Alabama Telecom Tax: Rates, Fees, And Rules

Quick Facts

How Alabama Taxes Telecom Services

The utility gross receipts tax is a privilege or license tax on every utility furnishing telephone or telegraph services in Alabama, levied under Code of Alabama Section 40-21-82(b) at a flat 6% of gross sales or gross receipts. The flat rate took effect with bills dated on or after April 1, 2002, replacing a graduated schedule that ran as high as 6.7%. Section 40-21-86 directs the provider to add the tax to the price billed to the customer, so the line item on the invoice is required by statute. The provider keeps one-fourth of 1% of the tax billed as a collection allowance and files monthly through My Alabama Taxes by the 20th.

The base is broad. Department of Revenue Rule 810-6-5-.26 includes local telephone service, intrastate toll service, private communications service, teletypewriter and computer exchange service, and telephone services resold by hotels, colleges, and hospitals. Since February 1, 2002 it also includes interstate telephone service that originates or terminates in Alabama and is charged to an Alabama service address. Wireless does not run through this tax: cellular, personal communications service, paging, and specialized mobile radio fall under the separate mobile telecommunication services tax, also 6%, sourced to the customer's place of primary use in Alabama.

The exclusions matter as much as the rate. The telephone services base leaves out internet access charges, sales for resale, charges for customer premises equipment, pay telephone service, prepaid calling cards, and ancillary services such as directory advertising, installation, and repair. A reseller claims the resale exclusion by giving its supplier a record of its utility tax license or a utility tax certificate of exemption, Form STE-3, issued by the Department of Revenue. One trap: since May 5, 2004, nontaxable charges bundled with taxable telephone charges and not separately stated are taxed in full unless the provider's books reasonably identify the exempt portion.

The utility service use tax closes the loop. It applies the same 6% to telephone and telegraph services stored, used, or consumed in Alabama, and when federal law bars a seller from collecting it, the buyer pays the Department of Revenue directly. The result is one rate on wireline, wireless, and consumption, each under its own statute and return.

A separate local layer sits outside all three state taxes. Code of Alabama Section 11-51-128 lets a municipality charge a business license tax on any company operating a telephone exchange or long distance lines within its limits, for the privilege of doing intrastate business there. The statute caps the amount rather than sets it: a flat annual figure tied to the municipality's population under the preceding federal census, running from $15 for an exchange license in a town of 500 or fewer people up to $12,000 in a city over 175,000, with a smaller parallel schedule for long distance licenses. Each municipality's own ordinance sets the figure it actually charges within that ceiling, so the number varies by location and is a business license cost rather than a line item state law requires on the customer's bill.

911 And Other Per-Line Fees

Alabama funds 911 through a single statewide charge that the Alabama 911 Board sets under Code of Alabama Section 11-98-5. The charge applies to each active voice communications service connection in Alabama that is technically capable of reaching a 911 system: wireline, wireless connections with a place of primary use in the state, and interconnected VoIP, which Section 11-98-1 folds into the definition of voice communications service. The current amount is $2.23 per month, effective January 1, 2024, up from the $1.86 set in 2019. The board reviews the amount on a five-year cycle tied to the consumer price index, and its most recent adjustment came on October 1, 2023, so treat the figure as a moving target. Providers keep a 1% administrative allowance and remit through the board's online portal.

Two structural rules shape multi-line billing. For a DS-1 or equivalent digital link, the charge applies per channel configured for or capable of reaching 911. The board also sets a cap on the number of wireline charges at a single subscriber location; confirm the current cap with the board before billing against it.

Prepaid wireless pays at the register instead. Each retail transaction in Alabama carries a $2.23 prepaid wireless 911 charge, effective January 1, 2024. The charge is the consumer's liability, the seller collects it and keeps 4%, and the Department of Revenue administers collection under its sales tax procedures before passing the funds to the 911 Board. Small transactions of 10 minutes or less, or five dollars or less, can fall outside the charge.

One charge that used to sit on this part of the bill is gone. From 1988 the state funded its Dual Party Relay system, which serves callers who are deaf, hard of hearing, or speech impaired, through a $0.15 monthly charge on each landline. The Public Service Commission announced on January 8, 2019 that it was eliminating the charge, after the relay fund built up reserves the commission estimated would cover at least eight more years of the program without further collection.

Taxability By Service Type

• Local and intrastate toll telephone service: taxable at 6% under the utility gross receipts tax.
• Interstate calls: taxable at 6% when the call originates or terminates in Alabama and is charged to an Alabama service address.
• Mobile services (cellular, personal communications service, paging, specialized mobile radio): taxable at 6% under the mobile telecommunication services tax, sourced to the customer's place of primary use.
• VoIP: subject to the utility telecommunications tax; the Department of Revenue states that telephony using internet protocol gets no shelter from the federal moratorium. The statewide 911 charge applies to each interconnected VoIP connection.
• Sales for resale, including access charges paid by an interexchange carrier: excluded when the buyer documents the purchase with a utility tax license record or Form STE-3.
• Internet access: excluded from the utility gross receipts tax and the utility service use tax, and protected by the federal Internet Tax Freedom Act.
• Customer premises equipment, pay telephone service, prepaid calling cards, and ancillary services such as directory advertising, installation, and repair: outside the telephone services base.
• Prepaid wireless: no monthly 911 charge; a $2.23 charge applies to each retail transaction instead.
• Landline voice service: no longer carries the dual party relay charge, which the Public Service Commission eliminated effective January 8, 2019.

How CereTax Handles Alabama

Alabama's difficulty is the base tests, not a rate stack. Every invoice needs the interstate service-address test applied call by call, the internet access and resale exclusions carved out cleanly, separately stated charges that survive the bundling rule, and the right 911 mechanism for postpaid, prepaid, and multi-channel circuits. CereTax assigns each charge to the right jurisdiction at the rooftop level, applies Alabama's base rules by service type, and keeps an audit trail behind every calculation. If you serve customers in Alabama, book a demo and bring a real invoice.

For the full evaluation checklist, see what a telecom tax engine should do.

Sources

• Alabama Department of Revenue, utility gross receipts tax, tax type page and FAQ. Accessed August 28, 2026.
• Alabama Department of Revenue, utility service use tax FAQ. Accessed August 28, 2026.
• Alabama Department of Revenue, mobile telecommunication services tax FAQ. Accessed August 28, 2026.
• Alabama Department of Revenue, Sales and Use Tax Rule 810-6-5-.26, Utility Privilege or License Tax. Accessed August 28, 2026.
• Alabama Department of Revenue, Internet Tax Freedom Act FAQ. Accessed August 28, 2026.
• Alabama Department of Revenue, prepaid wireless 9-1-1 charge, tax type page and 2024 rate notice. Accessed August 28, 2026.
• Alabama 911 Board, 9-1-1 fee remittance page. Accessed August 28, 2026.
• Alabama 911 Board, posted text of Code of Alabama Sections 11-98-1, 11-98-5, and 11-98-5.3. Accessed August 28, 2026.
• Alabama Legislature, Code of Alabama, Section 11-51-128, Telephone Companies. Accessed August 28, 2026.
• Alabama Public Service Commission, press release, "Alabama Public Service Commission Announces a Tax Cut for Consumers," January 8, 2019. Accessed August 28, 2026.
• Internet Tax Freedom Act, 47 U.S.C. § 151 note.

See how other states compare on the telecom tax by state hub.

Note: Always confirm current rates and filing obligations directly with the state’s DOR, PUC, or 911 authority before applying charges or remitting payments.