Alabama business privilege tax: who still has to file

Alabama used to charge every registered entity a minimum of $100 a year in business privilege tax, and almost every page you will find online still says so. It has not been true since 2024.

For tax years beginning after December 31, 2023, a taxpayer whose calculated privilege tax comes to $100 or less owes nothing and, more usefully, files nothing. The exemption from the return is written into the statute itself rather than sitting in Department guidance, which is worth knowing if anyone tells you otherwise.

Most small Alabama businesses are now in that group. Here is where the line falls and what the exemption does not cover.

How we got here

Act 2022-252 stepped the minimum down. It went to $50 for tax years beginning in 2023, and then for tax years beginning after December 31, 2023 the Act granted a full exemption from the tax and from the associated filing requirement. That second half is the part people miss. It is not that you file a return showing zero. You do not file.

Something else went with it. When the exemption landed it accidentally separated the Secretary of State's corporation annual report from the privilege tax return it used to ride along with, leaving corporations filing a standalone $10 form through most of 2024. That report was repealed outright with effect from October 1, 2024. No Alabama entity files one now.

Put the two together and an Alabama LLC or corporation under the threshold files nothing annually with either the Secretary of State or the Department of Revenue. If you are still being charged to prepare those filings, it is worth asking what is being prepared.

Where the line actually falls

The privilege tax is charged on net worth apportioned to Alabama, at a rate between $0.25 and $1.75 per $1,000 depending on the ratio of your federal taxable income to that net worth. The more profitable the entity relative to its balance sheet, the higher the rate band.

Because the rate varies, there is no single net worth figure that puts you over the threshold. At the lowest band a calculated tax of $100 corresponds to roughly $400,000 of apportioned net worth. At the top band it is closer to $57,000. Most owner-managed service businesses, which carry little on the balance sheet, sit comfortably under it. A business holding property, equipment or significant retained earnings may not. Our Alabama business privilege tax calculator works out where yours falls.

Two features of the calculation catch people out.

It is a cliff, not a deduction. If your calculated tax is $101, you file and you pay $101. You do not subtract the first $100 and pay one dollar. The whole exemption disappears the moment you cross it.

The calculation looks backwards. The determination period is the tax year immediately preceding the current one, so your 2026 return is worked out from your December 31, 2025 balance sheet. A business that grew last year can cross the line this year without anything changing in this one. It is the single most common reason a client who filed nothing last year gets a notice.

If you are over the threshold

Which form you file depends on how the entity is taxed, not on what it is called.

C corporations, and LLCs that have elected corporate taxation, file Form CPT. For a calendar-year entity that is due April 15, the same date as the federal return. A June 30 fiscal year end moves it to September 15, because the deadline runs two and a half months from the start of the year rather than the end.

S corporations, LLCs, limited liability entities and disregarded entities file Form PPT, due March 15 for a calendar year. A C corporation that makes the S election moves from Form CPT to Form PPT and, as a pass-through entity, deducts 30% of its federal taxable income apportioned to Alabama before the rate applies. An LLC that makes the S election already files Form PPT, so its form does not change.

Newly formed or newly qualified entities file Form BPT-IN within two and a half months of organizing, qualifying or starting business in Alabama, and only if the tax comes to more than $100. In practice a new small LLC now files nothing at formation. There is no extension available for the BPT-IN. That is unusual and it is the deadline most likely to be missed, because everything else in the Alabama calendar can be extended.

The tax is capped at $15,000 for most entity types. Qualifying family limited liability entities cap at $500.

How to pay

Alabama expects business returns to be filed electronically through My Alabama Taxes, the Department of Revenue's online portal, and the payment can be made in the same place. From a My Alabama Taxes account you can pay by ACH debit straight from the business bank account, which is the Department's default method, or by credit or debit card. Card payments go through an outside processor that adds a convenience fee, and can also be made by phone through the Department's Taxpayer Assistance Group on 334-353-8096.

A payment of $750 or more has to be made electronically. That is a statutory requirement, not a preference, and the Department can assess penalties for a mailed check above the line. Below $750 you can still mail a check or money order with voucher Form BPT-V to Alabama Department of Revenue, Business Privilege Tax Section, PO Box 327320, Montgomery, AL 36132-7320.

Either way, the money is due by the original due date of the return: March 15 for Form PPT and April 15 for Form CPT on a calendar year. An extension gives you more time to file. It does not give you more time to pay.

What the exemption does not touch

This is where the good news runs out. Being under the privilege tax threshold exempts you from that one return. It exempts you from nothing else.

You still maintain a registered agent, continuously, at a physical Alabama street address where process can be served in person. Not a PO box, not a mailbox service.

You still hold business licenses, in up to three layers. A state and county business privilege license, taken out with the probate judge or license commissioner in each county you operate in. A county license in some places. A municipal license on top. The state and county license year runs October 1 to September 30 and goes delinquent on November 1 with a 15% penalty plus interest. Birmingham runs on the calendar year instead, due January 1 and delinquent February 15, so a Birmingham business has two unrelated license deadlines four months apart.

And if you hold an Alabama tax account license for sales, rental, sellers use, lodgings or utility gross receipts, you still renew it annually in My Alabama Taxes between November 1 and December 31. Different license, different system, different window, and it has nothing to do with the privilege tax despite sharing half a name with the privilege license.

The trap in a dormant entity

Alabama has no mechanism that dissolves a company for inactivity. The provision that used to administratively dissolve entities after 60 days without a registered agent was repealed with effect from January 1, 2020, and nothing replaced it. For an LLC, dissolution happens on an event named in the operating agreement, on unanimous member consent, when no members remain, or by court order. Sitting dormant is not on the list.

The Department of Revenue states the consequence plainly: the privilege tax remains due every registered year until the entity is legally dissolved or withdrawn through the Secretary of State, whether or not it is doing any business.

So the old LLC you stopped using two years ago is still your LLC. If its balance sheet keeps it under the threshold, nothing accrues and no harm is done. If it holds property, the obligation has been quietly running the whole time. Closing an entity properly is a filing, not a decision to stop filing, and we would rather see clients spend an hour on that than discover it four years later. That work, and the filings around it, sits inside our tax services.

One thing to be careful of when you check this yourself

The Department of Revenue's own website contradicts itself. The main business privilege tax page carries the current position. A separate tax-types landing page is stale and still describes a $100 minimum plus a $10 Secretary of State annual report fee, both of which are gone.

If you are checking a figure, use the Department's business privilege tax page or the current year's CPT and PPT instructions. And treat anything published before 2024 as describing a regime that no longer exists, which unfortunately covers most of what a search will return.

Common questions

Do I need to file a return showing zero?
No. The exemption covers the filing requirement, not just the payment. If your calculated tax is $100 or less there is no return.

I made the S election. Does that change my privilege tax?
It can. A C corporation that elects S status moves from Form CPT to Form PPT, and as a pass-through entity it deducts 30% of its federal taxable income apportioned to Alabama before the rate applies. The rates, the $15,000 cap and the $100 threshold are the same.

I got a notice even though I thought I was exempt.
Usually one of three things. The prior year balance sheet crossed the threshold, so the current year is no longer exempt. Or the entity was dissolved in practice but never dissolved on the register. Or the notice relates to the business privilege license, which is an entirely different obligation that happens to share a word. The first of those is the one that clean bookkeeping prevents, since the threshold is read straight off the balance sheet.

How do I pay the privilege tax online?
Through My Alabama Taxes, by ACH debit from the business bank account or by card. Any payment of $750 or more must be made electronically. Smaller amounts can be mailed with Form BPT-V.

Has anything changed in 2026?
No. The 2026 regular session passed one tax bill, on a deduction for overtime pay. Nothing touched the privilege tax, and the annual report repeal remains in force.

What about a business registered in Alabama but operating elsewhere?
Apportionment matters, and so does whether the entity is still on the Alabama register. Worth a conversation rather than an assumption, because the two questions pull in different directions.