Each person, firm, corporation or other business entity must obtain a City of Pelham business license prior to conducting business activity in the City of Pelham. The license year is January 1 through December 31. Business license renewals are due January 1 and delinquent after January 31 each year. Proof of State certification is required for certain classifications. For additional license information call (205) 620-6480 or fax (205) 663-0050. A license application can be downloaded from this site.
A reminder from the Building Department and Fire Prevention Division to businesses opening a location in Pelham or moving from one location to another in Pelham: Inspections from both the Building Department and Fire Department must be made prior to occupancy and the issuance of a business license. When completing the license application, the business must also complete an inspection request form and pay the required $25.00 inspection fee. Once both inspections have been made and approval is given, the business license will be issued and the business can occupy the location. If you have questions about the process or code requirements please call City Hall at 620-6400 or the Fire Department at 620-6500.
The City of Pelham administers and self-collects the following taxes: sales, seller’s use, consumer’s use, rental, lodging, wine, liquor and gasoline. The general sales/use tax rate is 4% and the automotive rate is 1%. Returns are due by the 20th of each month for the preceding month. State rules are followed on definitions, exceptions, exemptions and deductions. For additional tax information please call (205) 620-6412 or fax (205) 663-0050.
OVERVIEW OF CITY OF PELHAM TAXES
SALES TAX (FOR BUSINESSES LOCATED IN PELHAM)
Sales tax is due on the sale of tangible personal property and is due from the consumer (customer). If a business is engaged in selling tangible personal property, they should add the tax to the sales invoice and collect the sales tax from the customer at the time of purchase.
Sales tax is also due on the gross receipts from places of amusement or entertainment.
The general sales tax rate in the City of Pelham is 9% (4% State of Alabama, 1% Shelby County, and 4% City of Pelham). If applicable, businesses may check with each agency to obtain their automotive, farm equipment and manufacturing rates. In the City of Pelham all sales are taxed at the City’s general rate of 4%, with the exception of automotive vehicles at 1% City tax.
Common exemptions to sales tax are the following type sales:
These are sales to a licensed retail merchant, jobber, dealer or others who are purchasing for resale. It is the seller’s responsibility to obtain and keep on file the purchaser’s valid sales tax number or exemption number. The State of Alabama Department of Revenue can verify that a number is valid.
Sales of tax exempt items
Certain items are specifically exempt from sales tax. Examples – lubricating oil, gasoline, livestock feed and other exemptions. Please verify whether an item is exempt before making the sale.
Sales to tax exempt organizations
- The State of Alabama, counties and cities within the State are exempt from paying tax on their purchases.
- Some organizations are exempt by special acts of the Legislature. A listing of these is found in rule number 810-6-3-.07.05. Some examples of these organizations are the Alabama Sheriffs Boys Ranch, Boy & Girl Scouts, YMCA and YWCA. Churches are not tax exempt, and not all non-profit organizations are tax exempt. If there is a question about exemption, call to verify before making the sale.
Out of State deliveries/shipments
Generally, businesses are not required to collect tax on deliveries/shipments of retail sales made outside this State. NOTE: Sales tax is due the City of Pelham on merchandise that is picked up by the purchaser or the purchaser’s agent from a Pelham location or on merchandise that is delivered to the purchaser at a location in the City of Pelham. Do not remit sales tax to the City of Pelham on sales that are shipped or delivered outside the City of Pelham.
Withdrawals from inventory for use or installation – Sales tax applies to withdrawals from inventory on purchases made tax free which are later withdrawn from inventory for use by the business or for installation in fulfilling a contract to make additions, improvements or alterations to real property. The measure of sales tax is the cost (price paid) for the item withdrawn by the person making the withdrawal. The tax is due at the time and place of withdrawal, regardless of the place where used. If this type activity is applicable to a business in Pelham, the sales tax is due Pelham on all withdrawals regardless of the place used or installed.
The following type businesses should obtain a clear understanding of the tax laws pertaining to their business activities:
- Dual businesses that make both retail sales and withdrawals from inventory for installation to improve or alter real property.
- Businesses that make retail sales and also provide labor in conjunction with those sales.
- Manufacturers that make sales and also install the manufactured product.
- Any business that does not have a clear understanding of their tax liability.
SELLER’S USE TAX (FOR BUSINESSES LOCATED OUTSIDE PELHAM)
If a business is located outside the City of Pelham but makes sales that are delivered/shipped into Pelham, it should charge the appropriate City of Pelham seller’s use tax if it has nexus with the City of Pelham. The rates are the same as outlined above for sales tax.
CONSUMER’S USE TAX
Use tax is the counterpart of sales tax. Pelham use tax applies to all tangible personal property purchased at retail that is used, stored or consumed in Pelham, on which the vendor did not collect Pelham tax at the time of purchase. The liability for use tax falls on the purchaser. If the vendor did not collect the City of Pelham tax at the time of purchase, it is the responsibility of the purchaser to report and pay the tax due.
On purchases made outside Pelham but shipped or delivered into Pelham, the vendor may not charge the FULL RATE of tax. All purchase invoices should be checked for compliance with the sales and use tax laws. The collective general rate of tax is 9% (State 4%, Shelby County 1% and City of Pelham 4%). If the vendor did not charge the City of Pelham tax, the business will be required to pay the tax directly to the City of Pelham.
If purchases are made in the City of Pelham, the vendor should add 9% sales tax to the invoice and collect the tax at the time of purchase, unless the purchase is specifically exempt by law.
It is the business’s responsibility to check all purchase invoices for compliance with the sales and use tax laws.
Consumer’s use tax does apply to purchases made via telephone, mail-order, the Internet, etc. The vendor does not usually collect the City of Pelham tax on these purchases. There are certain exemptions from the use tax law. If there is a question on exemption from use tax, please inquire.
Use tax returns and the remittance of any tax due the City of Pelham must be filed with the City of Pelham. Please inquire for additional information regarding consumer’s use tax. The above is a very brief overview, and more information may be required for a particular type of business transaction.
Rental tax is a privilege tax levied on the lessor of tangible personal property. The tax is on the gross receipts (including any tax invoiced) from the rental or leasing of any tangible personal property subject to the rental tax. The City of Pelham general rental tax rate is 2%, and the automotive rate is ½%. The State of Alabama and Shelby County also levy rental tax.
Lodgings tax is a privilege tax on persons, firms, or corporations engaged in renting or furnishing rooms, lodgings, or other accommodations to transients for periods of less than 180 days of continuous occupation. The tax applies to all charges in conjunction with providing such accommodations. The City of Pelham lodgings tax rate is 3%. The State of Alabama and Shelby County also levy lodgings tax.
The City of Pelham levies a .02 per gallon tax on the sale of gasoline, diesel fuel and all other motor fuels for on-road use. Please call the City of Pelham Tax Office to register to remit this tax.
The City of Pelham levies a 5% liquor tax on the purchase price of liquor by each retailer, distributor or club located in the City of Pelham. Please call the City of Pelham Tax Office to register to remit this tax.