How much does an Alabama business license cost?

There is no single price. State fees are set section by section in Title 40, Chapter 12 of the Code of Alabama and usually depend on the population of the city where you operate, or on capital, employees or contract size. The county adds its share and there is a $1 issuance fee per license, sometimes plus a county handling fee. City licenses are separate, often based on gross receipts.

When do Alabama business licenses expire?

State and county business privilege licenses run from October 1 to September 30. You renew during October, and anything not renewed by October 31 picks up a non-waivable 15% penalty plus interest. Many city licenses run on the calendar year instead; Huntsville's, for example, expire December 31 and are due by January 31.

Do I need an Alabama business license for an online or home-based business?

Usually yes. The Department of Revenue says a business run over the internet that has a physical presence in Alabama, such as a mailing address or employees, needs the same licenses as a store. Home-based businesses also need city zoning or home occupation approval in most municipalities before the city will license them.

Does an Alabama sales tax license cost anything?

The Department of Revenue does not charge to register for a sales tax account in My Alabama Taxes, and renewal is free. The account license must be renewed every year between November 1 and December 31, or it can be cancelled, which stops you buying inventory tax-free for resale.

Business registration & legal

Alabama Business License in 2026: State, County and City Licenses, Privilege Tax and Sales Tax

Q: Is the business privilege license the same as the business privilege tax?

No. The license is a fee for the right to operate, bought from your county. The business privilege tax is an annual tax on the Alabama net worth of corporations, LLCs and similar entities, filed with the Department of Revenue on Form CPT or PPT. For 2026, entities whose tax would be no more than the $100 minimum have no filing requirement.

Alabama business license 2026: the state/county privilege license from your probate judge or license commissioner, city licenses, BPT and ADOR sales tax.

Edited by Sumeet YadavFounder & editor, MSMETOOLS · fact-checked against official sources

Updated October 2026 Verified against official sources 9 October 2026 18 min read

Alabama business license — MSMETOOLS guide cover

Contents (11)

1. How business licensing works in Alabama
2. The state/county business privilege license
3. Municipal business licenses
4. Business privilege tax for LLCs and corporations
5. Sales tax and other Department of Revenue registrations
6. How to get licensed, step by step
7. Worked examples
8. Contractor, home builder and other state licenses
9. Secretary of State filings and trade names
10. Common mistakes and how to fix them
11. What to do next

Alabama is one of the few states where the state itself still sells a general business license, but you never deal with a state office to get it. The "state/county business privilege license" is bought from the license office in your county, and most cities then sell their own license on top. Add the separate business privilege tax for LLCs and corporations, and a sales tax account from the Department of Revenue, and a new owner can easily miss a layer. This guide walks through each one in order, with the fees, deadlines and penalties checked against Alabama Department of Revenue and Secretary of State pages in October 2026.

Quick answer

Most Alabama businesses need a state/county business privilege license from their county license office (the probate judge, revenue commissioner or license commissioner, depending on the county), plus a city license where they operate. State fees are set in Title 40, Chapter 12 of the Code of Alabama and vary by business type and city population. Licenses run October 1 to September 30, and late renewals pay a 15% penalty.

Buy the state/county license at the county office; a $1 issuance fee applies per license
Renew every October; deadline October 31
Ask your city or town clerk about the municipal license, usually based on gross receipts
Register for sales tax (4% state rate) free in My Alabama Taxes and renew it every November–December
LLCs and corporations also deal with the business privilege tax; no return is due if the tax would be no more than $100

How business licensing works in Alabama

Alabama splits licensing across three levels. The first is the state/county business privilege license, often shortened to BPL. It is a state law requirement under Sections 40-12-1 through 40-12-180 of the Code of Alabama, but counties collect it, and the money is shared, generally half to the state general fund and half to the county. The second is the municipal license sold by your city or town, which the state does not regulate at all. The third is a set of tax registrations and regulatory licenses: sales tax and withholding with the Department of Revenue, and occupational licenses from state boards for trades such as contracting, cosmetology or auto sales.

The Department of Revenue is careful to separate the business privilege license from the business privilege tax, and you should be too. The license is a fee for the right to carry on a particular activity. The tax, often called BPT, is an annual tax on the Alabama net worth of corporations, LLCs and similar entities, filed with the department's income tax division. A sole proprietor may need several privilege licenses and never owe the privilege tax; an LLC needs both.

Not every activity requires a state privilege license. Title 40, Chapter 12 lists licenses section by section, from retail stores and restaurants to contractors, manufacturers, vending machine operators and transient vendors. The department publishes a quick reference guide that maps businesses to code sections, and the county clerk uses it to tell you which licenses you need. If you sell several kinds of goods or provide several kinds of services, you may need more than one license, and some sections require a separate license for each location.

Layer	Who issues it	What it covers	Renewal
State/county business privilege license	County probate judge, revenue commissioner or license commissioner	The activity listed in Title 40, Chapter 12	Every October; due October 31
County business license (some counties only)	The same county office	A separate county-imposed fee where a county has one	Set by the county
Municipal business license	City or town clerk or revenue office	Doing business inside city limits, often by gross receipts	Usually the calendar year
Sales tax and withholding accounts	Alabama Department of Revenue (My Alabama Taxes)	Collecting sales tax, payroll withholding	Sales tax account renewed each November–December
Business privilege tax	Alabama Department of Revenue	Annual tax on the net worth of LLCs and corporations	Filed with your federal return

The state/county business privilege license

You buy the state/county business privilege license from the license office in the county where your business is located. The office's name varies: in some counties it is the probate judge, in others the revenue commissioner or a license commissioner. The Department of Revenue keeps a directory of county license offices on its website. In Limestone County, for example, the License Commissioner sells the license to businesses throughout the county, including those inside the city limits of Athens, Huntsville, Decatur and Madison, because the state/county license does not stop at city lines.

The fee depends on the code section that fits your activity. The department explains that rates usually depend on the population of the municipality where the business is located, and in some sections on capital invested, the number of employees or the gross amount of contracts. A contractor's license, for instance, is tied to the size of contracts, and a manufacturer's license to capital. The county adds its own share, and the department charges a $1 issuance fee for each license. Some counties add extra issuance or mailing charges, and some also impose a separate county business license on top, so ask for an itemised total.

Timing matters. The license year runs from October 1 to September 30. If your business does not begin operating until after April 1, you may qualify for a half-year license, which roughly halves the first bill. Licenses are not refundable once bought, except for a genuine duplicate in the same entity name for the same period, so make sure the clerk has the right code sections before you pay.

When you sell the business, the license can move with it. The new owner transfers it at the county office for a $1 transfer fee rather than buying a new license mid-year. The license must be displayed somewhere conspicuous at the business, and county inspectors can issue a citation if it is missing.

The white Alabama State Capitol in Montgomery, with its columned portico and dome, seen from the front lawn — Alabama's business license fees are written into Title 40 of the state code, passed at the Capitol in Montgomery, but the license itself is sold by your county.· Image: Eric Hunt (CC BY 2.5)

What the county office will ask for

The Department of Revenue lists a short set of information you need before you visit. You give the business name and legal structure (sole proprietor, partnership, LLC or corporation), your federal employer identification number or, for a sole proprietor without one, your Social Security number, and a clear description of what you will sell or do. That description matters more than people expect. A store selling bicycles, radios or auto accessories may need separate licenses for those product lines, so the clerk will ask detailed questions about your stock.

Some counties have you fill in an application form, and many now take applications online or by email. If your trade also needs a regulatory license, such as a contractor, cosmetologist, physician or auto dealer license, the county may want to see it first, so get that sorted before you go.

Municipal business licenses

Once you have the state/county license, contact the city or town where you operate. The Department of Revenue states plainly that Alabama does not regulate municipal licenses or county-imposed licenses; each city sets its own rules. Most larger cities base the fee on gross receipts, often with a minimum fee and a schedule that varies by type of business. Some cities also require a "delivery" license from businesses that only drive into the city limits to deliver goods, so a supplier based elsewhere can still owe a license.

City license years are often different from the state/county year. In Huntsville, for example, annual business licenses expire on December 31, and renewals are due by January 31. A 15% penalty is added on February 1 and a further 30% penalty on March 1. Huntsville requires a license for every business location inside city limits, including home-based businesses, and you must reapply if you move within the city, change ownership or your federal ID number, or add a new line of business. Renewal is based on actual gross receipts for the previous year, so keep your sales records by location.

Before a city issues a first license, it usually checks zoning. A home-based business typically needs home occupation approval that limits signage, customer visits and employees, and a storefront needs a certificate of occupancy. Ask the city clerk which approvals they need to see, because a license application without them is simply held.

Order of approvals for a new Alabama location

Step 1

State board license (if your trade needs one)

Step 2

State/county privilege license

Step 3

City zoning or home occupation approval

Step 4

Municipal license

often by gross receipts

Step 5

My Alabama Taxes accounts

Business privilege tax for LLCs and corporations

Corporations, LLCs, limited partnerships and similar entities that are organised in or doing business in Alabama owe the business privilege tax. It is calculated by multiplying the entity's taxable Alabama net worth by a rate that depends on its federal taxable income apportioned to Alabama. Pass-through entities, including S corporations and most LLCs, file Form PPT; C corporations file Form CPT. The return doubles as the entity's annual report to the state.

The big change for small businesses came with Act 2022-252. The department's 2026 preparation guide says that taxpayers who would otherwise be subject to the $100 minimum tax have no filing requirement. In plain terms, a small LLC whose calculated tax comes to no more than the minimum neither pays nor files. Many older guides still tell owners to pay a $100 minimum every year, which is no longer how it works. A new entity must file an initial return, Form BPT-IN, within two and a half months of forming or qualifying, but only if its tax calculates to more than $100.

Alabama business privilege tax rates (2026 returns)

Federal taxable income apportioned to Alabama	Tax per $1,000 of taxable Alabama net worth
Less than $1	$0.25
$1 to under $200,000	$1.00
$200,000 to under $500,000	$1.25
$500,000 to under $2,500,000	$1.50
$2,500,000 or more	$1.75

Less than $1

Tax per $1,000 of taxable Alabama net worth: $0.25

$1 to under $200,000

Tax per $1,000 of taxable Alabama net worth: $1.00

$200,000 to under $500,000

Tax per $1,000 of taxable Alabama net worth: $1.25

$500,000 to under $2,500,000

Tax per $1,000 of taxable Alabama net worth: $1.50

$2,500,000 or more

Tax per $1,000 of taxable Alabama net worth: $1.75

The maximum tax for most entities, including C and S corporations and LLCs, is $15,000, and an electing family limited liability entity is capped at $500. Returns are due on the same date as the matching federal income tax return, and payment must arrive by the original due date. A single-member LLC that is disregarded for federal tax purposes is exempt if its owner is itself subject to the privilege tax; otherwise it files Form PPT and pays.

Sales tax and other Department of Revenue registrations

The privilege license does not let you collect sales tax. If you sell taxable goods at retail, you register with the Alabama Department of Revenue online through My Alabama Taxes (MAT). The department does not charge for the registration. After you submit, you receive a confirmation number and your tax account license is mailed later; you can also print it from MAT once the account is open. The same process covers withholding for employees, rental tax, lodgings tax and the Simplified Sellers Use Tax program used by remote sellers.

The state sales tax rate is 4%, with lower rates for some items: 2% on food since September 1, 2025, when it fell from 3%, 2% on automotive sales and 1.5% on manufacturing and farm machinery. Counties and cities add their own sales taxes, and combined rates are among the highest in the country. Many local taxes are filed through MAT, but some cities and counties administer their own, so ask each locality where you sell whether you register with them directly.

Unlike many states, Alabama makes you renew the sales tax license every year. Tax account licenses for sales, rental, sellers use, lodgings and similar taxes must be renewed in MAT between November 1 and December 31. Renewal is free, but if you skip it the department can cancel the license, and suppliers will stop accepting your resale exemption. Put it in the same calendar as the October privilege license renewal.

Try it — Alabama state sales tax on a $400 sale

Purchase AmountState

Local / County Rate

Purchase Amount$400.00

State Tax (6.25%)$25.00

Local Tax (2%)$8.00

Combined Rate8.25%

Total Amount (Including Tax)$433.00

Open the full Sales Tax Calculator (PDF, save, compare)

How to get licensed, step by step

The order below avoids the most common hold-ups, which are a county office asking for a regulatory license you have not got yet, or a city asking for zoning approval you have not requested. Keep a copy of each confirmation, because later offices often ask to see the earlier ones.

Getting licensed in Alabama

1
Form the entity and get an EIN
Sole proprietors can trade in their own name. An LLC reserves its name and then files a Certificate of Formation with the Secretary of State ($200). Get a free EIN from the IRS.
EIN guide
2
Get any regulatory license first
Contractors, home builders, cosmetologists, auto dealers and similar trades get their board license before the business license.
3
Buy the state/county privilege license
Visit the county license office where you are located. Describe exactly what you sell or do so the clerk picks the right Title 40 sections.
Tip: Starting after April 1? Ask whether a half-year license applies.
4
Get the municipal license
Apply to the city or town clerk with your zoning or home occupation approval. Expect a fee based on gross receipts.
5
Register with the Department of Revenue
Open sales tax, withholding or other accounts in My Alabama Taxes. Registration is free.
My Alabama Taxes
6
Diary three renewal dates
State/county license in October, city license (often January), sales tax account in November–December.

Worked examples

A web designer working from home in Montgomery with no employees sells services only. She visits the Montgomery County license office, which identifies the right privilege license for a service business, and pays the state and county fee plus the $1 issuance fee. She then applies to the City of Montgomery with her home occupation approval. Because she sells no taxable goods, she does not need a sales tax account, and as a sole proprietor she owes no business privilege tax.

A boutique LLC opening in Huntsville in May buys its state/county retail licenses from the Madison County office. Because it opened after April 1, it asks about a half-year license. It applies for a City of Huntsville license, registers for sales tax in MAT and collects 4% state tax plus local tax on every sale. Its first city license is based on estimated receipts; the January renewal uses actual receipts from its first part-year.

The same LLC's privilege tax depends on its numbers. Suppose its Alabama net worth at the start of its second year is $60,000 and its Alabama taxable income is $90,000. That income falls in the $1.00 per $1,000 bracket, so the tax is $60,000 ÷ 1,000 × $1.00 = $60. That is below the $100 minimum, so under Act 2022-252 the LLC has no filing requirement. If its net worth grows to $250,000 and its income to $300,000, the rate becomes $1.25 per $1,000 and the tax is $312.50, so it must file Form PPT and pay.

Late renewals add up. If a business's combined state and county license fees came to $120 and it renewed in November, it would owe the 15% non-waivable penalty of $18 plus interest. The penalty is applied per license, so a business with several sections pays it on each.

The Montgomery County Courthouse in Montgomery, Alabama, a pale stone-clad multi-storey building with steps and ramps leading to the entrance — County courthouses house the probate judge or license commissioner who sells state and county business licenses.· Image: Chris Pruitt (CC BY-SA 3.0)

Contractor, home builder and other state licenses

Several trades need a license from a state board before the county or city will license the business. Commercial work with a total cost of labor and materials of $50,000 or more requires a license from the Alabama Licensing Board for General Contractors, and a subcontractor working under a licensed prime contractor also needs one when its own contract reaches that amount. Residential construction and repair where the job cost exceeds $10,000 requires a license from the Home Builders Licensure Board, and roofing has a lower trigger. Doctors, lawyers, accountants, real estate agents, barbers and cosmetologists, auto dealers and many others answer to their own boards.

The Department of Revenue points owners to the state agency directory to find the right board. If your trade appears there, contact the board first, because a county license does not give you permission to practise a regulated occupation.

Secretary of State filings and trade names

An LLC files a Certificate of Formation with the Secretary of State for $200, but only after obtaining a certificate of name reservation. A foreign LLC registers to do business in Alabama for $150. Alabama does not have a separate Secretary of State annual report for most entities; the privilege tax return, Form PPT or CPT, includes the annual report.

Make sure the name on your county and city licenses matches the legal name on your formation documents and EIN. If you trade under a brand name, list both the legal name and the brand on each license application so the county, the city and the Department of Revenue can match your accounts. Our DBA guide explains how trade names work across states.

Before you visit the county license office

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Common mistakes and how to fix them

The first mistake is assuming the county license covers the city, or the other way round. They are separate fees to separate governments. A business inside Huntsville needs both the state/county license from the county office and the City of Huntsville license, and missing either can bring a citation.

The second is missing the October renewal. Counties may mail courtesy reminders, but the law does not require them to, and the 15% penalty cannot be waived. If you have missed it, renew straight away; the penalty and interest only grow, and operating without a current license invites enforcement.

The third is paying a privilege tax you do not owe, or ignoring one you do. Run the net worth calculation each year. If the result is no more than $100, there is no return to file; if it is more, the return is due with your federal return, and the late penalties are steeper than the tax for many small entities.

The fourth is forgetting to tell anyone when you close or move. It is your responsibility to notify the county licensing official when the business closes or changes location, to close your MAT accounts by web request, and to tell the city. An LLC that stops trading should also file dissolution documents so it does not keep accruing filing duties.

Official Alabama links

What to do next

Decide on your structure with our LLC registration guide, get an EIN, and call your county license office with a clear description of what you will sell. Then line up the city license and your My Alabama Taxes registration, and put the October, January and December renewal dates in your calendar. Our business licenses overview compares Alabama with neighbours such as Tennessee and Georgia, and the startup cost calculator helps you budget the fees.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

Visit the license office in the county where the business is located, usually the probate judge, revenue commissioner or license commissioner, and buy the state/county business privilege licenses that match what you do. Then ask your city or town clerk about a municipal license, and register with the Alabama Department of Revenue in My Alabama Taxes for sales tax or withholding if they apply.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1.Operating a Business in Alabama: Business Privilege Licenses (B.E.S.T. webinar) — Alabama Department of Revenue · accessed 9 October 2026
2.Business Privilege License — Alabama Department of Revenue · accessed 9 October 2026
3.Quick Preparation Reference for TY 2026 Alabama Business Privilege Tax Forms (CPT and PPT) — Alabama Department of Revenue · accessed 9 October 2026
4.State Sales and Use Tax Rates — Alabama Department of Revenue · accessed 9 October 2026
5.How do I apply or register for a sales tax number? — Alabama Department of Revenue · accessed 9 October 2026
6.Sales Tax Renewal Notice — Alabama Department of Revenue · accessed 9 October 2026
7.Limited Liability Companies — Alabama Secretary of State · accessed 9 October 2026
8.Business License — License Commissioner — Limestone County, Alabama · accessed 9 October 2026
9.Business Licenses — City of Huntsville · accessed 9 October 2026
10.Is a license required from the Licensing Board for General Contractors for a subcontractor? — Alabama Department of Revenue · accessed 9 October 2026
11.Home Builders Licensure Board law (effective October 1, 2025) — Alabama Home Builders Licensure Board · accessed 9 October 2026

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We provide tools, guides and information for general educational purposes only. Always refer to official government websites for the latest and most accurate information.