Alabama Business Privilege Tax: What LLCs & Business Owners Need to Know in 2026

If you own an LLC or corporation in Alabama, the Business Privilege Tax (BPT) is one of the compliance items most likely to catch you off guard, but the rules changed in a way that helps many small businesses. Here is the plain-English version, current for 2026.

At Colvin & Sawyer Law Offices, founding attorney Christopher Colvin provides practical business counsel for owners across Birmingham, Mountain Brook, Hoover, Vestavia Hills, and throughout Alabama. We are not your tax preparer, that is your CPA's role, but we walk every business client through where the BPT fits in staying compliant and protecting the liability shield you formed your entity to get.

What Is the Alabama Business Privilege Tax?

The Alabama Business Privilege Tax is an annual tax imposed under Alabama Code Section 40-14A on the privilege of doing business in Alabama as a formal entity. It applies to Alabama LLCs, corporations (C and S), limited partnerships, limited liability partnerships, business trusts, and out-of-state entities registered to do business here. It is filed with the Alabama Department of Revenue (ALDOR), not the Secretary of State.

Who does not owe it: sole proprietorships and general partnerships (which are not registered entities), and qualifying nonprofits. If you have not formed an LLC or corporation, you generally are not in the BPT system, one of several trade-offs covered in Sole Proprietor vs. LLC in Alabama.

The 2024 Change: The $100-or-Less Exemption

This is the update most articles (and most business owners) have not caught up with. For tax years beginning after December 31, 2023, Alabama created a full exemption from the Business Privilege Tax on any tax calculated at $100 or less (Act 2022-252). If your calculated BPT is $100 or less, you owe nothing and you are not required to file the return at all.

Here is the history that causes confusion: the old minimum tax was $100 for every entity. A 2022 law dropped it to $50 for the 2023 year, then the $100-or-less exemption took over for 2024 and beyond. So depending on which article you read, you will see $100, $50, or "repealed." The current, correct answer for 2026 is: calculated tax of $100 or less means no tax and no return.

Important nuance: the tax itself was not repealed. Entities whose calculated tax exceeds $100 still file and pay as before. The exemption removed the smallest filers from the system; it did not end the BPT.

Who Still Has to File and Pay?

You still file a Business Privilege Tax Return if your calculated tax comes out above $100. Because the tax is based on net worth, this generally means businesses with meaningful accumulated net worth. A brand-new LLC with little net worth often calculates at or below $100 and owes nothing, while an established company with significant retained earnings and assets will owe and must file.

How Is the Alabama Business Privilege Tax Calculated?

The BPT is based on your entity's net worth apportioned to Alabama, multiplied by a rate that is tied to your federal taxable income. It is not a flat fee. The rate ranges from $0.25 to $1.75 per $1,000 of net worth: lower federal taxable income means a lower rate per $1,000, higher income means a higher rate, up to the $1.75 maximum rate.

Component	How it works
Tax base	Net worth apportioned to Alabama (Schedule BPT-NW)
Rate	$0.25 to $1.75 per $1,000 of net worth, set by your federal taxable income
Exemption	Calculated tax of $100 or less: no tax, no return
Maximum	$15,000 for most entities (higher for financial institutions and insurance companies)

Simple example: a small Alabama LLC with modest net worth and low taxable income might calculate a tax well under $100, meaning it owes nothing and files nothing. A larger company with substantial net worth could land anywhere from a few hundred dollars up to the $15,000 cap. Because the calculation involves your net worth schedule and apportionment, this is the part where a CPA earns their fee.

When Is the Alabama Business Privilege Tax Due?

BPT due dates track your federal return due date, which means they differ by entity type:

• S-corporations and limited liability entities (LLCs taxed as partnerships or S-corps): generally March 15 for calendar-year filers
• C-corporations: generally April 15 for calendar-year filers
• Newly formed entities: a new entity whose initial tax calculates to more than $100 must file an Initial Business Privilege Tax Return (Form BPT-IN) within 2.5 months of formation, printed and mailed, not filed online. As with the annual return, if the calculated tax is $100 or less there is no filing requirement. This early deadline catches many new owners off guard.

If you are just starting out, the initial-return deadline is the one to calendar immediately. See How to Form an LLC in Alabama for where this fits in the startup checklist.

How Do You File and Pay?

Annual returns (Form CPT for C-corporations, Form PPT for pass-through entities) are filed with ALDOR, and most owners file and pay online through My Alabama Taxes (MAT). The one exception is the initial return (Form BPT-IN), which must be mailed. You will need your ALDOR-issued BPT account number (separate from your federal EIN), your net worth figures, and your federal taxable income. If your calculated tax is $100 or less, you skip filing entirely, but keep your calculation in your records to show why.

Business Privilege Tax vs. Business License vs. Annual Report

These three get tangled together constantly, so here is the distinction:

• Business Privilege Tax: the annual state tax described on this page, filed with ALDOR.
• Business (privilege) license: a local city and county license to operate, separate from the state tax. Alabama has no single statewide business license; you get these where you operate.
• Secretary of State annual report: Alabama eliminated the corporate annual report requirement effective October 1, 2024 (Act 2024-213). It used to be filed alongside the BPT return; it no longer exists. If an old guide tells you to file an annual report with your BPT, that guide is out of date.

What Happens If You Do Not File?

If your calculated tax is over $100 and you fail to file, the consequences are real:

• Penalties and interest on the unpaid tax
• Loss of good standing with the state
• Administrative dissolution, Alabama can dissolve your entity for prolonged noncompliance
• Risk to your liability protection, once an entity is administratively dissolved, its good standing and the protections that depend on it are put at risk, which can expose owners in ways the entity was formed to prevent

A quick but important clarification: administrative dissolution does not automatically convert every business debt into your personal debt in all circumstances, whether owners face personal exposure depends on the facts. But it removes the clean, reliable protection a properly maintained entity provides, which is exactly the risk you formed the entity to avoid. If your entity has fallen out of good standing, talk to an attorney about restoring or properly closing it.

And note: the obligation continues every year the entity exists, until you formally dissolve or withdraw it with the Secretary of State and obtain a Certificate of Compliance from ALDOR. An inactive LLC you stopped using still has to be properly closed, or it keeps accruing obligations.

Common Business Privilege Tax Mistakes

• Assuming you must pay the old $100 minimum, when a calculated tax of $100 or less now means zero
• Missing the initial return due 2.5 months after formation
• Confusing the BPT with a local business license and skipping one or the other
• Still trying to file the repealed annual report
• Assuming an inactive LLC has no obligations, it does, until formally dissolved
• Using an outdated guide, many still show the pre-2024 rules

Birmingham and Jefferson County Business Owners

For business owners in Birmingham and across Jefferson County, the BPT is one piece of staying compliant, alongside local business licenses, your operating agreement, and the contracts your business runs on. If you would rather have an attorney make sure the whole compliance picture is right, not just the tax, our Birmingham business attorney page explains how we help, and our Alabama business law practice covers formation, operating agreements, and ongoing counsel.

When to Call an Attorney vs. a CPA

Straightforward answer: for calculating and filing your Business Privilege Tax, a CPA or tax preparer is usually the right call, that is squarely their work. An attorney is who you want when the BPT intersects with legal questions: whether your entity is set up correctly, restoring an entity that lost good standing, properly dissolving one you are done with, or making sure your compliance gaps have not quietly exposed your personal assets. Many Alabama business owners need both, working together.