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Unlawful/Wrongful Collection of Sales & Use Taxes

| Aug 18, 2020 | Firm News

Do you have information or evidence of a business unlawfully or wrongfully collecting and remitting Alabama sales or use tax?

The Alabama Department of Revenue does not require sales or use tax for services unrelated to the sale at retail of any tangible personal property (TPP). TPP includes merchandise and commodities but does not include bonds, other financial instruments, or electronically delivered services or products. Examples of services not subject to sale or use tax when performed in connection with providing an electronic or otherwise intangible product include retrieval fees, handling fees, and photocopying fees.

Some fees for services are not subject to sale or use tax even when they are performed in connection with the sale of TPP. Examples of these fees include:

  • Electronic access to delivered information or content via the Internet
  • Access to databases for research
  • Scanning information or content
  • Postage for mailing TPP where the fee does not include a profit markup
  • Tracking and confirming the status of information being delivered
  • Information certification
  • Information notarization
  • Affirmation that information is suitable to be utilized in a legal deposition
  • Electronic information storage

Labor and service charges are not subject to sale or use tax when they are incidental to the repair or maintenance of existing TPP without producing new parts. When an otherwise nontaxable repair requires the sale of repair parts, those parts alone are subject to sales and use tax.

The Alabama Department of Revenue has refunded incorrectly collected and remitted sales and use taxes to the relief of the customers of those businesses that collected them. Businesses who have improperly collected sales and use tax from customers may not be held accountable outside of legal action. For this reason, Montgomery Ponder’s experienced attorneys, with knowledge of the relevant Alabama rules and regulations, can assist you in seeking relief.

Want to learn more? Contact the Birmingham attorneys at Montgomery Ponder to schedule your free and confidential case evaluation.