Alabama Sales and Use Tax Assessment Protest / Petition for Refund

ALABAMA SALES AND USE TAX ASSESSMENT PROTEST

Petition for Review / Notice of Appeal / Petition for Refund

TABLE OF CONTENTS

1. Letterhead and Addressee
2. Subject and Identification
3. Timeliness
4. Statement of Jurisdiction and Authority
5. Statement of Facts
6. Issues Presented
7. Specific Objections to the Assessment
8. Nexus and the Wayfair / SSUT Framework
9. Exemption Assertions
10. Refund Claim Mechanics
11. Burden of Proof and Evidence
12. Penalty and Interest Abatement
13. Request for Conference and Hearing
14. Reservation of Rights
15. Prayer for Relief
16. Signature, Verification, and Certificate of Service
17. Appendix A — Notice of Appeal to Alabama Tax Tribunal
18. Alabama Practice Notes
19. Sources and References

1. LETTERHEAD AND ADDRESSEE

[LAW FIRM / TAXPAYER LETTERHEAD]

Date: [__/__/____]

Sent via Certified Mail, Return Receipt Requested, No. [________________________________]

Alabama Department of Revenue

[Sales & Use Tax Division / Audit Section]

[STREET ADDRESS AS SHOWN ON ASSESSMENT NOTICE]

Montgomery, AL [ZIP]

Attention: [ASSESSMENT OFFICER NAME], Examiner ID [________________________________]

2. SUBJECT AND IDENTIFICATION

RE:

This letter constitutes the Taxpayer's PETITION FOR REVIEW of the above-referenced preliminary sales and/or use tax assessment under Ala. Code § 40-2A-7(b)(4), NOTICE OF APPEAL of the above-referenced final assessment to the Alabama Tax Tribunal under Ala. Code §§ 40-2A-7(b)(5) and 40-2B-2, and/or PETITION FOR REFUND of sales/use tax under Ala. Code § 40-2A-7(c), as applicable.

3. TIMELINESS

3.1. The preliminary / final assessment was mailed by ADOR on [__/__/____] and received by the Taxpayer on [__/__/____]. This filing is made within thirty (30) days of the earlier of mailing or personal service, and is therefore timely under Ala. Code § 40-2A-7(b)(4)a. (preliminary) / § 40-2A-7(b)(5)a. and § 40-2B-2(g) (final).

3.2. [For refund:] This Petition for Refund is filed within three (3) years from the date the return was filed ([__/__/____]) or two (2) years from the date the tax was paid ([__/__/____]), whichever is later, and is therefore timely under Ala. Code § 40-2A-7(c)(2)a.

4. STATEMENT OF JURISDICTION AND AUTHORITY

4.1. ADOR's authority to assess sales and use tax is set forth in Ala. Code §§ 40-23-1 et seq. (sales) and 40-23-60 et seq. (use), as administered through the Uniform Revenue Procedures Act, Ala. Code §§ 40-2A-1 et seq.

4.2. Taxpayer invokes the rights under the Alabama Taxpayers' Bill of Rights, Ala. Code § 40-2A-4.

4.3. If unresolved at the Department level, jurisdiction over any final assessment is vested in the Alabama Tax Tribunal under Ala. Code § 40-2B-2 (or, after payment, in the appropriate circuit court under § 40-2A-7(b)(5)b.2.).

5. STATEMENT OF FACTS

5.1. Taxpayer is [a / an Alabama resident / domestic corporation / foreign corporation / LLC / remote seller] principally engaged in [BUSINESS DESCRIPTION] with its principal place of business at [ADDRESS].

5.2. During the audit period, Taxpayer's Alabama-related activities included [SUMMARIZE: in-state operations, employees, inventory, marketplace facilitator status, SSUT participation, etc.].

5.3. Taxpayer filed Alabama sales/use tax returns (Forms [2100 / SSU / appropriate form]) for each reporting period, reporting the following:

5.4. On or about [__/__/____], ADOR commenced an examination and proposed the following adjustments:

5.5. [ADDITIONAL FACTUAL NARRATIVE: describe the transactions, the exemption claimed (with certificate numbers), records produced, and the Taxpayer's compliance posture].

6. ISSUES PRESENTED

6.1. Whether the Department erred in disallowing the Taxpayer's claimed manufacturing exemption under Ala. Code § 40-23-1(a)(9)b. and § 40-23-2(3) for tangible personal property used in the production process.

6.2. Whether the Department erred in disallowing the Taxpayer's claimed agricultural exemption under Ala. Code §§ 40-23-4 and 40-23-4.3.

6.3. Whether the Department erred in asserting nexus and use-tax collection obligations on the Taxpayer's remote sales in light of South Dakota v. Wayfair, Inc., Ala. Code § 40-23-190 et seq., and the Simplified Sellers Use Tax Remittance Act.

6.4. Whether the Taxpayer is entitled to a refund of overpaid sales/use tax under Ala. Code § 40-2A-7(c) and, where applicable, § 40-23-196 for excess SSUT paid.

6.5. Whether penalties and interest assessed are appropriate where the Taxpayer's position rested on substantial authority, prior ADOR letter rulings, or reasonable cause (Ala. Code § 40-2A-11).

7. SPECIFIC OBJECTIONS TO THE ASSESSMENT

Pursuant to Ala. Code § 40-2A-7(b)(4)a., the Taxpayer sets forth the following specific objections:

7.1. Objection No. 1 — [SHORT TITLE].

• Department's Position: [QUOTE OR SUMMARIZE]
• Taxpayer's Objection: [REASONS]
• Authority: [CITATIONS]

7.2. Objection No. 2 — [SHORT TITLE].

• Department's Position: [QUOTE OR SUMMARIZE]
• Taxpayer's Objection: [REASONS]
• Authority: [CITATIONS]

7.3. Objection No. 3 — [SHORT TITLE].

• Department's Position: [QUOTE OR SUMMARIZE]
• Taxpayer's Objection: [REASONS]
• Authority: [CITATIONS]

8. NEXUS AND THE WAYFAIR / SSUT FRAMEWORK

8.1. Constitutional framework. Under South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), a state may impose sales/use tax collection obligations on remote sellers who establish substantial economic nexus, provided the state's regime does not impose undue burden under the dormant Commerce Clause.

8.2. Alabama's economic-nexus rule. Alabama's economic-nexus regulation, Ala. Admin. Code r. 810-6-2-.90.03, requires remote sellers with more than $250,000 in retail sales of tangible personal property delivered to Alabama in the preceding calendar year to register and collect Alabama tax. This rule was promulgated in 2015 and applied prospectively to remote sellers beginning October 1, 2018, following Wayfair.

8.3. Simplified Sellers Use Tax (SSUT) Program. Alabama's SSUT Program, codified at Ala. Code §§ 40-23-190 to 40-23-199 (Act 2015-448), allows eligible remote sellers to collect, report, and remit a flat eight percent (8%) sellers use tax on sales delivered into Alabama, in lieu of state and local sales/use tax. Eligibility requires that the seller have no physical presence in Alabama and not otherwise be required to collect tax under §§ 41-4-142 or 40-23-190.

8.4. Application to the Taxpayer. [STATE WHETHER TAXPAYER PARTICIPATES IN SSUT, MAINTAINS PHYSICAL PRESENCE, USES MARKETPLACE FACILITATOR, ETC. AND ARGUE WHY ASSESSMENT IS INCORRECT IN LIGHT OF NEXUS RULES].

8.5. Marketplace facilitator collection. Where applicable, the Taxpayer's sales were facilitated by a registered marketplace facilitator that collected and remitted SSUT under Ala. Code § 40-23-199.2, eliminating the Taxpayer's collection obligation on those transactions.

9. EXEMPTION ASSERTIONS

9.1. Manufacturing Exemption — Ala. Code § 40-23-1(a)(9)b. and § 40-23-2(3)

9.1.1. Alabama imposes a reduced 1.5% manufacturing rate on machines used in mining, quarrying, compounding, processing, and manufacturing of tangible personal property. See Ala. Code § 40-23-2(3); Ala. Admin. Code r. 810-6-1-.74 and -.75.

9.1.2. The Taxpayer's purchases of [DESCRIBE EQUIPMENT — e.g., process machinery, replacement parts, conveyor systems] qualify for the manufacturing rate because [FACTUAL APPLICATION — used directly in the production process].

9.1.3. Certificates of exemption (Form ST: EX-A1 / ST: EX-A1-SE) are attached as Exhibit [__].

9.2. Agricultural Exemption — Ala. Code § 40-23-4 and § 40-23-4.3

9.2.1. Alabama exempts the gross proceeds of sales of fertilizer used for agricultural purposes (§ 40-23-4(a)(2)), seeds for planting, baby chicks and poults, seedlings/plants/shoots used for vegetable gardens or truck farms, and other enumerated agricultural items.

9.2.2. Producer value-added agricultural products. For the period October 1, 2022 through September 30, 2027, gross receipts derived from the sale of producer value-added agricultural products by the producer (or the producer's immediate family or employees) are exempt.

9.2.3. The Taxpayer's purchases / sales of [DESCRIBE] qualify under [CITED SUBSECTION], as supported by the certificate(s) of exemption attached as Exhibit [__].

9.3. Sales for Resale — Ala. Code § 40-23-1(a)(10)

9.3.1. Sales for resale are exempt where the purchaser holds a valid Alabama resale certificate. The Taxpayer's sales to [CUSTOMER NAMES] are documented by valid resale certificates attached as Exhibit [__].

9.4. Other Exemptions

9.4.1. [ADD AS APPLICABLE: utility gross-receipts, government, non-profit § 501(c)(3) — note Alabama's narrow nonprofit treatment, healthcare/prescription drugs, occasional sale, isolated sale, etc.].

10. REFUND CLAIM MECHANICS

10.1. Statutory authority. A petition for refund must be filed with ADOR within (i) three (3) years from the date the return was filed, or (ii) two (2) years from the date the tax was paid, whichever is later. Ala. Code § 40-2A-7(c)(2)a.

10.2. Standing to claim refund. Under Ala. Code § 40-2A-7(c)(1), a petition may be filed by the consumer/purchaser who paid the tax to a collecting taxpayer; by the taxpayer who remitted in excess of tax due but never collected from the consumer; or by the taxpayer where the consumer paid the tax directly to the taxpayer (subject to credit/repayment to the consumer). A 2018 amendment authorizes consumer/purchaser refund claims to be filed directly without joinder of the seller.

10.3. SSUT-specific refunds. Under Ala. Code § 40-23-196, any taxpayer who pays SSUT in excess of the actual state and local sales or use tax that would otherwise apply may file for a refund or credit of the excess paid to the eligible seller participating in the program.

10.4. Refund computation. The Taxpayer paid sales/use tax of $[____] during the period [YYYY-MM through YYYY-MM]. Of that amount, $[____] was attributable to [exempt transactions / nontaxable services / SSUT excess] as detailed in the schedule attached as Exhibit [__]. Taxpayer claims a refund in the amount of $[____], plus statutory interest under Ala. Code § 40-1-44.

10.5. Pass-through and unjust enrichment. Where applicable, the Taxpayer affirms that any refunded tax will be credited or repaid to the consumer/purchaser as required by Ala. Code § 40-2A-7(c)(1).

11. BURDEN OF PROOF AND EVIDENCE

11.1. The Taxpayer acknowledges its burden under Ala. Code § 40-2A-7(b)(5)c. to demonstrate that the assessment is incorrect, and its burden under § 40-2A-7(c) to prove entitlement to refund.

11.2. Supporting evidence includes:

• ☐ Sales/use tax returns and reconciliations (Exhibit [__])
• ☐ Certificates of exemption, with vendor/customer matching (Exhibit [__])
• ☐ Sales journals, invoices, and shipping documentation (Exhibit [__])
• ☐ Fixed-asset and use-tax accrual schedules (Exhibit [__])
• ☐ SSUT program acceptance letter and remittance reports (Exhibit [__])
• ☐ Marketplace facilitator collection statements (Exhibit [__])
• ☐ Affidavits and witness statements (Exhibit [__])
• ☐ Expert reports (manufacturing process flow, nexus study) (Exhibit [__])

12. PENALTY AND INTEREST ABATEMENT

12.1. The Taxpayer requests abatement of all penalties under Ala. Code § 40-2A-11(g) based on reasonable cause and good-faith reliance on [CITED AUTHORITY / VENDOR-PROVIDED EXEMPTION CERTIFICATE / PROFESSIONAL ADVICE / PRIOR ADOR GUIDANCE].

12.2. The Taxpayer requests abatement of any portion of interest attributable to ADOR delay under Ala. Code § 40-1-44.

13. REQUEST FOR CONFERENCE AND HEARING

13.1. Pursuant to Ala. Code § 40-2A-7(b)(4)b., the Taxpayer requests an administrative conference with ADOR's reviewing officer prior to entry of any final assessment.

13.2. Should the matter be appealed to the Alabama Tax Tribunal, the Taxpayer demands an evidentiary hearing pursuant to Ala. Code § 40-2B-2 and Ala. Admin. Code r. 887-X-1.

14. RESERVATION OF RIGHTS

14.1. Taxpayer reserves the right to amend, supplement, or withdraw any portion of this filing.

14.2. Taxpayer reserves all defenses including, without limitation:

• Statute-of-limitations defenses (Ala. Code § 40-2A-7(b)(2));
• Constitutional defenses (Commerce Clause, Due Process);
• Federal preemption defenses (e.g., Internet Tax Freedom Act for digital products, where applicable);
• Setoff or recoupment based on overpayments in other tax types or periods.

14.3. Nothing herein waives any privilege.

15. PRAYER FOR RELIEF

WHEREFORE, the Taxpayer respectfully requests that the Department / Alabama Tax Tribunal:

• A. Withdraw or vacate the preliminary / final assessment in its entirety;
• B. In the alternative, reduce the assessment to reflect only those adjustments supported by clear and convincing evidence;
• C. Grant the Petition for Refund and order payment of $[________________________________], plus statutory interest under Ala. Code § 40-1-44;
• D. Abate all penalties and accrued interest attributable to Department delay or reasonable cause;
• E. Schedule an administrative conference and, if necessary, an evidentiary hearing before the Alabama Tax Tribunal; and
• F. Grant such further relief as is just and proper under Alabama law.

16. SIGNATURE, VERIFICATION, AND CERTIFICATE OF SERVICE

Respectfully submitted,

[LAW FIRM NAME / TAXPAYER REPRESENTATIVE]

By: [________________________________]

[ATTORNEY / CPA NAME], Alabama State Bar No. [####] / Alabama CPA No. [####]

Counsel for Taxpayer

[STREET ADDRESS]

[CITY, STATE ZIP]

Telephone: [NUMBER]

Email: [EMAIL]

VERIFICATION

STATE OF ALABAMA

COUNTY OF [COUNTY]

I, [TAXPAYER OR OFFICER NAME], being first duly sworn, depose and say that I am the [Taxpayer / authorized officer of the Taxpayer]; that I have read the foregoing Petition / Notice of Appeal / Petition for Refund; and that the factual statements contained therein are true and correct to the best of my knowledge, information, and belief.

[________________________________]

[NAME], [TITLE]

Sworn to and subscribed before me this [____] day of [_______________], 20[____].

[________________________________]

Notary Public, State of Alabama

(My Commission Expires: [_______________])

CERTIFICATE OF SERVICE

I hereby certify that on [__/__/____] I served a true and correct copy of the foregoing upon the Alabama Department of Revenue (and, if applicable, the Alabama Tax Tribunal) by Certified Mail, Return Receipt Requested, postage prepaid, addressed as set forth on the first page hereof.

[________________________________]

[NAME]

17. APPENDIX A — NOTICE OF APPEAL TO ALABAMA TAX TRIBUNAL

BEFORE THE ALABAMA TAX TRIBUNAL

Docket No.: [________________________________] (assigned by Tribunal)

NOTICE OF APPEAL FROM FINAL ASSESSMENT (SALES AND USE TAX)

Pursuant to Ala. Code §§ 40-2A-7(b)(5) and 40-2B-2, and Ala. Admin. Code r. 887-X-1-.03, Taxpayer hereby appeals from the Final Assessment of Alabama [Sales / Use / Sellers Use / SSUT] Tax for the period(s) [YYYY-MM through YYYY-MM], in the amount of $[________________________________], mailed by the Department on [__/__/____].

The grounds for appeal, supporting facts, legal authorities, and prayer for relief are set forth in the foregoing Petition (Sections 5–15), incorporated by reference.

Taxpayer demands a hearing before the Alabama Tax Tribunal.

Date: [__/__/____]

[________________________________]

[ATTORNEY / CPA NAME], Alabama State Bar No. [####]

Counsel for Taxpayer / Appellant

Service Address for Tax Tribunal:

Alabama Tax Tribunal

P.O. Box 303240

Montgomery, AL 36130-3240

(Verify current address at https://www.taxtribunal.alabama.gov/)

18. ALABAMA PRACTICE NOTES

• Manufacturing rate, not exemption. Alabama taxes manufacturing machinery at a reduced 1.5% rate (Ala. Code § 40-23-2(3)) rather than fully exempting it. Argue eligibility for the reduced rate; claim full exemption only where the property qualifies as raw materials or ingredients consumed in the manufactured product (§ 40-23-1(a)(9)b., § 40-23-1(a)(10)).
• Agricultural exemption is narrow. Section 40-23-4 enumerates specific agricultural exemptions; not all farm-related purchases qualify. Section 40-23-4.3 provides an exemption certificate for certain agricultural purposes; verify the certificate is on file with the seller.
• Local taxes. ADOR administers many but not all local sales/use taxes. Some municipalities self-administer (e.g., several Class 1 cities). Verify the assessment scope.
• SSUT eligibility. A seller with physical presence in Alabama is NOT eligible for SSUT; physical presence triggers regular sales tax collection. Marketplace facilitators with Alabama nexus must collect on behalf of marketplace sellers (Ala. Code § 40-23-199.2).
• Marketplace facilitator immunity. A marketplace seller whose sales are made through a registered marketplace facilitator generally is not liable for tax on those sales. Maintain facilitator collection statements as audit defense.
• Two-tier appeal track. Preliminary assessment → 30 days → Petition for Review (ADOR). Final assessment → 30 days → Notice of Appeal (Tax Tribunal) or, after payment, suit in circuit court.
• Refund SOL. Three years from filing or two years from payment, whichever is later (Ala. Code § 40-2A-7(c)(2)a.). Calendar precisely.
• Use-tax accrual exposure. Common audit issues include: capital asset purchases without sales tax collected (especially from out-of-state vendors); inventory withdrawals for personal/promotional use; and untaxed services bundled with tangible personal property.
• Successor liability. Asset acquirers can inherit transferor's unpaid sales tax liability under Ala. Code § 40-23-25.1. Run a tax clearance request before closing.
• Tax Tribunal de novo review. The Tribunal is independent of ADOR and reviews assessments de novo on the law and facts. Position accordingly.
• Constitutional defenses. Wayfair did not eliminate dormant-Commerce-Clause challenges. Where Alabama's regime imposes undue burden on small or occasional sellers, preserve constitutional arguments for circuit-court review.

19. SOURCES AND REFERENCES

• Alabama Code Title 40, Chapter 23 (Sales and Use Taxes) — https://alisondb.legislature.state.al.us/alison/codeofalabama/1975/coatoc.htm
• Ala. Code § 40-23-4 (Sales tax exemptions, 2025) — https://law.justia.com/codes/alabama/title-40/chapter-23/article-1/division-1/section-40-23-4/
• Ala. Code § 40-23-196 (SSUT refund/credit) — https://law.justia.com/codes/alabama/2018/title-40/chapter-23/article-6/division-3/part-2/section-40-23-196/
• Ala. Code § 40-2A-7 (Uniform Revenue Procedures) — https://codes.findlaw.com/al/title-40-revenue-and-taxation/al-code-sect-40-2a-7/
• Ala. Code § 40-2B-2 (Alabama Tax Tribunal) — https://law.justia.com/codes/alabama/title-40/chapter-2b/section-40-2b-2/
• ADOR — Simplified Sellers Use Tax (SSUT) — https://www.revenue.alabama.gov/sales-use/simplified-sellers-use-tax-ssut/
• ADOR — Sellers Use Tax — https://www.revenue.alabama.gov/sales-use/sellers-use-tax/
• ADOR — Wayfair Effect on Alabama Purchasers — https://www.revenue.alabama.gov/faqs/what-is-the-effect-of-the-wayfair-decision-on-alabama-purchasers/
• ADOR — Petition for Refund FAQs — https://www.revenue.alabama.gov/faq-categories/petition-for-refund/
• ADOR — Time Limit for Refund Requests — https://www.revenue.alabama.gov/faqs/what-is-the-time-limit-for-requesting-a-refund/
• ADOR — Agricultural Sales Guidelines (PDF) — https://www.revenue.alabama.gov/wp-content/uploads/2022/03/Alabama_Agricultural_Guide.pdf
• ADOR — Sales and Use Tax Incentives — https://www.revenue.alabama.gov/tax-incentives/sales-use-tax/
• Ala. Admin. Code Ch. 810-6-3 (Sales/Use Tax Exemptions) — https://admincode.legislature.state.al.us/administrative-code/810-6-3
• Ala. Admin. Code r. 810-6-5-.02 (Certificate of Exemption) — https://admincode.legislature.state.al.us/administrative-code/810-6-5-.02
• Ala. Admin. Code r. 810-14-1-.19 (Refund time limitations) — https://www.law.cornell.edu/regulations/alabama/Ala-Admin-Code-r-810-14-1-.19
• Ala. Admin. Code r. 887-X-1 (Tax Tribunal Rules) — https://www.law.cornell.edu/regulations/alabama/Ala-Admin-Code-r-887-X-1-.3
• Alabama Tax Tribunal — https://www.taxtribunal.alabama.gov/
• South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018)
• Alabama Retail Association — SSUT Overview — https://alabamaretail.org/advocacy/action/state-issues/simplified-sellers-use-tax/

Disclaimer: This template is provided for informational purposes only and does not constitute legal or tax advice. An attorney or CPA licensed in Alabama must review and customize this document before filing. Statutory citations, exemption rules, and Tax Tribunal procedures change; verify all authorities before use.