SALT Report 1632 – The Alabama Department of Revenue adopted a new rule regarding out-of-state sellers making retail sales of tangible personal property within the state. Rule 810-6-4-.19 provides that sellers making retail sales of tangible personal property for storage, use or consumption in Alabama are required to register with the department and collect and remit use tax when the seller has “substantial nexus.”
Substantial nexus is defined as the association between a seller and the state, created by the seller’s business activities in the state, which are substantial enough to cause the seller to be subject to the taxing authority of the state.
Alabama Code §40-23-190 provides that a seller has substantial nexus with the state if:
- The seller and an in-state business are related parties,
- The seller and the in-state business use an identical or substantially similar name, trade name, trademark, or goodwill, to develop, promote, or maintain sales,
- The in-state business and the seller pay for each other’s services in whole or part contingent upon the volume or value of sales,
- The in-state business and the seller share a common business plan or substantially coordinate their business plans, or
- The in-state business provides services to the benefit of the business related to developing, promoting, or maintaining the in-state market
Once substantial nexus has been established Alabama Code §40-23-68 outlines the conditions in which the seller must collect and remit use tax on retail sales of property for storage, use or consumption in Alabama. These conditions include:
- Delivery within the state by a vehicle owned by the seller,
- The seller maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, an office, place of distribution, sales or sample room or place, warehouse or storage place or other place of business, or
- The seller employs or retains under contract any representative, agent, salesman, canvasser, solicitor or installer operating in the state for the purpose of selling, delivering, or taking orders for the sale of tangible personal property or any services subject to tax or solicits and receives purchases or orders by an agent or salesman
Sellers that are required to collect use tax must register with the Department and provide the name and address of any agent operating in Alabama, the location of any distribution centers, sales houses, offices or other places of business in the state, and any other information the Department may require regarding the enforcement of Alabama Use Tax Law.
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