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Business Privilege Tax

The business privilege tax is an annual tax paid by corporations and limited liability entities (including disregarded entities) for the privilege of conducting business in Alabama.  The tax base is the taxpayer’s net worth apportioned to Alabama.  For business entities new to Alabama, the tax accrues as of the date of organization, qualification, or beginning to do business, and is due 30 days thereafter.   The tax for existing entities accrues as of January 1 of every taxable year, and is due March 15.

Business Privilege Tax Rate

The tax rate for business privilege tax is graduated, based on the entity’s federal taxable income apportioned to Alabama.  The rates range from $.25 to $1.75 for each $1,000 of net worth in Alabama. The minimum tax is $100.

Business Privilege Tax Cap

The maximum business privilege tax for most business entities is $15,000.  The exceptions are for financial institutions, financial institution groups, and insurance companies that have a maximum business privilege tax of $3,000,000.

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