Alabama: Use Tax Not Owed on Materials Temporarily Present in Alabama City

The Alabama Tax Tribunal recently addressed whether a taxpayer owed use tax on materials that were temporarily present in the City of Bessemer, Alabama before being used out-of-state. The taxpayer was in the business of furnishing and installing protective custom curtain walls on the exterior of buildings. Materials used in the installations were shipped to and stored at the taxpayer’s facility in Bessemer before being sent to the taxpayer’s out-of-state job site locations. While at the facility, the taxpayer did some initial installation and assembly of the materials.

The City of Bessemer imposes use tax on tangible personal property purchased at retail “for storage, use, or other consumption” within the City. The City tax parallels the state use tax. An exemption applies to property that is temporarily stored in Alabama for use outside the state. Under the regulation addressing the temporary storage exemption, use tax liability attaches after the act of transportation ends and the property comes to rest within Alabama for use or consumption, unless there is a contractual intent to the contrary.  The Tribunal noted that it is well established in Alabama that the use tax levy contains an element of intent. In other words, the taxpayer must purchase the property with the intent to use it in Alabama for use tax liability to attach. In the instant case, the taxpayer’s invoices and purchase orders clearly noted that the materials were purchased for use at individual out-of-state job sites. Further, the taxpayer segregated its materials while at the Bessemer facility prior to shipping the materials the specified out of state locations. Both factors evidenced an intent that they were to be used out of state.  The Tribunal noted that it was unsurprising that the state and county—with their identical statutes—had granted the taxpayer’s refund requests.  For more information on Physical Security please contact Scott Jackson at (404) 614- 8688.