Revenue & Taxes

Wholesale Sales

• Sales to a licensed retail merchant, jobber, dealer, or others who are purchasing for resale.
• It is the seller's responsibility to obtain and keep on file the purchaser's valid sales tax number or exemption number.
• The State of Alabama Department of Revenue can verify that a number is valid.

Sales of Tax-Exempt Items

• Certain items are specifically exempt from sales tax. Examples: lubricating oil, gasoline, livestock feed, and other exemptions.

Please verify whether an item is exempt before making the sale.

Sales to Tax-Exempt Organizations

• The State of Alabama, counties, and cities within the State are exempt from paying tax on their purchases.
• Some organizations are exempt by special acts of the Legislature. A listing of these is found in rule number 810-6-3-.07.05. Some examples of these organizations are the Alabama Sheriff's Boys Ranch, Boy & Girl Scouts, YMCA, and YWCA. Churches are not tax-exempt, and not all non-profit organizations are tax-exempt. If there is a question about an exemption, call to verify before making the sale.

Out-of-State Deliveries/Shipments

• Generally, businesses are not required to collect tax on deliveries/shipments of retail sales made outside this State.
• Sales tax is due to the City of Pelham on merchandise that is picked up by the purchaser or the purchaser's agent from a Pelham location or on merchandise that is delivered to the purchaser at a location in the City of Pelham.
• Do not remit sales tax to the City of Pelham on sales that are shipped or delivered outside the City of Pelham.
• Withdrawals from inventory for use or installation - Sales tax applies to withdrawals from inventory on purchases made tax-free, which are later withdrawn from inventory for use by the business or for installation in fulfilling a contract to make additions, improvements, or alterations to real property.
• The measure of sales tax is the cost (price paid) for the item withdrawn by the person making the withdrawal. The tax is due at the time and place of withdrawal, regardless of the place where used.
• If this type of activity is applicable to a business in Pelham, the sales tax is due Pelham on all withdrawals regardless of the place used or installed.
• The following types of businesses should obtain a clear understanding of the tax laws pertaining to their business activities:
  • Dual businesses that make both retail sales and withdrawals from inventory for installation to improve or alter real property.
  • Businesses that make retail sales and also provide labor in conjunction with those sales.
  • Manufacturers that make sales and also install the manufactured product.
  • Any business that does not have a clear understanding of its tax liability.

Seller's Use Tax

• Businesses located outside the City of Pelham but make sales that are delivered/shipped into Pelham should charge the appropriate City of Pelham seller's use tax if it has nexus with the City of Pelham.
• The rates are the same as outlined above for sales tax.

Consumer's Use Tax

• Use tax is the counterpart of sales tax.
• Use tax applies to all tangible personal property purchased at retail that is used, stored, or consumed in Pelham, on which the vendor did not collect Pelham tax at the time of purchase.
• The liability for use tax falls on the purchaser.
• If the vendor did not collect the City of Pelham tax at the time of purchase, it is the responsibility of the purchaser to report and pay the tax due.
• On purchases made outside Pelham but shipped or delivered into Pelham, the vendor may not charge the full rate of tax.
• All purchase invoices should be checked for compliance with the sales and use tax laws.
• The collective general rate of tax is 10% (State 4%, Shelby County 1%, and the City of Pelham 5%).
• The collective food/grocery rate of tax (Act 2023-554) is 8% (State 3%, Shelby County 1%, and the City of Pelham 4%)
• If the vendor did not charge the City of Pelham tax, the business will be required to pay the tax directly to the City of Pelham.
• If purchases are made in the City of Pelham, the vendor should add 9% sales tax to the invoice and collect the tax at the time of purchase unless the purchase is specifically exempt by law.
• It is the business's responsibility to check all purchase invoices for compliance with the sales and use tax laws.
  Note: Consumer's use tax does apply to purchases made via telephone, mail-order, the Internet, etc. The vendor does not usually collect the City of Pelham tax on these purchases. There are certain exemptions from the use tax law. If there is a question on an exemption from use tax, please inquire.
• Use tax returns and the remittance of any tax due to the City of Pelham must be filed with the City of Pelham. Please inquire for additional information regarding consumer use tax. The above is a very brief overview, and more information may be required for a particular type of business transaction.

Rental/Leasing Tax

• A privilege tax levied on the lessor of tangible personal property.
• The tax is on the gross receipts (including any tax invoiced) from the rental or leasing of any tangible personal property subject to the rental tax.
• The general rental tax rate is 2%, and the automotive rate is ½%.
• The State of Alabama and Shelby County also levy rental tax.

Lodgings Tax

• Lodgings tax is a privilege tax on persons, firms, or corporations engaged in renting or furnishing rooms, lodgings, or other accommodations to transients for periods of less than 180 days of continuous occupation.
• The tax applies to all charges in conjunction with providing such accommodations.
• The City of Pelham lodgings tax rate is 6%.
• The State of Alabama and Shelby County also levy lodgings tax.

Gasoline Tax

• $0.02 per gallon tax on the sale of gasoline, diesel fuel, and all other motor fuels for on-road use.
• Please call the Finance Department at 205.620.6400 to register to remit this tax.

Liquor Tax

• 5% liquor tax on the purchase price of liquor by each retailer, distributor, or club located in the City of Pelham.
• Call the Finance Department at 205.620.6400 to register to remit this tax.