If you sell to customers in Alabama, you may need to register for sales tax even if your business is based elsewhere.
Alabama’s economic nexus threshold is more than $250,000 in qualifying direct retail sales into the state during the previous calendar year. Unlike many states, Alabama does not have a transaction-count threshold.
Alabama Economic Nexus at a Glance
| Rule | Alabama Rule |
| Economic Nexus | More than $250,000 |
| Measurement period | Previous calendar year |
| Transaction threshold | None |
| Marketplace sales included? | Generally no |
| Marketplace facilitator law | Yes |
| Tax authority | Alabama Department of Revenue |
What Is Economic Nexus in Alabama?
Economic nexus allows Alabama to require an out-of-state business to collect and remit tax based on its level of sales into the state, even if it has no physical location there.
Alabama’s economic nexus rules apply to remote sellers whose qualifying Alabama sales exceed $250,000 during the previous calendar year.
This threshold is higher than the $100,000 threshold used by many other states.
What Sales Count Toward Alabama’s $250,000 Threshold?
Alabama’s threshold generally includes retail sales made directly by the seller, including taxable and non-taxable sales.
This can include sales made through:
- Shopify
- WooCommerce
- Your own ecommerce website
- Other direct sales channels
Businesses selling through several channels should therefore separate direct sales from marketplace sales when monitoring Alabama nexus.
Do Amazon Sales Count Toward Alabama Economic Nexus?
Generally, marketplace sales are not included in an individual remote seller’s $250,000 threshold calculation. Qualifying marketplace facilitators such as Amazon, eBay, Etsy and Walmart are generally responsible for collecting and remitting Alabama tax on marketplace transactions.
For example, if you have $300,000 of Amazon sales but only $75,000 of direct Shopify sales into Alabama, you would generally remain below the $250,000 economic nexus threshold based on your direct sales.
However, Amazon and other marketplace sellers should separately consider whether storing inventory in Alabama creates physical nexus.
Can You Have Alabama Nexus Below $250,000?
Yes, economic nexus isn’t the only way to establish sales tax nexus.
Physical presence can potentially create nexus regardless of your sales volume. This can include:
- Inventory stored in Alabama
- A warehouse or business location
- Employees working in the state
- Certain other in-state business activities
This is particularly important for Amazon FBA sellers and businesses using third-party warehouses.
What Should You Do After Crossing the Alabama Nexus Threshold?
If you exceed Alabama’s economic nexus threshold:
- Confirm when you crossed the threshold.
- Check whether you also have physical nexus.
- Register for the appropriate Alabama tax account.
- Configure your website to collect the correct tax.
- Begin filing Alabama returns as required.
Don’t wait until you are significantly over the threshold before reviewing your obligations.
Alabama Economic Nexus Examples
Shopify seller:
A remote business has $275,000 of qualifying direct Shopify sales into Alabama. It exceeds the economic nexus threshold and should review its registration requirements.
Amazon seller:
A business has $350,000 of qualifying marketplace sales through Amazon but only $50,000 in direct Alabama sales. Its marketplace sales generally aren’t included in the seller’s $250,000 direct-sales threshold calculation, although physical nexus should also be considered.
Seller with Alabama inventory:
A business has only $60,000 of Alabama sales but stores inventory in the state. It may have physical nexus even though it hasn’t reached the economic nexus threshold.
What If You Should Have Registered Previously?
If you discover that your business established Alabama nexus in a previous year but didn’t register, you could be responsible for tax that should have been collected, plus applicable interest and penalties.
Depending on your circumstances, a Voluntary Disclosure Agreement (VDA) may help resolve historical liabilities, potentially with benefits such as penalty relief or a limited lookback period. It’s important to investigate your options before Alabama contacts your business.
Businesses selling eligible products should review Virginia Tax’s guidance each year to ensure they apply the exemption correctly.
FAQs
What is the economic nexus threshold in Alabama?
The threshold is generally more than $250,000 in qualifying direct retail sales into Alabama during the previous calendar year.
Does Alabama have a transaction threshold?
No, Alabama does not have a separate 200-transaction or similar economic nexus threshold.
Do Amazon sales count toward Alabama’s economic nexus threshold?
Generally, marketplace sales aren’t included in an individual remote seller’s $250,000 direct-sales threshold calculation.
Does Shopify automatically handle Alabama sales tax?
Shopify provides tax calculation tools, but sellers are responsible for determining nexus, registering where required and correctly configuring tax collection.
Can I have Alabama nexus without $250,000 in sales?
Yes, physical presence, such as inventory, employees or a warehouse in Alabama, can potentially create nexus regardless of sales volume.
Final Thoughts
Alabama’s economic nexus rules are relatively straightforward, but sellers need to look beyond the $250,000 threshold. Direct sales, marketplace sales and physical presence can all affect whether your business has a sales tax obligation.
The key is to monitor your Alabama sales and review your nexus position as your business grows. If you’ve already crossed the threshold or established physical nexus, addressing your registration requirements early can help prevent back taxes, penalties and interest.
RJM Tax Exemption can help you determine whether you have nexus in Alabama and assist with sales tax registration, filing and Voluntary Disclosure Agreements where required.
Last updated: August 2026. Sales tax rules can change. Always check current Alabama Department of Revenue guidance when determining your obligations.
