For governmental construction projects entered into after January 1, 2014, Alabama law now provides an exemption from sales tax for the materials purchased for use in the project. Taking advantage of this exemption, however, requires that contractors and subcontractors first jump through a few administrative hoops.
The exemption applies to materials and supplies that become part of a structure pursuant to a qualifying contract. Qualifying projects are ones entered into with the following governmental entities: The state of Alabama, Alabama counties and cities, public schools, or an Alabama industrial or economic development board that is already exempt from sales tax. Contracts with the Federal government and contracts pertaining to highways and roads do not qualify for the exemption.
Each exempt entity, each contractor, and each subcontractor must make an application with the Alabama Department of Revenue by using Form ST:EXC-01 to register the particular project with the state and to obtain the required exemption certificates. In addition to this process, contractors can also be appointed as "purchasing agents" for the exempt entity and purchase materials directly from vendors without paying Alabama sales tax. Form ST:PAA1 is used to apply for purchasing agent status.
Your questions or comments are encouraged! Let me know if there are particular Alabama sales-use issues that you'd like to see covered in this blog.
Other recent “Alabama (AL)” posts by Ned Lenhart, CPA:
- Alabama DOR Withdraws Amendment to Tax Digital Transmissions
- “Digital Transmissions” Subject to Alabama Rental Tax! (Update)
- Alabama Caterers: Service Charges Are Taxable!
- Alabama's "Non-Nexus Use Tax Remittance" - Will Flat Tax Fall Flat?
- Alabama Governor Proposes Sales Tax Increase to Balance Budget!