Utility Service Use Tax.

Ala. Code tit. 40, ch. 21, art. 4

in effect

Ala. Code § 40-21-100 Definitions.

40-21-100. Definitions. (a) For the purpose of this article, the following terms shall have the respective meanings ascribed by this section: (1) BUSINESS. All activities relating to the furnishing of utility services. (2) DEPARTMENT. The Department of Revenue of the State of Alabama. (3) DOMESTIC WATER. All water except water that is sold to persons for use or consumption in industrial processes and not primarily for human consumption. (4) GROSS RECEIPTS. The value proceeding or accruing from the furnishing of utility services, all receipts actual and accrued, without any deduction on account of the cost of the utility services sold, the cost of the materials used, labor or service cost, interest paid, or any other expense whatever, and without any deductions on account of losses. (5) GROSS SALES. The value proceeding or accruing from the furnishing of utility services, and including the proceeds from the sale of any utility services handled on consignment by the taxpayer, without any deduction on account of the cost of the utility services sold, the cost of the materials used, labor or service cost, interest paid, or any other expenses whatever and without any deductions on account of losses. (6) PERSON. An individual, firm, copartnership, association, trustee, receiver, corporation, or other entity, and shall specifically include the State of Alabama, every county in the State of Alabama, every municipal corporation in the State of Alabama, the United States of America and its agencies, and every public corporation or entity organized under the laws of the United States of America or under the laws of any state of the United States of America and operating in the State of Alabama, as well as every private or nonpublic entity. (7) PURCHASE. Utility services which are acquired, with or without consideration, whether such acquisition is effected by a transfer of title or of possession, or of both, or a license to use or consume, whether such transfer is absolute or conditional, and by whatsoever means the same shall have been effected. (8) RETAIL SALE. All sales except those defined herein as wholesale sales. (9) SALES PRICE. The total amount for which utility services shall have been sold, or, if not sold or sold for only a nominal amount, the fair market value thereof, valued in money, whether paid in money or otherwise, and includes any amount for which credit is given to the purchaser by the seller, without any deduction therefrom on account of the cost of the utility services sold, the cost of the materials used, labor or service cost, interest charged, losses, or any other expenses whatever; provided, that cash discounts allowed and taken shall not be included. (10) STORAGE. Any keeping or retention in the State of Alabama of utility services for any purpose, except sale in the regular course of business or subsequent use solely outside the State of Alabama. (11) TAXPAYER. Any person liable for taxes under the provisions of this article. (12) USE. The exercise of any right or power over utility services or the disposition thereof incident to a proprietary or possessory interest therein, except that it shall not include the sale of utility services in the regular course of business. (13) UTILITY. Every person regularly engaged in furnishing utility services to another person in the State of Alabama. (14) UTILITY GROSS RECEIPTS TAX. The tax levied by Article 3 of this chapter. (15) UTILITY SERVICES. Electricity, domestic water, natural gas, telegraph services, and telephone services; provided, however, that “utility services” shall not mean electricity, domestic water, natural gas, telephone services, or telegraph services stored, used, or consumed by a utility regularly engaged in furnishing the same such services to the public, other than by a municipality or other municipal entities organized by a municipality. (16) WHOLESALE SALE. A sale or exchange of utility services by a utility to any person or any other utility engaged in the resale of such utility services in the regular course of business. (17) TELEPHONE SERVICES. Local telephone service, interstate telephone service which originates or terminates within this state but does not both originate and terminate in this state and is charged to a service address in this state, and intrastate toll telephone service, private communications service, teletypewriter, and computer exchange service. The term “telephone services” includes transmission by or through any media such as wires, cables, microwaves, light waves, or any combination of those or similar media. It includes, but is not limited to, telephone services sold by motels and hotels to their customers or to others, telephone services sold by colleges and universities to their students or to others, and telephone services sold by hospitals to their patients or to others. The term “telephone services” shall not include: (i) Telephone services provided through any pay telephone; (ii) Any excise, franchise, or similar tax or like fee or assessment levied by the United States, by the State of Alabama, or by any political subdivision, upon the purchase, sale, use, or consumption of any telephone services, which tax, fee, or assessment is collected by the seller from the purchaser; (iii) The furnishing of any telephone services for resale, including access charges paid by an interexchange carrier, provided that any utility making a sale of telephone services for resale shall obtain a certificate from the purchaser of such services certifying that such services are purchased for the purpose of resale, the form of the certification to be determined by rules and regulations to be promulgated by the department; (iv) Charges for customer premises equipment, including such equipment that is leased or rented by the customer from any source; (v) Cable television service, paging services, specialized mobile radio, or mobile telecommunications service; or (vi) Services which are ancillary to the provision of telephone service but are not directly related to the transmission of voice, data, or information such as directory advertising and installation and repair of equipment and inside wiring. The term “local telephone service” means the access to a local telephone system, and the privilege of telephonic-quality communication with substantially all persons having telephone stations constituting a part of such local telephone system. The term “toll telephone service” means (A) a telephonic-quality communication for which there is a toll charge which varies in amount according to the distance and elapsed transmission time of each individual communication, or (B) a service that entitles the subscriber or user, upon the payment of a periodic charge that is determined as a flat amount or upon some basis of total elapsed transmission time, or upon some combination thereof, to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radio telephone stations in a specified area which is outside the local telephone system area in which the station provided with this service is located. The term “toll telephone service” includes wide-area telephone service charges. The term “private communications service” means a communication service that entitles the subscriber or user to exclusive or priority use of a communication channel or group of channels, regardless of whether such channel or group of channels may be connected through switching with a service described in this subparagraph. The terms “teletypewriter” and “computer exchange service” mean the access from a teletypewriter, telephone, computer, or other data station of which such station is a part, and the privilege of intercommunication by such station with substantially all persons having teletypewriter, telephone, computer, or other data stations constituting a part of the same teletypewriter or computer exchange system. The terms “teletypewriter” and “computer exchange service” do not include the storage of data or information for subsequent retrieval, the retrieval of data or information, or the processing, or reception and processing, of data or information intended to change its form or content, and the term “computer exchange service” does not include the Internet nor access thereto. The term “intrastate,” as applied to telephone services, includes only those services originating and terminating wholly in this state. The term “call-by-call basis” means any method of charging for telephone service where the price is measured by individual calls. The term “communications channel” means a physical or virtual path of communications over which signals are transmitted between or among customer channel termination points. The term “customer” means the person or entity that contracts with the seller of telephone services. If the end user of the telephone services is not the contracting party, the end user of the telephone service is the customer of the telephone service, but this sentence only applies for the purpose of sourcing sales of telecommunications under Section 40-21-81. “Customer” does not include a reseller of telephone service. The term “customer channel termination point” means the locations where the customer either inputs or receives the communications. The term “end user” means the person who utilizes the telephone service. In the case of the entity, “end user” means the individual who utilizes the service on behalf of the entity. The term “post-paid calling service” means the telephone service obtained by making a payment on a call-by-call basis either through the use of a credit card or payment mechanism such as a bank card, travel card, credit card, or debit card, or by charge made to a telephone number which is not associated with the origination or termination of the telephone service. A post-paid calling service includes a telephone service that would be a prepaid calling service except it is not exclusively a telephone service. The term “place of primary use” means the street address representative of where the customer’s use of the telephone service primarily occurs, which must be the residential street address or the primary business street address of the customer. The term “service address” means: (A) The location of the telecommunications equipment to which a customer’s call is charged and from which the call originates or terminates, regardless of where the call is billed or paid. (B) If the location in (A) is not known, service address means the origination point of the signal of the telephone services first identified by either the seller’s telephone system or in information received by the seller from its service provider, where the system used to transport such signals is not that of the seller. (C) If the location in (A) and (B) are not known, the service address means the location of the customer’s place of primary use. (b) “Herein,” “hereby,” “hereunder,” “hereof” and other such words of reference shall refer to this article as a whole, and not solely to the particular section or portion of this article in which any such word may be used. (c) The definitions set forth in this section shall be deemed applicable whether the words defined are used in the singular or the plural. (Acts 1969, Ex. Sess., No. 37, p. 88, §§1, 2; Acts 1969, No. 240, p. 571; Acts 1992, No. 92-623, p. 1466, §7; Act 98-654, p. 1431, §1; Act 2001-1090, 4th Sp. Sess., p. 1120, §1; Act 2006-292, p. 584, §1.)

Ala. Code § 40-21-101 Legislative Intent.

40-21-101. Legislative Intent. It is the intention of the Legislature of Alabama that the tax herein levied shall be supplemental to and complementary with the utility gross receipts tax so as to prevent discrimination in the effect of the utility gross receipts tax upon either intrastate or interstate commerce. It is the intention of the Legislature of Alabama that the tax herein levied shall apply to purchases of utility services from any utility. With respect to every tax exemption which may be enacted into law subsequent to the enactment of this article, there shall be a presumption that such exemption does not apply to the tax herein levied unless the statute containing such exemption shall make specific reference to this article and shall clearly show a legislative intention to make such exemption applicable to the tax herein levied. (Acts 1969, Ex. Sess., No. 37, p. 88, §3; Acts 1992, No. 92-623, p. 1466, §8.)

Ala. Code § 40-21-102 Levy of Tax; Sourcing of Total Sales Price for Telegraph or Telephone Services.

40-21-102. Levy of Tax; Sourcing of Total Sales Price for Telegraph or Telephone Services. (a) There is hereby levied, in addition to all other taxes of every kind now imposed by law, and shall be collected as herein provided, an excise tax on the storage, use, or other consumption of electricity, domestic water, and natural gas in the State of Alabama. The amount of the tax shall be determined by the application of rates against the sales price of such services in the State of Alabama. The tax shall be computed monthly in accordance with the following table: If the total sales price of the utility services furnished by a utility and stored, used, or otherwise consumed by a person in one month is: | The tax with respect to the utility service is: Not over $40,000.00 | 4% of the sales price Over $40,000.00 but not over $60,000.00 | $1,600.00 plus 3% of excess over $40,000.00 Over $60,000.00 | $2,200.00 plus 2% of excess over $60,000.00 (b) There is hereby levied an excise tax on the storage, use, or other consumption of telegraph services or telephone services in the State of Alabama. The amount of the tax shall be determined by the application of rates against the sales price of such services in the State of Alabama. The tax shall be applied to interstate telephone service beginning with bills dated on or after February 1, 2002, regardless of when the services being billed were provided. The amount of the tax shall be computed monthly, in accordance with the following table: If the total sales price of the utility services furnished by a utility and stored, used, or otherwise consumed by a person in one month is: | The tax with respect to the utility service is: Not over $60,000.00 | 6.7% of the sales price Over $60,000.00 | $4,020.00 plus 3.7% of excess over $60,000.00 Beginning with bills dated on or after April 1, 2002, the tax shall be computed at the rate of six percent. The utility furnishing such telegraph or telephone services shall be entitled to deduct and retain from the gross amount of tax billed by the utility nine-tenths of one percent of the amount of such tax billed on or after February 1, 2002, in consideration of the costs incurred by the utility in collecting and remitting the tax levied by this subsection; provided, however, that on and following October 1, 2002, the amount deducted and retained by such utility shall be one-fourth of one percent of the gross amount of such tax billed. (c) Every person storing, using, or otherwise consuming utility services in the State of Alabama shall be liable for the tax imposed herein. Such liability shall not be extinguished until the tax has been paid to the State of Alabama. (d) If charges for a nontaxable service are aggregated with and not separately stated from charges for telephone or telegraph service that are subject to taxation, then the charges for the nontaxable service are subject to taxation unless the utility can reasonably identify the charges not subject to taxation from its books and records that are kept in the regular course of business. (e) The provisions of subsection (d) do not create any customer right to require that, for purposes of determining the amount of tax applicable to a transaction, either the utility or the department allocate or attribute the bundled charge to the different portions of the transaction in order to minimize the amount of tax charged to the customer. (f) The total sales price from the storage, use, or other consumption of telegraph service or telephone service is sourced as follows: (1) Except for the defined telegraph or telephone services in subdivisions (3) and (4), the storage, use, or consumption of telephone service sold on a call-by-call basis shall be sourced to a. each level of taxing jurisdiction where the call originates and terminates in that jurisdiction or b. each level of taxing jurisdiction where the call either originates or terminates and in which the service address is also located. (2) Except for the defined telegraph or telephone services in subdivisions (3) and (4), the storage, use, or consumption of telephone service sold on a basis other than a call-by-call basis is sourced to the customer’s place of primary use. (3) The storage, use, or consumption of post-paid calling service is sourced to the origination point of the telecommunications signal as first identified by either a. the seller’s telecommunication system, or b. information received by the seller from its service provider, where the system used to transport such signal is not that of the seller. (4) The storage, use, or consumption of private communication service is sourced as follows: a. Service for a separate charge related to a customer channel termination point is sourced to each level of jurisdiction in which such customer channel termination point is located. b. Service where all customer channel termination points are located entirely within one jurisdiction is sourced to the jurisdiction in which the customer channel termination points are located. c. Service for segments of a channel between two customer channel termination points located in different jurisdictions and which segments of channel are separately charged is sourced 50 percent in each level of jurisdiction in which the customer channel termination points are located. d. Service for segments of a channel located in more than one jurisdiction or levels of jurisdiction and which segments are not separately billed is sourced in each jurisdiction based on the percentage determined by dividing the number of customer channel termination points in such jurisdiction by the total number of customer channel termination points. (Acts 1969, Ex. Sess., No. 37, p. 88, §4; Acts 1971, 1st Ex. Sess., No. 99, p. 173; Acts 1992, No. 92-623, p. 1466, §9; Act 2001-1090, 4th Sp. Sess., p. 1120, §1; Act 2004-397, p. 668, §1; Act 2006-292, p. 584, §1.)

Ala. Code § 40-21-103 Exclusions. (Effective September 1, 2026)

40-21-103. Exclusions. (Effective September 1, 2026) The storage, use, or other consumption of utility services in the State of Alabama is hereby specifically excluded from the tax herein levied: (1) Whenever the State of Alabama is prohibited from taxing such storage, use, or consumption under the Constitution or laws of the United States of America or the Constitution of Alabama of 2022; (2) Whenever any tax relating to the sale, use, storage, or consumption of the utility services is levied under the provisions of Article 2 of Chapter 23, or under the provisions of Sections 40-23-1 through 40-23-36, or the Alabama Transaction Tax Act of 1992 if enacted into law; (3) Whenever the purchase of the utility services is at a wholesale sale; (4) Whenever electricity, natural gas, or domestic water is used or consumed directly in or for the production, generation, processing, storage, delivery, or transmission of electricity, natural gas, or domestic water; (5) Whenever electricity purchased for storage, use, or other consumption is used or consumed by a manufacturer or compounder in an electrolytic or electrothermal manufacturing or compounding process; (6) Whenever natural gas purchased for storage, use, or other consumption is used or consumed by a manufacturer or compounder as a chemical raw material in the manufacturing or compounding of tangible personal property, but not as fuel or energy; (7) Whenever natural gas purchased for storage, use, or other consumption is used by a manufacturer or compounder to chemically convert raw materials prior to the use of the converted raw materials in an electrolytic or electrothermal manufacturing or compounding process; (8) Whenever the sales price of utility services is included as a part of the gross receipts or gross sales of a utility subject to the utility gross receipts tax for the purpose of calculating the utility gross receipts tax payable by the utility; (9) Whenever electricity purchased for storage, use, or other consumption is used or consumed in a process for the isotopic enrichment of uranium and when the electricity is purchased from a subsidiary corporation of the corporation engaged in the isotopic enrichment of uranium; (10) Whenever utility services are furnished through the use of a prepaid telephone calling card; and (11)a. Whenever natural gas or electricity purchased for storage, use, or other consumption is used or consumed as fuel or energy in commercial aquaculture aeration systems, commercial greenhouses, pivot irrigation systems, and poultry houses. b. The exclusion provided in this subdivision shall not include natural gas or electricity purchased for storage, use, or other consumption as fuel or energy in the production of industrial hemp or hemp, as defined in Section 2-8-381, or cannabis, as defined in Section 20-2A-3. (Acts 1969, Ex. Sess., No. 37, p. 88; Acts 1975, No. 1193, p. 2340, §1; Acts 1992, No. 92-623, p. 1466, §10; Act 97-867, 1st Ex. Sess., p. 208, §2; Act 2026-595, §1.)

Ala. Code § 40-21-104 Utilities to Register and Give Information.

40-21-104. Utilities to Register and Give Information. Every utility, except as hereinafter provided, engaged in making retail sales of utility services for storage, use, or other consumption in the State of Alabama shall register with the department and give the name and address of its officers and directors, the location of each of its offices in the State of Alabama, the names and addresses of all persons with whom said utility has contracts for furnishing utility services by said utility, the names and addresses of all persons who have purchased utility services from said utility during the then next preceding 12 months, the amounts of the sales prices of all utility services furnished by said utility and such other information as the department may require with respect to matters pertinent to the enforcement of this article; provided, that this section of this article shall not apply to persons holding a license under the provisions of the utility gross receipts tax; provided further, that this section of this article shall not apply to the United States of America or to any agency or department of the United States of America or to any corporation exempted from so registering with the department under the Constitution or laws of the United States of America. (Acts 1969, Ex. Sess., No. 37, p. 88, §6; Acts 1992, No. 92-623, p. 1466, §11.)

Ala. Code § 40-21-105 Seller to Collect Tax; Regulations; Penalty.

40-21-105. Seller to Collect Tax; Regulations; Penalty. Every seller making sales of utility services for storage, use, or other consumption in this state, not exempted under the provisions of Section 40-21-103, shall at the time of making such sales or, if the storage, use, or other consumption of the utility services is not then taxable hereunder, at the time such storage, use or other consumption becomes taxable hereunder, collect the tax imposed by this article from the purchaser and give to the purchaser a receipt therefor in the manner and form prescribed by the department. The tax required to be collected by the seller from the purchaser shall be displayed separately from the list, advertised in the premises, marked or other price on the sales check or other proof of sales. It shall be unlawful for any such seller to advertise or hold out or state to the public or to any customer, directly or indirectly, that the tax or any part thereof imposed by this article will be assumed or absorbed by the seller or that it will not be added to the selling price of the property sold or, if added, that it or any part thereof will be refunded. Any person violating any of the provisions of this section shall be guilty of a misdemeanor. The tax herein required to be collected by the seller shall constitute a debt owed by the seller to this state. In the event that a seller making sales of utility services for storage, use or other consumption in this state, not exempted under the provisions of Section 40-21-103, is exempted from collection of the tax herein levied by any provisions of the Constitution or laws of the United States of America, then the purchaser of such utility services shall pay the said tax directly to the department each month pursuant to such regulations as the department may prescribe from time to time. (Acts 1969, Ex. Sess., No. 37, p. 88, §7.)

Ala. Code § 40-21-106 Procedure for Collecting Tax.

40-21-106. Procedure for Collecting Tax. The tax herein levied shall be administered and collected in accordance with the uniform procedures set forth in this title, along with the procedures set forth for collecting the use tax described in Article 2 of Chapter 23 of this title, and for that purpose there are hereby incorporated into this article by reference the provisions of Sections 40-23-68, 40-23-74, 40-23-75, and 40-23-77, 40-23-82, 40-23-83, and 40-23-88; provided, that wherever in said provisions the words “this article” shall appear, the same for the purposes of this article shall be construed to mean “this article”; provided further, that wherever in said provisions reference shall be made to March 1, 1939, the same for the purposes of this article shall be construed to mean September 1, 1969; provided further, that wherever in said provisions reference shall be made to June 30, 1939, the same shall for the purposes of this article mean that certain day one calendar month subsequent to September 1, 1969; provided further, that none of the said provisions shall apply to the United States of America or to any agency or department of the United States of America; provided further, that the tax herein levied shall be collected monthly, and all reports and records respecting the said tax herein levied shall be made on a monthly basis; and, to that end, wherever in said provisions the word “quarterly” shall appear, the same for the purpose of this article shall be construed to mean “monthly”; and wherever in said provisions the words “three months” shall appear, the same for the purposes of this article shall be construed to mean “one month”. (Acts 1969, Ex. Sess., No. 37, p. 88, §8; Acts 1992, No. 92-186, p. 349, §64.)

Ala. Code § 40-21-107 Disposition of Proceeds of Tax.

40-21-107. Disposition of Proceeds of Tax. All taxes or other funds received or collected by the Department of Revenue of the State of Alabama under the provisions of this article remaining after the application of any exemptions, exclusions, deductions, or credits applicable thereto, and after the payment of the expenses of administration and enforcement of this article shall be without delay deposited into the State Treasury to the credit of Alabama Education Trust Fund. (Acts 1969, Ex. Sess., No. 37, p. 88, §9; Act 2015-27, §4.)

Source: Alabama Legislature (alison.legislature.state.al.us)URL: https://alison.legislature.state.al.us/code-of-alabamaFetched: 10/20/2026