Taxes Levied on Gross Sales and Gross Receipts; Applicable Tax Rates

Retail sales of stand-alone, commercial and portable electrical generators that manufacture alternating current electricity are taxable at the reduced machine rate. (Sections 40-23-2(3) and 40-23-61(b))

Materials or equipment which might constitute a machine or machinery when not used for mining, quarrying, manufacturing, compounding or processing are taxed at the general rate of 4%. (Adopted March 9, 1961, amended November 1, 1963) §40-23-1(10)

A self-propelled dragline purchased for use in mining tangible personal property taxable at the reduced machine rate of sales or use tax. Replacement parts and attachments for self-propelled draglines used in mining tangible personal property are also taxable at the reduced machi…

(1) Patterns purchased by a manufacturer for use as a part or attachment to a machine used in manufacturing tangible personal property are subject to the sales and/or use tax at the machine rate of 1 1/2%. (2) Pattern materials purchased by a manufacturer for use in making patter…

The proper rates of state sales tax to be paid on sales of boats, motors, trailers. and other items associated with the marine industry are as follows: (a) Boat trailers sold alone are taxable at 2 percent of the net difference paid. (b) Boat motors sold alone are taxable at the …

(1) Equipment used for transporting materials to the plant of a manufacturer, processor, or compounder or used for transporting finished products from such plants is taxed at the general 4% rate. (2) The movement of materials or products purely for transportation purposes is not …

(1) Pattern materials used by foundrymen in making patterns to be used in casting are taxed at the special machine rate of 1 1/2%. (2) Sales of patterns are taxed at the special machine rate of 1 1/2% when made to a foundryman to be used by him in making molds for castings. (3) S…

Mats purchased by advertisers to be furnished to newspaper publishers for use in producing plates used in printing newspapers are taxed at the special machine rate of 1 1/2%. §40-23-2(3)

Where both lodgings and meals are furnished to students by institutions of higher learning, both public and private, the meals are subject to sales tax. If both lodgings and meals are furnished for a lump sum, the full amount is to be used as the measure of the tax. Where lodging…

(1) Sales to children of lunches, when not for profit, in kindergartens, grammar schools, junior high schools, and high schools, both private and public, are specifically exempted from sales tax. (2) Sales of meals made by all colleges, universities or other institutions of highe…

(1) Members of the armed services of the United States stationed in Alabama have no immunity from sales taxes imposed upon sales of tangible personal property to them by Alabama vendors. (2) Property is not subject to Alabama use tax where purchased outside Alabama for use in thi…

Manufacturers of metal products are taxed on the use of all chemicals and oils which they use as cleaning materials, except oils classified and taxed as lubricating oils. §40-23-2(1)

Mechanically operated devices used in making molds from sand for use in manufacturing are taxed at the special machine rate of 1 1/2%. §40-23-2(3)

Gross receipts from the operation of musical devices (juke boxes) are taxable. The Supreme Court of Alabama held in the case Birmingham Vending Company v. State of Alabama, 38 So. 2d 876, that both the machine owner and the proprietor of the place of the business where the machin…

(1) Sales of tangible personal property to any national or state bank are taxable unless the bank is purchasing the property for resale. (Sections 40-23-2 and 40-23-61, Code of Ala. 1975, and 12 U.S.C. Section 548) (2) National or state banks that are in the business of selling t…

(1) Gross receipts accruing from the retail sales of black and white negatives or color separations sold to printers to produce plates for offset printing are subject to the sales tax at the machine rate of 1 1/2% where sold for use as parts or attachments of machines used in man…

Mechanical equipment used in measuring, weighing, or packaging by manufacturers, compounders, or processors is taxed at the special machine rate of 1 1/2% when such equipment is a part of the production line used to put the product in condition for sale. §40-23-2(3)

Pan glaze used by bakers as a coating for pans and trays used in baking is a supply item subject to tax. §40-23-1(10)

Used equipment is subject to the sales and use taxes on the same basis that new equipment is subject to tax. (Section 40-23-2(3)

Materials purchased by a manufacturer, compounder, processor, miner, or quarryman for attachment to, or to be made a part of, a machine used in manufacturing, compounding, processing, mining or quarrying is entitled to the reduced machine rate of sales or use tax regardless of wh…

Patterns which become parts or attachments of molding machines used in manufacturing are taxed at the special machine rate of 1 1/2%. §40-23-2(3)

Foundry operators use patterns to form the molds in which their products are cast. These patterns are subject to tax at the special machine rate of 1 1/2% when purchased by the foundry operators. In those cases where the foundryman fabricates the pattern used by him, the material…

Pipe threading machines used for construction purposes by a contractor or other builder are taxed at the 4% general rate. §§40-23-1(10), 40-23-2(1)

Piping leading to and from storage tanks and piping bringing gas or water into a plant does not come within the levy on machines used in manufacturing. The general rate of 4% applies. (Adopted March 9, 1961, amended November 1, 1963, effective July 1, 1963) §40-23-2(1)

(1) Piping furnished and installed by contractor along with pump houses and well connections is subject to use tax when intended for use by a paper manufacturer to supply his plant with the water necessary to the manufacturing of paper. The Supreme Court of Alabama held that the …

(1) Plates purchased by a printer for use as a part or attachment for a machine used in printing tangible personal property are subject to the sales and/or use tax at the machine rate of 1 1/2%. (2) Materials purchased by a printer for use in making plates that become a part or a…

In Alabama-Georgia Syrup Company v. State of Alabama, 42 So. 2d 796, the Alabama Supreme Court held that platform trucks "used for moving the company's products in the process of blending and packing the syrup in the plant" are not exempted by the machine exemption "under old sal…

(1) The Sales and/or Use Tax Laws levy a tax of 1 1/2% on the net difference paid for any machine, machinery, or equipment used in planting, cultivating, or harvesting farm products or used in connection with the production of agricultural produce or products, livestock, or poult…

Power cables supplying power to working areas in mines and quarries are subject to the tax at the 4% rate. §40-23-2(1)

Electric power lines carrying electric power into a plant of a manufacturer, compounder or processor are taxed at the general rate of 4%. (Adopted March 9, 1961, amended November 1, 1963, effective July 1, 1963)

Sales of materials to printers are at wholesale, tax free, when such materials become a component of the printed matter produced for sale. The machines used in the printing come within the machine levy and are taxed at the 1 1/2% rate. The supplies, materials, and equipment not b…

Gross receipts accruing from the retail sales of proofs sold to printers, publishers or others, which are used to make negatives to produce plates for offset printing, are subject to the sales tax at the machine rate of 1 1/2%. The machines used by the processor in the processing…

Pumps when used in mining are taxed at the special machine rate of 1 1/2%. §40-23-2(3)

Rail bonds used in the construction and maintenance of mine tracks used in bringing minerals to the surface of the earth are taxed at the special machine rate of 1 1/2%. This provision does not, however, extend to rail bonds used in the construction and maintenance of trucks used…

Machines when sold to, or for use by, railroad companies in maintaining, repairing or reconditioning their equipment are subject to the sales or use tax at the general rate of 4%. §40-23-2(1)

(1) Railroad rails are taxable at the general rate of 4% when used as a roadway for transportation equipment or for general purposes not described in the next paragraph. (2) Railroad rails are taxed at the special machine rate of 1 1/2% when used as a roadway for quarrying or min…

Mine rails used in the construction and maintenance of tracks used in removing minerals from the earth are taxed at the special machine rate of 1 1/2%. This provision does not, however, extend to rails used in the construction or maintenance of tracks used in transporting mineral…

(1) When repairs require service only or service with the use of an inconsequential amount of materials, the amount received is not subject to tax. (2) When materials and service are used in repairing machines taxed at the special machine rate and when there is no separation in t…

(1) Parts and attachments furnished by repairmen in reconditioning or repairing electric motors and electric generators are sold by the repairmen to the owners of the motors and generators. The repairman's sales of repair parts, such as ball bearings, brushes and wire used in rew…

Resales of automotive vehicles repossessed by the seller or for him by a finance company are taxable measured by the gross proceeds of the resales thereof less credit for any automotive vehicle accepted as part-payment of the sales price of the vehicle so resold.

(1) Restaurants and cafeterias are considered to be processors and compounders of food products for sale; therefore, they are entitled to purchase machines used in processing and compounding at the reduced rate of 1 1/2%. (2) The machines falling in this category include, but are…

Machines and equipment used by manufacturers for conditioning and transporting, while in process, sand for use in mold making are taxed at the special machine rate of 1 1/2%. (§40-23-2(3)

(1) Equipment manufactured for and customarily used in removing sawdust from saws in saw mills is taxed at the special machine rate of 1 1/2% when such equipment is a part or attachment of the sawing mechanism. (2) The same rule applies to equipment manufactured for and customari…

A school bus purchased by an individual for use under direction of and control of a board of education is subject to tax. §40-23-1(10)

(1) Except as outlined in paragraph (2), retail sales of tangible personal property made by all schools and colleges owned and operated by the State of Alabama are subject to sales tax. (2) Sales by elementary or secondary schools owned and operated by the State of Alabama are ex…

(1) The term “ elementary or secondary school” as used in Act No. 96-653 and in this regulation shall mean both public and private schools where the curriculum consists of one or more of grade levels K through 12. The term “ elementary or secondary school” shall not include nurse…

A scrap metal shredder that will take such items as junk automobile bodies and through a series of magnetically operated devices separate the metal from the nonmetal items, shred the metal, and hydraulically compress it into blocks of certain sizes to specifications so that it ca…