Alabama Resale Certificate: How to Get, Use, and Accept One
Alabama Resale Certificate: How to Get, Use, and Accept One
TL;DR
Alabama has no separate retailer resale certificate form. Your sales tax license serves as your resale certificate.
Licensed retailers can buy property tax-free when they purchase it for resale, under Alabama’s wholesale sales rule.
Out-of-state retailers can use their home-state sales tax license. For drop shipments, the vendor should accept the reseller’s home-state resale certificate.
Alabama sales tax licenses expire every December 31 and must be renewed annually. No tax-free purchases can be made with an expired license. Sellers carry the risk under Rule 810-6-1-.184.
In Alabama, your sales tax license is your resale certificate
Alabama retailers use their sales tax license as their resale certificate. The Alabama Department of Revenue calls the license the resale certificate, so you do not need a separate retailer form to buy inventory for resale tax-free.
If you operate an in-state retail business, register through My Alabama Taxes to obtain the license, then provide a copy to your vendor when buying inventory for resale. Rule 810-6-1-.144.03 ties tax-free wholesale purchases to holding the sales tax license required by law. The license does not make purchases for your own use tax-free.
Inventory you use instead of reselling
If you use or consume inventory you bought tax-free instead of reselling it, you owe use tax on that portion. Rule 810-6-1-.89.02 treats a licensed dealer’s purchases for its own use or consumption as taxable, so track any inventory you divert from resale.
Out-of-state buyers and drop shipping
An out-of-state retailer can use its home-state sales tax license to buy property for resale tax-free in Alabama. The Alabama Department of Revenue does not issue an Alabama sales tax license to a remote business with no Alabama location.
In a drop-shipping sale, the vendor sells to the reseller and ships directly to the reseller’s Alabama customer. Alabama treats the vendor’s sale to the reseller and the reseller’s sale to the customer as separate transactions. When the reseller buys the property for resale, the vendor or drop shipper should accept the reseller’s home-state resale certificate. The reseller must assess its own tax obligations on the sale to the Alabama customer separately.
STE-1 versus the sales tax license
Alabama’s Form STE-1 serves certain buyers who can make qualifying wholesale purchases without holding a sales tax license. Under Rule 810-6-5-.02, the Alabama Department of Revenue does not issue STE-1 to anyone who holds a sales tax license. Retailers use their sales tax license as their resale certificate, not STE-1.
Seller checks and risk
Collect a copy of the buyer’s Alabama Sales Tax License before treating an inventory sale as tax-free. For an out-of-state retailer, ALDOR accepts an out-of-state sales tax license, so collect a copy of that license instead.
Compare the license with the buyer’s identity and the purchase. A licensed dealer’s purchase for its own use is taxable under Rule 810-6-1-.89.02. If the license is missing, incomplete, or inconsistent with the transaction, request clarification or charge tax. Keep the license copy with the sale records so you can support the tax-free treatment later.
Rule 810-6-1-.184 says a vendor “sells tax free at his risk.” The seller bears the burden of proving the sale qualified, even when the buyer claimed it was for resale.
License expiry and recordkeeping
Alabama sales tax licenses must be renewed every year. ALDOR requires all tax account licenses, including sales tax, to be renewed each November–December through My Alabama Taxes, and under Rule 810-6-5-.01.01 no tax-exempt transactions may be made with an expired license. Before 2020, Alabama licenses did not expire.
Because the license is the resale certificate, it effectively expires every December 31. Buyers should renew on time and send vendors a copy of the new license each year. Sellers should request the buyer's current-year license before making tax-free sales in January, and keep each license copy with the related sale records.
Alabama also has locally administered sales taxes, so check local rules separately.
Buyer and seller checklist
Buyer | Seller |
|---|---|
Register in My Alabama Taxes. | Collect a copy of the buyer’s Alabama sales tax license or out-of-state equivalent. |
Obtain your Alabama sales tax license. | Verify the license and the resale purpose of the purchase. |
Give the seller a license copy when buying inventory for resale. | Keep the license copy with your sales records. |
Track inventory you use instead of reselling and account for the tax owed. | Reassess tax-free treatment if the documentation is incomplete or invalid. |
Renew your license every November–December and send vendors the new copy. | Request each buyer's current-year license every January. |
FAQs
Is there a separate Alabama resale certificate form? No. For retailers, Alabama treats the sales tax license as the resale certificate.
Does an Alabama resale certificate expire? Yes, effectively. Because the sales tax license serves as the resale certificate, it expires every December 31 and must be renewed in November–December. No tax-free purchases can be made with an expired license.
Can I use my home state’s resale certificate in Alabama? Alabama accepts an out-of-state sales tax license for qualifying resale purchases. For a drop-shipped sale to an Alabama customer, the vendor should accept the reseller’s home-state resale certificate.
What if a buyer has no sales tax license? The seller should not assume the purchase qualifies for resale treatment. Certain buyers who are not required to hold a license may qualify for STE-1.
What happens if I use resale inventory myself? You owe tax on inventory you use or consume instead of reselling, under Alabama Rule 810-6-1-.89.02.
What’s the difference between STE-1 and a sales tax license? STE-1 serves certain buyers who are not required to have a sales tax license. Alabama does not issue STE-1 to license holders.
Where Taxwire fits
If you use inventory bought for resale, you may owe use tax. Taxwire calculates tax at the invoice level for transactions across states. If unpaid tax reaches prior periods, Taxwire can file prior-period returns and handle voluntary disclosure agreements. See the Alabama tax guide for state-specific guidance.