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Pass-through businesses include sole proprietorships, partnerships, limited liability companies, and S-corporations. The share of business activity represented by pass-through entities has been rising for several decades.
All Alabama C corporations and S corporations must include an Alabama Annual Report (Schedule AL-CAR) WITH the business tax return. Annual Reports that are filed without a tax return will be rejected. LLCs that are taxed as S corporations DO NOT have to include an annual report. The filing fee is $10.
In Alabama, the corporate tax currently is computed at a flat rate of 6.5% of taxable net income. If your LLC is taxed as a corporation you also will need to pay this tax.
For taxable years beginning on or after January 1, 2021, and before January 1, 2026, qualifying pass-through entities (PTEs) may annually elect to pay an entity level state tax on income. Qualified taxpayers receive a credit for their share of the entity level tax, reducing their California personal income tax.
Alabama has a 6.50 percent corporate income tax rate. Alabama has a 4.00 percent state sales tax rate, a max local sales tax rate of 7.50 percent, and an average combined state and local sales tax rate of 9.24 percent. Alabama's tax system ranks 39th overall on our 2022 State Business Tax Climate Index.
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Pass-Through Businesses Avoid Double Taxation Pass-through businesses don't have to deal with double taxation. Instead, the company's revenues and expenses \u201cpass-through" to the business owner's tax return, where the owner pays tax on profits or deducts losses along with their other personal income and expenses.
The Alabama Electing Pass-Through Entity Tax Act (Act 2021-1 and Act 2021-423) allows Alabama S-Corporations and Subchapter K entities (pass-through entities or PTEs) to elect to pay Alabama income tax at the entity level. Entities making this election (Electing PTEs) must submit Form PTE-E via My Alabama Taxes (MAT).
The Alabama Business Privilege Tax is levied for the privilege of being organized under the laws of Alabama or doing business in Alabama (if organized under the laws of another state or country). File and Pay Business Privilege Tax Online.
The tax rate for business privilege tax is graduated based on the entity's federal taxable income apportioned to Alabama. The rates range from $0.25 to $1.75 for each $1,000 of net worth in Alabama. The minimum business privilege tax is $100.
The tax rate for the Alabama Business Privilege Tax is based on how much revenue your business brings to the state of Alabama. So, your rate will rise and fall depending on how much money your business earns each year. Alabama tax rates range from $0.25 to $1.75 for each $1000 of your entity's Alabama net worth.

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