Alabama sales tax on invoices (2026 guide)

Alabama's general state sales tax rate is 4%. Cities and counties add their own sales taxes on top, so the rate you charge depends on where the sale takes place — and in Alabama, not every local tax is collected by the state.

Alabama's sales tax is built around the retail sale of tangible personal property. That means most freelancers who sell only services won't charge it, but anyone who sells goods — or mixes parts and labor, like repair shops and handymen — needs to set up their invoices carefully. This guide covers rates, what's taxable, licensing and what your Alabama invoices should show.

Alabama sales tax rates

The Alabama Department of Revenue (ALDOR) administers more than 200 local sales taxes, but it says it does not administer every city or county sales tax. Some localities collect their own. If your business is in a self-administered city or county, you register with that locality separately. ALDOR publishes city and county rates on its website, and its ONE SPOT system lets you file state-administered and many non-state-administered local sales taxes in one place.

Is what you sell taxable in Alabama?

ALDOR describes the sales tax as applying to the retail sale of tangible personal property sold in Alabama by Alabama businesses. In practice for small businesses:

• Goods — retail products, parts and materials you sell — are taxable unless an exemption applies.
• Labor to repair or install property is exempt as long as it's billed as a separate item.
• Labor to fabricate an item is not exempt, even if you list it separately.
• Freight: if you deliver with your own vehicle, the transportation charge is taxable. Charges by a common carrier or the U.S. Postal Service are exempt if billed separately and paid by the buyer.
• Most purely professional services — consulting, design, writing, bookkeeping — aren't sales of tangible property, so they're generally outside the sales tax.

Common exemptions include prescription drugs and gasoline and motor oil. Sales to the U.S. government, the State of Alabama, schools and certain nonprofit organizations are also exempt.

Getting an Alabama sales tax license

If you make retail sales of taxable goods in Alabama, register with ALDOR through My Alabama Taxes (MAT), the department's online portal. You receive a sales tax license, which ALDOR mails to you after registration. If the business has several locations owned by the same legal entity, ALDOR says you need only one state sales tax number and you combine those sales on one return.

Two more points from ALDOR's guidance:

• Once your account is open, you must file a return for each period even when no tax is due.
• Check every city and county you sell in. If a locality administers its own tax, you may need to register with it as well.

Remote sellers

Out-of-state sellers whose retail sales delivered into Alabama were more than $250,000 in the previous calendar year must collect and remit Alabama tax. ALDOR counts all retail sales made directly by the seller, taxable or not. Eligible sellers can use the Simplified Sellers Use Tax (SSUT) program, which lets them collect a flat 8% on all sales into Alabama instead of looking up each local rate.

What an Alabama sales tax invoice should show

• your business name and address,
• the customer's name and address,
• a unique invoice number and the invoice date,
• each item or service with its price,
• parts and materials on separate lines from repair or installation labor,
• the sales tax amount and the rate you applied, and
• the total due.

Separating labor matters more in Alabama than in many states: repair and installation labor stays exempt only when it's billed separately. In Invoice Native, tick Tax on the parts lines and leave it off the labor lines.

Resale and exemption certificates

ALDOR says that in Alabama, a resale certificate is called a Sales Tax License. A business buying goods to resell in the regular course of business can buy them tax-free once it holds the license, and it can print a copy from MAT to give its suppliers. Keep a copy of your customer's license with the invoice.

Organizations that are exempt but aren't required to hold a sales tax license can apply to ALDOR for a Sales Tax Certificate of Exemption. Ask exempt customers for their certificate and keep it on file. See how to invoice a tax-exempt customer.

A worked example

Suppose you repair a customer's riding mower and the combined state and local rate at your shop is 9% (4% state plus a hypothetical 5% in local taxes). You invoice:

• $180 for replacement parts (taxable), and
• $150 for repair labor, billed as a separate line (exempt).

Only the parts are taxed: $180 × 9% = $16.20. The invoice total is $180 + $150 + $16.20 = $346.20. If the labor were lumped into one $330 "repair" line, you'd have a hard time showing that part of it was exempt.

Selling to customers in other states

If you ship goods to customers in another state, that state's rules may apply instead of Alabama's. Since the Supreme Court's 2018 decision in South Dakota v. Wayfair, states can require out-of-state sellers to register and collect their sales tax once sales into the state pass a threshold the state sets. If you sell across state lines regularly, check each state's threshold and registration rules — and use that state's rate on those invoices. Our sales tax calculator can help you check the math.

Common mistakes on Alabama invoices

• Lumping parts and labor together, which can make the whole charge taxable.
• Treating fabrication labor as exempt — only repair and installation labor qualifies.
• Assuming the state collects every local tax. Some cities and counties administer their own.
• Using the 4% general rate on food or vehicles, which have reduced state rates.
• Skipping returns in months with no sales once your account is open.

Quick checklist for Alabama invoices

• ✅ Sales tax license through My Alabama Taxes before your first taxable sale
• ✅ Registered with any self-administered city or county you sell in
• ✅ Parts and repair or installation labor on separate lines
• ✅ Correct state and local rate for the location of the sale
• ✅ Copies of customers' sales tax licenses or exemption certificates on file