USA Update: Alabama Excludes Credit Card Fees From Sales Tax From 15 October, What International Sellers Must Do

TITLE: Alabama Credit Card Fee Sales Tax Rules: What Sellers Need to Know

Alabama’s credit card fee rule: the key dates

Alabama has clarified when a credit card transaction fee can be left out of the sales tax calculation. If you sell into Alabama from the UK, EU, Canada, Australia, or elsewhere, check how your checkout displays the fee and how your tax system treats it.

There are two dates to understand:

• September 1, 2026: Act 2026-587, enacted as SB221, took effect. Alabama’s Department of Revenue (ALDOR) says its treatment of qualifying fees applies to transactions from this date.
• October 15, 2026: Amended Administrative Code Rule 810-6-3-.50 took effect. It specifies that a fee must be “separate and identifiable from other charges” to be excluded from the taxable amount.

So October 15 is the effective date of the amended administrative rule, not the first date of the statutory exclusion. The ALDOR FAQ, enrolled SB221, and certified rule filing set out the change.

What the Alabama rule says

Act 2026-587 excludes a qualifying credit card transaction fee from the amount on which Alabama sales and use tax is assessed. The amended rule adds an important condition: the fee must be separate and identifiable from the other charges.

ALDOR describes these transaction fees as charges assessed on purchases made by debit or credit card to offset interchange fees charged to the merchant or seller. They may be called swipe fees, credit card surcharges, processing fees, service charges, or convenience fees.

The name you give a charge is not enough to qualify it. Check that it is genuinely a card transaction fee of the kind covered by the Act, and that your receipt or invoice clearly shows it as a distinct line item.

If the fee is combined with the product or other charges into one total, the exclusion does not apply. Alabama sales tax is calculated on the full combined amount.

The $100 sale example

ALDOR’s example makes the distinction straightforward:

• A customer buys goods for $100 and is charged a $3 credit card fee.
• If the receipt shows the $100 purchase and $3 fee as separate, identifiable charges, sales tax applies to the $100 purchase.
• If the receipt shows only one combined charge of $103, sales tax applies to the full $103.

The display matters. It is not enough for your payment provider or internal ledger to identify a fee separately if the customer-facing receipt presents only a single total. Your checkout, tax calculation, and final receipt should tell the same story.

What international sellers need to check

The rule is relevant to international businesses selling to Alabama customers through their own online store, Shopify, WooCommerce, or other checkout platforms. It can also matter if you fulfill orders from inventory held in the United States.

First, establish whether you have an Alabama sales tax collection obligation. ALDOR describes a remote seller as an out-of-state seller with no physical presence in Alabama. Remote sellers that directly exceed $250,000 in total retail sales delivered into Alabama in the previous calendar year are generally required to collect and remit tax. Physical presence, including inventory or fulfillment arrangements, can change your compliance position.

If you sell through a marketplace, check whether the marketplace is collecting and remitting tax on your behalf. ALDOR says a remote seller that sells exclusively through a participating marketplace that collects and remits may not need to register for a state sales and use tax account. Sales through your own store, or through a marketplace that does not collect and remit, may still leave you with obligations. Review ALDOR’s guidance on remote seller registration and online and marketplace sales.

Eligible remote sellers may also consider Alabama’s Simplified Sellers Use Tax (SSUT) program. It offers a flat 8% rate on qualifying sales into Alabama. It is an option to assess against your circumstances, not a replacement for checking your registration, marketplace, and filing responsibilities. See ALDOR’s SSUT program information.

This update changes how a qualifying fee is treated in the taxable amount. It does not remove tax from the underlying taxable sale or eliminate a seller’s collection and filing obligations.

Take these steps to protect your sales tax returns

Use this checklist to bring your systems and records into line:

1. Review the payment fee itself. Confirm that the charge is a qualifying card transaction fee assessed to offset interchange costs. Don’t assume that every service or handling charge qualifies.
2. Update your checkout display. Show the qualifying fee as a distinct line item, separate from the product price and other charges. This helps make the fee identifiable to the customer.
3. Check the tax engine configuration. Confirm that Alabama sales tax is calculated on the taxable sale without the qualifying, separately stated fee. Test both card and other payment methods so the treatment follows the actual transaction.
4. Inspect invoices and receipts. Make sure the fee appears separately on the customer’s final receipt, not only in your payment processor’s records. A single combined total may make the full amount taxable.
5. Reconcile sales from September 1 onward. ALDOR says the treatment applies from September 1, 2026. Review transactions from that date, including those processed before the rule’s October 15 effective date, and compare checkout records with your tax reports.
6. Check your Alabama collection route. Review direct sales, marketplace sales, sales thresholds, inventory locations, registration, and returns. Confirm whether SSUT or standard Alabama sales tax applies to your circumstances.

Keep copies of configuration changes, sample receipts, transaction reports, and filed returns. Clear records help you explain why a fee was excluded if your calculations are reviewed.

For international sellers, this is a practical example of why sales tax compliance needs to connect checkout data with filing records. A UK ecommerce accountant or compliance team supporting U.S. sales should be able to track the fee treatment alongside your wider sales tax processes. Sterlinx Global supports ongoing accounting and compliance delivery for international businesses, including bookkeeping, tax calculations, and filings. Learn more about our ecommerce accounting and compliance support.

Frequently asked questions

Does the Alabama exclusion apply from September 1 or October 15, 2026?

Act 2026-587 took effect on September 1, 2026, and ALDOR says its treatment of qualifying fees applies to transactions from that date. October 15, 2026 is the effective date of amended Administrative Code Rule 810-6-3-.50, which sets out the “separate and identifiable” condition. October 15 is not the first date of the statutory exclusion.