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Do You Make Retail Sales To Entities That Are Exempt From Paying Sales, Use, Or Lodging Taxes?

Posted by Lisa Albritton on Feb 18, 2016 11:49:10 AM

71011795_thumbnail-661286-edited.jpgIn most cases if you make retail sales of tangible personal property or lodging accommodations, you must collect and remit the applicable tax associated with that transaction. However, there are three types of customers that are tax-exempt:

  • Customers who have provided you with a copy of their sales tax license as evidence that they are not the end user of the product and will be reselling the products
  • Customers who have furnished you with a copy of their *Certificate of Exemption from the State of Alabama
  • Customers who are governmental entities

The term “governmental entity” means the Federal Government, the State of Alabama public schools, Alabama public universities, healthcare authorities, Alabama counties and municipalities, and public corporations incorporated under any provisions of Chapter 50 of Title 11, Chapter 50A of Title 11, Chapter 5 of Title 37, or Chapter 7 of Title 39. Governmental entities are not required to obtain a Certificate of Exemption but may do so for ease of tax-free purchasing.

*Just because an entity is a not-for-profit does not mean that they are exempt from sales, use, or lodging taxes. The phrase not-for-profit or non-profit is used to refer to a variety of exempt organizations, but does not automatically mean that the organization is exempt from paying sales or lodging taxes.

Starting in January of 2016, all certificate of exemptions have an expiration date.

The burden of proof that a sale is exempt is upon the vendor who grants the sale which is why having a properly executed reseller ID or certificate of exemption should be exchanged prior to the sale of tax exempt personal property or tax exempt lodging. Any sale for which an exemption has been claimed but a properly executed reseller ID or exemption certificate has not been retained, may be deemed a sale at retail by the Department of Revenue. In this instance, a seller may be held liable for any tax ultimately owed.

If you are interested in the types of transactions that are taxable here is a link to the Alabama matrix:

If you have a customer who needs to register for a Certificate of Exemption, the customer must complete Form ST: EX-A1 at the link below:

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To learn more about  state and local tax planning and compliance services contact Lisa Albritton at  334-887-7022 or fill out the contact form below.


Topics: Tax Updates

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