Revenue, Alabama Department of – Repeal and Replace Rule 810-6-1-.196 Proposal

TRANSMITTAL SHEET FOR NOTICE

OF INTENDED ACTION

Control:

810

Department or Agency:

Alabama Department of Revenue

Rule No.:

810-6-1-.196

Rule Title:

Withdrawals From Inventory

Intended Action

Repeal and Replace

Would the absence of the proposed rule significantly harm or

endanger the public health, welfare, or safety?

Is there a reasonable relationship between the state’s police

power and the protection of the public health, safety, or welfare?

Yes

Is there another, less restrictive method of regulation available

that could adequately protect the public?

Does the proposed rule have the effect of directly or indirectly

increasing the costs of any goods or services involved?

To what degree?: N/A

Is the increase in cost more harmful to the public than the harm

that might result from the absence of the proposed rule?

Are all facets of the rule-making process designed solely for the

purpose of, and so they have, as their primary effect, the

protection of the public?

Yes

Does the proposed action relate to or affect in any manner any

litigation which the agency is a party to concerning the subject

matter of the proposed rule?

Does the proposed rule have an economic impact?

If the proposed rule has an economic impact, the proposed rule is required to be

accompanied by a fiscal note prepared in accordance with subsection (f) of Section

41-22-23, Code of Alabama 1975.

Certification of Authorized Official

I certify that the attached proposed rule has been proposed in full compliance

with the requirements of Chapter 22, Title 41, Code of Alabama 1975, and that it

conforms to all applicable filing requirements of the Administrative Procedure

Division of the Legislative Services Agency.

Signature of certifying officer

Cameran Clark

Date

Friday, April 19, 2024

APA-1

REC’D & FILED

APR 19, 2024

LEGISLATIVE SVC AGENCY

ALABAMA DEPARTMENT OF REVENUE

NOTICE OF INTENDED ACTION

AGENCY NAME: Alabama Department of Revenue

RULE NO. & TITLE: 810-6-1-.196 Withdrawals From Inventory

INTENDED ACTION: Repeal and Replace

SUBSTANCE OF PROPOSED ACTION:

Pursuant to the Red Tape Reduction Act 2013-88, this rule has been reviewed and

rewritten to add titles and provide better clarity to taxpayers relating to

taxable transactions for withdrawals from inventory.

TIME, PLACE AND MANNER OF PRESENTING VIEWS:

A public hearing will be conducted at 1:30 P.M. on Tuesday, June 04, 2024, via

web-conference. To participate in the upcoming web-conference public hearing

please contact the Tax Policy and Governmental Affairs Division at

[email protected] or 334-242-1380 to obtain the appropriate sign-in

information for a specific public hearing date. Copies of the rule(s) can be

obtained at http://www.revenue.alabama.gov/tax-policy/.

All interested parties may present their views in writing to the Secretary of the

Alabama Department of Revenue, Room 4131, Gordon Persons Building, 50 N Ripley

Street, Montgomery, Alabama 36132 at any time following publication of the notice

up until the conclusion of the hearing. Interested parties may also may present

their views during the web-conference.

FINAL DATE FOR COMMENT AND COMPLETION OF NOTICE:

Tuesday, June 4, 2024

CONTACT PERSON AT AGENCY:

Meagan Barrett

Alabama Department of Revenue

4131 Gordon Persons Building

Montgomery, Alabama 36132

(334) 242-1380

Cameran Clark

(Signature of officer authorized

to promulgate and adopt

rules or his or her deputy)

APA-2

810-6-1-.196 Withdrawals From Inventory.

(1) Except as noted in paragraphs (2), (3) and (4) below, all

withdrawals of tangible personal property from inventory are

taxable under the withdrawal provisions of the sales tax statute

unless the property has been previously withdrawn from the

inventory and the sales tax has been paid because of the

previous withdrawal or unless the property withdrawn enters into

and becomes an ingredient or component part of tangible personal

property or products manufactured or compounded for sale and not

for the personal and private use or consumption of the person

withdrawing same. (Ex parte Sizemore, 605 So. 2d 1221 (Ala.

1992))(Sections 40-23-1(a)(6), 40-23-1(a)(8), 40-23-1(a)(10),

and 40-23-60(5), Code of Ala. 1975).

(2) The transactions in (a) and (b) below shall not be deemed or

considered to constitute a transaction subject to sales tax.

Qualified charitable entities listed in 26 U.S.C. Sections

170(b) or (c) are defined in (c) below.

(a) Pursuant to Section 40-23-1(e), the withdrawal, use, or

consumption of a manufactured product by the manufacturer

thereof in quality control testing performed by employees or

independent contractors of the manufacturer, nor a gift by

the manufacturer of a manufactured product, withdrawn from

the manufacturer's inventory, to an entity listed in 26

U.S.C. Sections 170(b) or (c).

(b) Pursuant to Section 40-23-23-1(f), effective July 1,

2006, a gift by a retailer of a product or products

withdrawn from the retailer’s inventory to a qualified

charitable entity listed in 26 U.S.C. Sections 170(b) or

(c), where the aggregate retail value of any single gift is

equal to or less than $10,000.00.

Sections 170(b) or (c) include, but are not limited to the

following:

1. a church, or a convention or association of churches;

2. an educational organization which normally maintains

a regular faculty, curriculum, and enrolled body of

students;

3. a hospital or a medical research organization which

provides medical or hospital care, medical education, or

medical research as their primary purpose or function;

4. an organization which normally receives a substantial

part of its support from the United States or any State

or political subdivision thereof or from direct or

indirect contributions from the general public, and

which is organized and operated for the benefit of a

college or university referenced in 2. above;

5. a governmental unit that is a State or a possession

of the United States and any political subdivision of

any of the foregoing, the United States, or the District

of Columbia, which uses the gift exclusively for public

purposes;

6. a corporation, trust, or community chest, fund, or

foundation created or organized in the United States or

in any possession thereof or under the laws thereof, and

organized and operated exclusively for religious,

charitable, scientific, literary, or educational

purposes, or to foster national or international amateur

sports competition, or for the prevention of cruelty to

children or animals, and which normally receives a

substantial part of its support from governmental

units referenced in 5. above or from direct or indirect

contributions from the general public;

7. a private foundation described in 26USC170(b)(1)(E);

and

8. an organization described in 26USC509(a)(2).

(3) Sales of equipment, accessories, fixtures, and other similar

tangible personal property used in connection with a sale of

commercial mobile services as defined in Section 40-23-1(a)(6)

or in connection with satellite television services, at a price

below cost, are not taxable as a withdrawal. Instead, sales of

this nature are retail sales and are taxable measured only by

the seller’s stated retail selling price. (Sections 40-23-1(a)

(6) and 40-23-1(a)(10)).

(4) Refinery, residue, or fuel gas, whether in a liquid or

gaseous state, that has been generated by, or is otherwise a by-

product of, a petroleum-refining process, which gas is then

utilized in the process to generate heat or is otherwise

utilized in the distillation or refining of petroleum products

is not taxable under the withdrawal provisions of the sales or

use tax statutes. (Sections 40-23-1(a)(6), 40-23-1-(A)(8), and

40-23-7=60(5)).

(5) The sales tax due on taxable withdrawals shall be computed

and paid by the person, firm, or corporation withdrawing the

property. The measure of the sales of tax due on taxable

withdrawals is the price paid for the property by the person,

firm, or corporation withdrawing same. Alabama sales tax becomes

due at the time and place of the withdrawal of tangible personal

property from inventory. Alabama sales tax is due on tangible

personal property withdrawn from inventory in Alabama regardless

of where the property so withdrawn is used or consumed.

(6) Withdrawals of building materials by a contractor who makes

retail sales of building materials and who also withdraws

building materials from the same stock of goods for use in

fulfilling a contract for making additions, alterations, or

improvements to realty are taxable to the person, firm, or

corporation making the withdrawals. The measure of sales tax due

on these withdrawals is the price paid for the building

materials by the person, firm, or corporation withdrawing same.

Alabama sales tax becomes due on these of building materials at

the time and place of the withdrawals. Alabama sales tax is due

on building materials withdrawn from stock in Alabama for use in

fulfilling contracts both inside and outside the State of

Alabama.

Author: Donna Joyner

Statutory Authority: Code of Ala. 1975, §§40-2A-7(a)(5),

40-23-1(a)(6), 40-23-1(a)(8), 40-23-1(a)(10), 40-23-1(e),

40-23-31, 40-34-60(5), 40-23-83.

History: Filed January 15, 1993; April 15, 1993. Amended:

Filed December 1, 1995; effective January 5, 1996. Amended:

Filed November 18, 1999; effective December 23, 1999. Amended:

Filed August 24, 2007; effective September 28, 2007.

810-6-1-.196 Withdrawals From Inventory.

(1) Taxable Transactions. Unless specifically exempted by law,

withdrawals of tangible personal property from inventory are

taxable under the withdrawal provisions of the sales tax

statute.

(a) The sales tax due on taxable withdrawals are computed

and paid by the person, firm, or corporation withdrawing the

property.

(b) The measure of the sales tax due on taxable withdrawals

is the price paid for the property by the person, firm, or

corporation making the withdrawal.

that tangible personal property is withdrawn from inventory.

(d) Alabama sales tax is due on tangible personal property

withdrawn from inventory in Alabama, regardless of where the

withdrawn property is used or consumed.

(e) Withdrawals of building materials by a contractor who

makes retail sales of building materials and who also

withdraws building materials from the same stock of goods

for use in fulfilling a contract for making additions,

alterations, or improvements to realty are taxable to the

person, firm, or corporation withdrawing the property. The

measure of sales tax due on these withdrawals is the price

paid for the building materials by the person, firm, or

corporation making the withdrawals. Alabama sales tax

becomes due on these building materials at the time and

place of the withdrawals. Alabama sales tax is due on

building materials withdrawn from stock in Alabama for use

in fulfilling contracts both inside and outside of the

state.

(2) Exemptions. The transactions in this paragraph shall not be

deemed or considered to constitute a transaction subject to

sales tax.

(a) The withdrawal, use, or consumption of a manufactured

product by the manufacturer of such product in quality

control testing performed by employees or independent

contractors of the manufacturer.

(b) A gift by the manufacturer of a manufactured product,

withdrawn from the manufacturer's inventory to an entity

listed in 26 U.S.C. Section 170(b) or (c).

from the retailer’s inventory to a qualified charitable

entity listed in 26 U.S.C. Section 170(b) or (c), where the

aggregate retail value of any single gift is equal to or

less than $10,000.

(d) Refinery, residue, or fuel gas, whether in a liquid or

gaseous state, that has been generated by, or is otherwise a

by-product of, a petroleum-refining process, which gas is

then utilized in the process to generate heat or is

otherwise utilized in the distillation or refining of

petroleum products.

(e) The property has been previously withdrawn from the

inventory and the sales tax has been paid because of the

previous withdrawal.

(f) The property withdrawn enters into and becomes an

ingredient or component part of tangible personal property.

(g) Products manufactured or compounded for sale and not for

the personal and private use or consumption of the person

making the withdrawal.

(3) Exceptions. Sales of equipment, accessories, fixtures, and

other similar tangible personal property used in connection with

a sale of commercial mobile services as defined in §40-23-1,

Code of Ala. 1975, or in connection with satellite television

services, at a price below cost, are not taxable as a

withdrawal. Instead, sales of this nature are retail sales and

are taxable measured only by the seller’s stated retail selling

price.

Author: Donna Joyner and Christy Vandevender

Statutory Authority: Code of Ala. 1975, §§40-2A-7(a)(5),

40-23-1(a)(6), 40-23-1(a)(8), 40-23-1(a)(10), 40-23-1(e),

40-23-31, 40-34-60(5), 40-23-83. Ex Parte Sizemore, 605 So. 2d

1221 (Ala. 1992)

History: Filed January 15, 1993; April 15, 1993. Amended:

Filed December 1, 1995; effective January 5, 1996. Amended:

Filed November 18, 1999; effective December 23, 1999. Amended:

Filed August 24, 2007; effective September 28, 2007. Repealed

and New Rule: Published ______; effective ______.