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On Sept. 26, Alabama Gov. Kay Ivey announced the implementation of a major tax reform designed to benefit small businesses in the state.

The reform will be effective Oct. 1 and according to the governor’s office, more than 3,000 Alabama small businesses will no longer be required to pay monthly estimated sales taxes to the Alabama Department of Revenue.

“Alabama’s economy is anchored in the stability and prosperity of many thousands of hard-working small businesses,” Ivey said. “In my 2023 State of the State Address, I called on the Legislature to help lower the financial load shouldered by most small businesses, making it easier for them to thrive in a challenging national economy.”

The Alabama Legislature passed the tax reform this summer and Ivey signed into law in June. The new tax removes the monthly estimated sales tax requirement for businesses with less than $20,000 in average monthly sales tax liability.

“I am pleased to report that this small business tax reform law, which will take effect Oct. 1, is expected to positively affect over 3,000 small businesses,” Ivey said. “By freeing small businesses with less than $500,000 in monthly sales from having to pay estimated monthly sales taxes and allowing them to pay the taxes after the point of sale, they will experience greater cash flow and accordingly more flexibility to operate.”

Effective Oct. 1, affected small businesses will be required to pay sales taxes based on the previous month’s sales tax receipts, payable in monthly installments on or before the 20th of the month. Those that are affected by the change in threshold will be notified by letter. Businesses may also contact the Alabama Department of Revenue’s Sales Tax Administration Section for more information at (334) 242-1490.