Industrial projects might be abated from property taxes for up to ten years except educational taxes. Alabama has a fixed assessment ratio established at 20% of assessed value for businesses. $2 million minimum investment or 30% of original value to qualify and abatements are granted locally (Acts 92-598 &599). The amount of property taxes to be paid is determined by multiplying the appropriate millage rate by assessed value less the proper exemptions. The millage figures indicated below are equivalent to the number of dollars paid per $1,000 of assessed value. Property tax exemptions are available to qualifying companies through the Opelika City Council.
Sales and Use Tax
Reduced state rate of 1.5% on new machinery used in manufacturing. May be abated except school taxes and subject to local approval. State rate of 4.0% on building construction materials in eligible projects may be abated except school taxes and subject to local approval. $2 million minimum investment or 30% of original value to qualify for existing industry expansions (Acts 92-598 & 599). Sales and use tax exemptions are available to qualifying companies through the Opelika City Council.
*The Opelika City council voted in favor of increasing the city's sales and use tax, changing the tax from 3.0% to 4.0% at the June 21, 2011 City Council meeting.
Personal Income Tax
Individual income tax is levied on the taxable net income earned from all sources by residents and income from sources within this state by nonresidents and part-year residents. Individuals are taxed at a rate of 5.0%. Allowances are made for the deduction of federal income tax paid, creating a net effective rate of 3.5%.
State Corporate Income Tax
State constitutionally provided at a maximum of 6.5% and the apportioned amount of federal income taxes paid or accrued are deductible when computing state income tax, creating a net effective rate of approximately 4.42%. A net operating loss is applied to the first taxable year to which it may be carried and can be carried forward 15 consecutive years.
Alabama does not levy a property tax on inventory of goods, wares and merchandise that is offered for sale. Exemption on all business inventories from property taxation including all materials used in manufacturing goods in process, stored manufactured goods and goods in transit for a period of 12 months (Act 75-1048).
Gross Receipts (Business Privilege Tax)
The Business Privilege Tax applies to all corporations and limited liability entities, including disregarded entities, which do business in Alabama or are organized under the laws of Alabama. This tax replaces the former franchise tax that was declared unconstitutional in March 1999. The tax accrues as of January 1 of every taxable year and is due March 15. In the case of a taxpayer organized during the year, qualifying during the year, or doing business in Alabama for the first time, the tax accrues as of the date of organization, qualification, or beginning to do business and is due 30 days thereafter. The tax base is the taxpayer's net worth apportioned to Alabama. The tax rates are graduated and based on the entity's federal taxable income apportioned to Alabama. The rate ranges from $.25 to $1.75 for each $1,000 of net worth in Alabama. The minimum privilege tax is $100; the maximum privilege tax is $15,000, except for financial institutions, financial institution groups and insurance companies, which have a maximum privilege tax liability of $3 million. An electing family limited liability entity is capped at $500.
See also Business Incentives for information on available programs to qualifying companies.