Alabama Business Privilege Tax: Rates, Filing, and Who Owes It (2025)

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H1

Alabama Business Privilege Tax: Rates, Filing, and Who Owes It

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ANSWER SECTION

The Alabama Business Privilege Tax is an annual tax on the privilege of doing business in Alabama. It applies to corporations, LLCs, limited partnerships, and other business entities. The tax is based on the company's net worth in Alabama, with rates ranging from $0.25 to $1.75 per $1,000 of net worth, plus a minimum tax of $100. Returns are due April 15 each year (or the 15th day of the 3rd month after fiscal year-end).

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H2: Who Must File Alabama Business Privilege Tax?

Most business entities doing business in Alabama must file:

Required to File:

• C Corporations
• S Corporations
• Limited Liability Companies (LLCs)
• Limited Partnerships (LPs)
• Limited Liability Partnerships (LLPs)
• Business Trusts

Exemptions:

• Sole proprietorships (unless registered as LLC)
• General partnerships (unless electing limited liability)
• Passive investment entities
• Certain nonprofit corporations
• Insurance companies (taxed under different provisions)
• Financial institutions (separate tax regime)

Nexus Requirements: You must file if your business:

• Is organized under Alabama law
• Has a physical presence in Alabama
• Derives income from Alabama sources

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H2: Alabama Business Privilege Tax Rates

Tax rates vary based on entity type and federal taxable income:

Entity Type	Federal Taxable Income	Rate (per $1,000 net worth)
Corporations	All levels	$1.50
LLCs taxed as corporations	All levels	$1.50
LLCs (disregarded/partnership)	$0 - $50,000	$0.25
LLCs (disregarded/partnership)	$50,001 - $100,000	$0.50
LLCs (disregarded/partnership)	$100,001 - $500,000	$1.00
LLCs (disregarded/partnership)	$500,001 - $1,000,000	$1.50
LLCs (disregarded/partnership)	Over $1,000,000	$1.75

Minimum Tax:

• All entities: $100 minimum
• Due even if no net worth or operating at a loss

Maximum Tax:

• Corporations: $500,000
• LLCs: $500,000

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H2: Calculating Net Worth for Alabama BPT

The tax base is your Alabama net worth:

Net Worth Calculation:

Net Worth = Total Assets - Total Liabilities

Alabama Apportionment: If you do business in multiple states, calculate Alabama net worth using:

Alabama Net Worth = Total Net Worth × Alabama Apportionment Factor

Apportionment Factor:

(Property in Alabama / Total Property + Payroll in Alabama / Total Payroll + Sales in Alabama / Total Sales) ÷ 3

Asset Valuation:

• Generally at fair market value or book value
• Real property at assessed value
• Investments at market value
• Accounts receivable at face value

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H2: Filing Requirements and Deadlines

Form:

• Form BPT-IN: Initial return (first year)
• Form BPT-20V: Annual return
• Filed with Alabama Department of Revenue

Due Dates:

• Calendar year: April 15
• Fiscal year: 15th day of 3rd month after year-end

Estimated Payments:

• Required if tax liability exceeds $500
• Due in 4 equal installments
• April 15, June 15, September 15, December 15

Penalties:

• Late filing: 10% of tax due per month (max 50%)
• Late payment: 1% per month interest
• Minimum penalty: $50

Extensions:

• 6-month extension available (Form BPT-EXT)
• Must pay estimated tax by original due date
• Extension only extends filing, not payment

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H2: Related Tax Questions

For general business tax compliance information, see our guide on tax compliance with IRS requirements and best practices.

Learn about finding your IRS business classification code in our guide on business activity code lookup with Schedule C code tables.

For information on Nevada's business tax, see our guide on Nevada modified business tax with state comparison.

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