Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-6-5 - USE TAX LAW; CONTRACTORS GROSS RECEIPTS TAX; LODGINGS TAX; RENTAL TAX; UTILITY TAXES; MISCELLANEOUS RULES › Section 810-6-5-.04 - Credit For Taxes In Other States

Current through Register Vol. 42, No. 9, June 28, 2024
(1)
Code of Ala.
			 1975
, Section
			 40-27-1,
			 Article V. 1, provides that "each purchaser liable for a use tax on tangible
			 personal property shall be entitled to full credit for the combined amount or
			 amounts of legally imposed sales or use taxes paid by him with respect to the
			 same property to another state and any subdivision thereof. The credit shall be
			 applied first against the amount of any use tax due the state, and any unused
			 portion of the credit shall then be applied against the amount of any use tax
			 due a subdivision."
(2)
			 Notwithstanding
Code of Ala. 1975
, Sections
			 40-23-65 and
			 40-23-106,
			 credit for legally imposed sales and use taxes paid to any other state or its
			 subdivisions will be allowed against Alabama use tax due even if that state
			 does not allow credit for sales and use taxes paid to Alabama or its
			 subdivisions.
(3) The total credit
			 allowed cannot exceed the taxes due the state of Alabama or its subdivisions.
			 Any amount of tax paid to another state or its subdivisions which exceeds the
			 amount of tax due Alabama with respect to the same property may then be
			 credited against any local taxes due with respect to the same property. If the
			 legally imposed taxes paid to another state or its subdivisions exceed the
			 taxes due Alabama and its subdivisions, no further credit shall be allowed. The
			 excess of taxes paid on a purchase cannot be credited against taxes due Alabama
			 and its subdivisions on another purchase. No credit will be allowed for taxes
			 paid in error which were not legally due another state or its
			 subdivisions.
(4) The following
			 example is provided to illustrate how credit shall be allowed for legally
			 imposed taxes paid to other states and their subdivisions:
Purchase Price of Item A: $4,000 (no tax paid to another state
				or its subdivisions)
Purchase Price of Item B: $6,000 (7% total tax paid to another
				state and its subdivisions)
Total Purchases: $10,000
Assume that the local use taxes levied by Alabama subdivisions
				and applicable to Items A and B total 2 percent. (Local tax rates in Alabama
				vary.)
State of Alabama Use Tax Due on Items A and B: $400 (4% x
				$10,000)
Use Tax Due Subdivisions of Alabama on Items A and B: $200 (2%
				x $10,000)
Maximum Available Credit: $420 (7% x $6,000)
Alabama State Use Tax Eligible for Offset: $240 (4% x
				6,000)
Local Use Taxes of Alabama Subdivisions Eligible for Offset:
				$120 (2% x $6,000)
Actual Allowable Credit (Total State and Local Taxes Eligible
				for Offset: $360
State Use Tax Due Alabama after allowance of allowable
				credit:
$160 ([4% x $10,000] less $240 = $160)
Local Use Tax Due Alabama Subdivisions after allowance of
				allowable credit: $80 ([2% x $10,000] less $120 = $80)
(a) In this example, 4 percent Alabama use
			 tax totaling $400 is due on the total purchases of $10,000. The taxpayer is
			 entitled to credit for up to $420 in legally imposed taxes paid to another
			 state and its subdivisions with respect to Item B; however, the actual
			 allowable credit cannot exceed total taxes due Alabama and its subdivisions
			 with respect to Item B.
(b) The
			 taxpayer must pay Alabama state use tax of $160 ($400 tax due on all purchases
			 less credit of $240 for taxes paid to another state and its subdivisions since
			 the credit can only be applied to Alabama tax due on Item B). The balance of
			 $180 shall be applied against local use taxes due Alabama subdivisions with
			 respect to Item B.
(c) The taxpayer
			 must pay local use tax to Alabama subdivisions to $80 ($200 local tax due on
			 all purchases less credit for $120. The $60 in taxes paid to another state and
			 its subdivisions with respect to Item B cannot be used as a credit against
			 taxes due Alabama and its subdivisions with respect to Item A).
Authors:
Joe Cowen, Dan DeVaughn, Patricia A.
				Estes