Alabama business license: who needs one, what it costs, and how to get one

Businesses in Alabama usually need at least one business license, and often several, depending on the type of business. One of the first steps to starting a business is learning how to get a business license to ensure you’re meeting all the legal requirements for operation. The process for an Alabama business license requires checking with the county, city, and possibly state boards.

Does Alabama require a business license?

Yes. Alabama doesn’t have a single, general statewide business license, but state law requires a business privilege license for most business activities. This Alabama business license covers activities on the state’s license schedule and is issued at the county level. Cities have their own licensing requirements, so businesses with unlisted activities will still likely need a city license.

What is the Alabama business privilege license?

The business privilege license is the closest thing there is to a state of Alabama business license. It’s technically a state and county license issued by the county probate judge or license commissioner under Title 40 of the Code of Alabama.

You need a business privilege license in every county where you conduct business and for every business activity you carry out. To find your licensing office and learn about Alabama business license requirements, visit the Alabama Department of Revenue’s county probate office directory.

The Alabama state business license has two fees:

• A state fee set by the business classification
• A county fee, generally half the state fee

Business privilege licenses are valid from October 1 through September 30. The renewal period runs from October 1 through October 31, with renewals becoming delinquent on November 1.

Although similar in name, Alabama’s business privilege license is different from the state’s business privilege tax. The license authorizes a business to operate and is bought from the county. The business privilege tax is an annual tax filed with the Department of Revenue. They’re separate obligations from different offices, and paying one doesn’t cover the other.

Do you also need a city business license in Alabama?

In most cities, yes. Alabama’s business privilege license doesn’t cover city licensing, and the Department of Revenue doesn’t administer municipal licenses. Cities license businesses on their own schedules and fee formulas. Several of the largest cities base fee amounts on the type of business and gross receipts, including:

• Birmingham
• Huntsville
• Mobile
• Montgomery
• Tuscaloosa

Here’s a two-step check you can use:

1. Contact your county probate office for the business privilege license.
2. Check the city revenue or license office for the municipal license.

If your business operates in multiple cities, it may need a license in each one. For example, if you’re based in Huntsville but also do business in Athens, then you’d need a Huntsville, Alabama business license and an Athens, Alabama business license. Note also that city licensing schedules follow the calendar year, so they run on a different schedule than the business privilege license.

Some counties also require their own county-level business licenses, separate from the business privilege license. The Jefferson County Alabama business license is one example.

How to get an Alabama sales tax license

The Alabama Department of Revenue (ALDOR) issues the state’s sales tax license, its term for a resale certificate. Anyone selling taxable goods and services needs this license to collect and pay sales tax. The sales tax license in Alabama is different from the business privilege license.

Certain types of businesses also need other accounts through the sales tax system. For example, businesses involved in property leasing generally need a rental tax account, and businesses that provide short-term lodging need a lodging tax account. Out-of-state businesses that have nexus in Alabama need either a sellers use tax or simplified sellers use tax account.

You register for a sales tax license through My Alabama Taxes. Here’s how to do it:

1. Gather the required information. You’ll need your legal name, street address, contact information, officer or owner information, date of organization, and NAICS code. Corporations, partnerships, and LLCs need an employer identification number (EIN), while sole proprietors can use a Social Security number.
2. Complete the application in one sitting. It may take over half an hour to complete. You can’t save and come back later, which is why it’s important to have everything ready before you start.
3. Choose the tax types for your business. Select sales tax and any others that apply. The application also allows you to register for state-administered local taxes.
4. Wait for your account number. It normally takes the ALDOR three to five business days to process your application and issue your account number. After approval, you can print your tax account license from your My Alabama Taxes account.
5. Renew yearly. You renew your sales tax license online at My Alabama Taxes, and you must do so by December 31 every year.

Which Alabama occupations need a state license?

Many Alabama occupations require a license from a state board in addition to a privilege license and city license. Some of the most common include:

• Commercial construction: Licensed through the Alabama Licensing Board for General Contractors on commercial and multifamily projects of $100,000 or more, or for swimming pool construction of $5,000 or more.
• Residential construction: Licensed through the Home Builders Licensure Board for residential construction, remodeling, and repair that exceeds $10,000 (residential roofing work above $2,500 also requires a license).
• Electrical, HVAC, plumbing, and gas fitting: Each licensed through its own state board.
• Cosmetology and barbering: The Alabama Board of Cosmetology and Barbering licenses cosmetologists, barbers, estheticians, and manicurists, as well as their shops and schools.
• Real estate: Licensed through the Alabama Real Estate Commission.
• Businesses serving alcohol: Licensed through the Alabama Alcoholic Beverage Control (ABC) Board.
• Health and legal professions: Each licensed through its own state board.

Cleaning companies don’t need an occupational Alabama cleaning business license unless offering pest control or using pesticides, in which case they’re licensed through the Alabama Department of Agriculture and Industries.

Landscaping businesses may need a license depending on the services offered. Basic lawn care, such as mowing, weed eating, and routine maintenance, doesn’t require a license. If you plant trees, shrubs, or flowers for pay, you need a Horticulture Professional Services License. This landscaping business license in Alabama is only issued to businesses with a certified operator who has taken and passed the Setting of Landscape Plants (SLP) exam.

Professional landscape design and tree surgery require a Horticulture Professional Services License under a separate category. If you buy plants to set, sell, or provide to customers, even at no charge, you need a Nursery Dealer Certificate. Pesticide or herbicide application requires a commercial applicator license from the Alabama Department of Agriculture and Industries.

How to get a business license in Alabama in 6 steps

Here’s how to get a business license in Alabama:

1. Register your business with the Secretary of State. LLCs and corporations file formation documents with the Secretary of State. If you plan to do this yourself, Nav’s guide on how to start an LLC can help. There are also business formation services that handle the process for you. You don’t need to register if you’re a sole proprietor, but if you plan to operate under a trade name, you can register it with the Secretary of State.
2. Get an EIN. You can get an EIN online directly from the IRS in minutes. Corporations, partnerships, and LLCs need this to register for state taxes. Sole proprietors can use their Social Security number.
3. Register for tax accounts through My Alabama Taxes. Fill out an application for a sales tax license and any other types of tax accounts you need.
4. Buy the business privilege license from the county. Visit the probate office or license commissioner to check which license sections apply for your business and buy the appropriate licenses. Remember that you need to do this in every county where you do business.
5. Apply for the city license. Contact the revenue or license offices in the city where your business is located and any other cities where it operates. Some cities let you apply for an Alabama business license online (with the city, not the state/county business privilege license).
6. Check the state boards for occupational licenses. See if your business needs any occupational licenses from a state board before opening.

Once you have your Alabama business license, put the October renewal on your calendar so you renew on time and avoid a delinquency penalty.

Corporations and LLCs may also need to pay the business privilege tax to the Department of Revenue, with the initial return due two-and-a-half months after formation. Businesses with a tax due of $100 or less are exempt and don’t need to file a business privilege tax return.

How much does a business license cost in Alabama?

Alabama’s business privilege license costs a state fee, which is set by business classification, plus a county fee generally equal to half of it. Many state and county privilege licenses cost less than $50 combined, while some business types in large cities pay a few hundred dollars. If your business starts after April 1, you pay half the license fee for the remainder of the license year unless your license section says otherwise.

Additional licensing costs can include:

• City license: Most Alabama cities require business licenses. The cost typically depends on the city, business classification, and gross receipts.
• County license: Some counties may charge their own separate licensing fees on top of the business privilege license.
• Occupational licenses: Boards set their own licensing fees, which vary depending on the type of license.

The sales tax license is free through My Alabama Taxes.

Businesses are also responsible for filing fees and the business privilege tax. These are formation and tax costs rather than licensing costs, but you should budget for them, all the same.

How long does it take to get an Alabama business license?

The Alabama business privilege license is issued at the county probate or license office when you pay the licensing fee, so it’s normally issued on the same day or within days. City licenses generally take anywhere from a few days to several weeks, with many cities requiring zoning and inspections for businesses with a physical location, which extend the wait. A sales tax account takes three to five business days.

Occupational licenses often take the longest, generally weeks or months when exams are required. The range varies quite a bit, because each board sets its own exam schedule and review times.

Renewing an Alabama business license

Each type of business license in Alabama has its own renewal schedule:

• Business privilege license: The renewal period runs from October 1 through October 31, and licenses become delinquent on November 1. The renewal deadline is extended to November 2 in years when October 31 falls on a weekend. A late renewal has a 15% penalty on the license amount plus interest at the rate the state sets each quarter.
• City licenses: City licensing schedules follow the calendar year, with licenses expiring on December 31 and renewals due in January or February. Exact deadlines depend on the city. For example, Huntsville has a deadline of January 31, and Tuscaloosa has a deadline of February 15.
• Sales tax account: All sales and use tax licenses need to be renewed by December 31 through My Alabama Taxes. Renewals are open from November 1 through December 31. If you don’t renew, your sales tax license is canceled.

The business privilege tax is a separate annual filing obligation with the Department of Revenue for LLCs and corporations. It’s not a business license renewal.

Why licensing matters for financing and business credit

Licensing is legally required for most Alabama businesses, and it can also help lenders and credit bureaus verify your business when you apply for financing or build business credit. Lenders may require proof of business licensing during the application process. If a license is missing or expired, you could have trouble qualifying for business loans.

A properly licensed Alabama business is part of the same legitimacy foundation as a robust business credit file. It signals that your business is a real, separate entity to lenders, vendors, and other companies. Use the same legal name and address across licenses, registrations, and bank accounts for consistency, and because mismatched details can lead to verification issues for lenders offering business loans in Alabama and business credit bureaus.

The bottom line

Alabama has state- and county-level licensing through the business privilege license as well as separate city licensing — new businesses should buy the privilege license before opening and be ready to renew yearly in October. The privilege license isn’t the same as the privilege tax, and it’s important to keep both straight and stay on top of each obligation. Once you’ve set up your Alabama business, Nav offers tools to help you work toward building business credit and compare financing options.

Learn how to get a business license in another state:

• How to get a business license in California
• How to get a business license in Florida
• How to get a business license in Georgia
• How to get a business license in Nevada
• How to get a business license in New York
• How to get a business license in Texas
• How to get a business license in Washington state

Frequently asked questions