SB242 Alabama 2016 Session

Summary

Primary Sponsor

Trip Pittman

Republican

Session

Regular Session 2016

Title

Sales and use taxes, application of taxes, wholesale sale, definition amended to require component to become part of finished product, definition of tangible personal property and digital goods included, including electronic data, digital products or services, Secs. 40-23-1, 40-23-2, 40-23-60, 40-23-61 am'd.

Summary

SB242 updates Alabama's sales and use tax rules by defining tangible personal property and digital goods, clarifying wholesale sales, and expanding the tax base to include digital products and related services.

What This Bill Does

It adds explicit definitions for tangible personal property and digital goods. It updates wholesale sale definitions to clarify when a sale is for resale and to include containers, pallets, and packaging, while excluding capital equipment. It expands the tax base to cover digital goods and prepaid wireless service and introduces a remote use tax on out-of-state sellers, with specific tax rates for machinery, vehicles, and amusements, and directs revenue to the Education Trust Fund and General Fund; it also creates export provisions and related requirements.

Who It Affects

• Retailers and wholesalers in Alabama: their tax collection and reporting requirements change due to new definitions and wholesale categories, affecting how they calculate and remit taxes.
• Consumers and out-of-state vendors/buyers: digital goods and other taxable property (including prepaid wireless service) become subject to Alabama sales/use tax, and there are new remote use tax rules and export-related provisions.

Key Provisions

• Definition updates: Tangible personal property now includes digital goods; explicit definitions for digital goods are added.
• Wholesale sale changes: Expands scenarios counted as wholesale (containers, pallets, packaging, etc.) and clarifies when goods are considered components; capital equipment remains excluded from wholesale.
• Tax base expansion: Digital goods and prepaid wireless service are included in the tax base; remote use tax applies to out-of-state vendors and to consumer remittances.
• Rate structure: 4% use tax on tangible personal property and digital goods; 1.5% on mining/processing machines; 2% on automotive vehicles and mobile home setup materials; 3% on coin-operated vending machines.
• Revenue distribution: From the 2% automotive-related tax, 58% goes to the Education Trust Fund and 42% to the State General Fund.
• Export and drive-out provisions: Vehicle export rules tax at Alabama rate with limits; the Department must publish a list of states; mislisting affords taxpayer relief; proper documentation is required on forms.
• Remote use tax and filing: Out-of-state vendors collect remote use tax and consumers remit amounts on their individual tax returns.
• Effective date and legal framework: The act becomes effective immediately upon passage; provisions are severable; conflicting laws repealed.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Taxation