Alabama – New Market-Based Sourcing Rule

SALT Report 2363 – The Alabama Department of Revenue has finalized a rule that amends section §40-27-1(IV)(17) Code of Alabama to provide that sales other than sales of tangible personal property are to be sourced to Alabama if the taxpayer’s market for the sale is in Alabama. The new rule applies to all tax years beginning after December 31, 2010.

The new rule also addresses when, and to what extent, a service will be considered delivered to a location in Alabama. For example, if the location where the service is delivered cannot be determined, the rule authorizes a reasonable approximation of where the sale should be sourced. Additionally, if the taxpayer is not taxable in a state to which a sale is assigned under the new market-based sourcing rules, or if an approximation cannot be made, then the sale will be excluded from the denominator of the sales factor.

The new rule also clarifies the Department’s position on the following:

  • The double weighted sales factor,
  • Sourcing of sales of services to individual and unrelated business customers, and
  • Market sourcing for sales other than sales of tangible personal property

The new rule was effective April 9, 2013.

For Further Information

Alabama Department of Revenue – Rule 810-27-1-4-.17.01