Federal Taxes
While your organization may be exempt from federal income tax, you must still file an annual information return with the IRS.
If your nonprofit qualifies for an exemption under Alabama Statute 40-9-1, you may fill out Form ST:EX-A1. The mailing address for this form will depend on the region your county of formation is in. For more information, you can call the Department of Revenue at (334) 242-1490 or visit them at their website.
Step 11: Open a Nonprofit Bank Account. After you acquire an EIN and a federal tax exemption for your nonprofit, you can open a 501(c)(3) bank account to begin soliciting donations or paying vendors and employees of the organization.