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Alabama Taxes Lease-Purchase Agreements

(04/03/2009)

A trucking company that contracted with customers to both furnish and deliver materials, was found to be reselling materials at retail. The trucking company contended that it was a construction contractor and that it correctly paid sales tax when it purchased the materials. However, since the company did not apply or attach the materials to any realty, they could not be considered a contractor for sales and use tax purposes. Therefore, the company was found liable for sales tax on the lump-sum amounts paid by its customers. (Pearce Trucking, Inc. v. Alabama Department of Revenue, Alabama Department of Revenue, Administrative Law Division, No. S. 08-317, September 29, 2008)

(03/03/2009)

The Alabama Revenue Commissioner and State Governor announced a tax amnesty period from February 1, 2009 to May 15, 2009. The amnesty program, known as “Operation Clean Slate”, is for any outstanding taxes owed, including, but not limited to, sales and use tax, personal and corporate income tax, and business franchise tax. In order to be eligible, participants cannot already be under investigation or have previously been contacted by the Department of Revenue with regards to their tax liability. Any person who participates in the program will not be subject to civil penalties or late fees. Any citizen or business with outstanding tax liability is strongly urged to participant in this program as the Department plans on implementing a new state-of –the-art computer system that will aide in identifying unpaid and understated taxes owed. (Press Release, Office of Alabama Governor Bob Riley, January 15, 2009)

(01/23/2009)

In a recent hearing, Alabama court determined that tickets provided to sponsors in conjunction with sponsorships were subject to the gross receipts sales tax. The taxpayer conducted a wine tour that was open to the public. In addition to selling tickets to the different events, the taxpayer sold lump-sum sponsorships that included advertising, tickets to the events, and other miscellaneous tangible items. The taxpayer argued that the fee, in effect, was for non-taxable advertising and that the tickets were merely incidental. The Departments’ position was that the entire charge was taxable because the taxpayer operated a public place of amusement. Both of these arguments were rejected. It was determined that the price of the tickets, not the advertising, was taxable based on the applicable legal principle that states: where a lump-sum amount is paid for both a taxable activity and a separate non-taxable activity, and the value of the taxable and/or non-taxable activity can be reasonably determined, only the amount attributable to the table activity should be taxed. (Ellis v. Alabama Department of Revenue, Alabama Department of Revenue, Administrative Law Division, No. S. 07-834, August 25, 2008)

(10/08/2008)

An Alabama court determined that a taxpayer who relied on an invalid Uniform Multi-Jurisdiction Sales and Use Tax Certificate and sold repair parts tax-free to a service contractor was not subject to Alabama use tax on the sales because the taxpayer knew the contractor was in the business of reselling repair parts to its service customers. Therefore, a seller who acts in good faith and reasonably believes a tax-exempt purchase is legal is not liable for sales or use tax later determined to be due on a sale for which the purchaser provides an exemption certificate (Coca-Cola Co. d/b/a The Minute Maid Co. v. Alabama Department of Revenue, Alabama Department of Revenue, Administrative Law Division, No. S. 06-1261, August 29, 2007)

(06/30/2008)

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