Alabama – Contractor’s Gross Receipts Tax

SALT Report 1895 – The Alabama Department of Revenue updated its guide regarding the contractor’s gross receipts tax. The contractor’s gross receipts tax is imposed on persons, firms, and corporations that construct, reconstruct, or build public highways, roads, bridges, streets, or tunnels for the state of Alabama.

The tax is imposed at a rate of 5% and applies to all payments made to the contractor or the contract assignee. The tax applies whether the payments are made pursuant to a contract, purchase order, supplemental agreement, change request or other arrangement to perform work.

However, the contractor’s gross receipts tax does not apply to the following:

  • Contracts between the contractor and the federal government when the state of Alabama is not listed as a joint party,
  • Contracts between the contractor or contract assignee and the city, town, or county when the state of Alabama is not listed as a joint party,
  • Contracts to construct, reconstruct, or build rest areas or welcome stations,
  • Contracts that do not include or require the construction, reconstruction, or building of a public highway, road, bridge, street, or tunnel, and
  • Additional payments, which may cause an increase in the contract price, due to escalations in the cost of fuel, material, and/or labor

The tax must be remitted on a monthly basis along with your return.  A 5% discount is offered if you pay your tax before the 20th day of the month in which the tax is due. The 5% discount can be applied to the first $100 of the tax due and 2% on all tax over $100; however, the total discount may not exceed $400.

For Further Information:

Alabama Department of Revenue – Frequently Asked Questions