Montgomery, AL – In a move aimed at bolstering the resilience of Alabama’s small businesses, Governor Kay Ivey has announced a groundbreaking tax reform initiative set to take effect on October 1, 2023. This measure is expected to benefit more than 3,000 small businesses across the state by relieving them of the monthly burden of estimated sales tax payments to the Alabama Department of Revenue.
Alabama’s economic backbone comprises the dedication and prosperity of numerous hardworking small businesses, and Governor Ivey has stated she is committed to lightening their financial load. In her 2023 State of the State Address, she called upon the Legislature to take action, making it easier for small businesses to thrive in the midst of a challenging national economic landscape.
Responding swiftly to Governor Ivey’s call, the Legislature passed legislation, which was subsequently signed into law by the governor on June 9, 2023. This groundbreaking law abolishes the requirement for monthly estimated sales tax payments for businesses with less than $20,000 in average monthly sales tax liability.
Governor Ivey expressed her enthusiasm for the positive impact this small business tax reform will have on over 3,000 Alabama small businesses, stating, “By liberating small businesses with monthly sales under $500,000 from the obligation of prepaying estimated monthly sales taxes and allowing them to remit taxes after the point of sale, they will experience improved cash flow and greater operational flexibility.”
Effective from October 1, 2023, the affected small businesses will be required to pay sales taxes based on the previous month’s sales tax receipts, to be settled in monthly installments on or before the 20th of each month.
To facilitate the transition, the Alabama Department of Revenue will review businesses’ monthly sales tax returns for the calendar year 2022, identifying those that will be impacted by the new law. Notifications will be sent by letter to those affected by the threshold change.
For additional information, businesses are encouraged to reach out to the Alabama Department of Revenue’s Sales Tax Administration Section.
