Alabama Business Privilege Tax 2023 - 2024
All business entities that conduct business in the State of Alabama are required to file an annual business privilege tax return. This is an important requirement for a number of reasons.
The Alabama business privilege tax is a state tax imposed on all entities that conduct business in the State of Alabama. The tax is levied based on the entity’s federal taxable income apportioned to the State of Alabama. The rate varies from $0.25 to $1.75 per $1,000 of net worth in the State of Alabama. The Alabama business privilege tax is a minimum of $100, and the maximum is $15,000. A disregarded entity’s net worth is calculated as its assets less its liabilities. In addition to filing the Alabama business privilege tax, a disregarded entity must also file an annual report.
The return is due no later than two and a half months after the taxpayer’s taxable year begins. The tax return must be filed electronically. The tax return should contain XML data and supporting binary documents as specified in the Alabama Business Privilege Tax Modernized Electronic Filing (MeF) schemas, business rules, and Handbook for Software Developers and Transmitters.
The Department of Revenue offers a Business Privilege Tax Online Filing System that allows businesses to file their return electronically. However, this system has some limitations, so it is recommended that taxpayers file by mail if possible. When filing by mail, taxpayers should be sure to include all the required information on their return and pay any applicable taxes by the due date. If the taxpayer does not file by the deadline, they will be subject to a late penalty of up to $50.
Key Points for Alabama Business Privilege Tax
Here are the key points for the Alabama Business Privilege Tax:
Applies to: Corporations, LLCs, partnerships, and some single-member LLCs.
Tax Rate: Graduated based on federal taxable income apportioned to Alabama (ranges from $0.25 to $1.75 per $1,000 of net worth).
Minimum Tax: No minimum tax for 2024 (don’t file if calculated tax is $100 or less).
Maximum Tax: $15,000 for most businesses (higher for financial institutions and insurance companies).
Filing: Due by March 15th for calendar year taxpayers.
Resources: Alabama Department of Revenue website or a tax professional for specific guidance.
