The Alabama Attorney General issued an opinion regarding the manner in which sellers located within the state are required to pay local sales tax on deliveries made to Alabama customers. See Ala. Att’y Gen. Op. 2017-001 (Oct. 5, 2016), available here. The opinion addressed how passage of title impacts the jurisdiction to which sales tax is due. Specifically, the opinion addressed whether a retailer is permitted to contractually specify when title passes from the seller to the buyer, and thus, to which locality sales tax is due. The ruling confirms what many practitioners and businesses believed to be the law when it comes to passage of title and sales tax obligations for deliveries.
The opinion largely comports with a prior, revoked revenue ruling issued by the Alabama Department of Revenue in 2006 (Rev. Rul. 06-001 (Mar. 22, 2006)). Under Alabama law, sales tax is due when and where a retail sales transaction is completed. In Rev. Rul. 06-001, the Department explained that a sale is completed for sales tax purposes at the point where title passes, and not necessarily the locale in which physical delivery takes place. Accordingly, businesses are generally permitted to contractually arrange where title to goods will pass for sales tax purposes – either at the seller’s place of distribution or upon delivery of the goods to a purchaser. The Attorney General opinion points out an important caveat as well, which is that the seller must deliver the goods through use of its own trucks or via a “contract carrier.” As Rev. Rul. 06-001 held, in the event a common carrier or the U.S. Postal Service is used for delivery, title to the goods passes upon delivery. As such, sales tax is due to the destination locality regardless of where the title may pass contractually.
The Attorney General opinion is a welcome development. It confirms what practitioners and businesses have believed the law to be for some time and helps to remove some uncertainty for Alabama retailers.