Alabama Code 51-90: Municipal Business License Fees and Renewal

If you run a business inside an Alabama city or within its police jurisdiction, you almost certainly need an Alabama municipal business license. The rules come from the Business License Reform Act of 2006, codified at Section 11-51-90 of the Alabama Code, which standardized the application, capped certain fees, and set the ground rules every municipality must follow. Licenses are annual, fees vary by city and by business type, and operating without one can bring fines up to $500 per day and jail time.¹

Who Needs a License

Alabama gives municipalities broad authority to require a license for essentially any business activity the state does not prohibit outright. Retail stores, professional practices, contractors, food vendors, service businesses of every size: if you are doing business inside the city, assume you need a license unless a specific exemption applies.²

The obligation extends past the city limits. Municipalities can also license businesses operating in the police jurisdiction, the unincorporated ring around the corporate limits. The rate there is capped at half of what the same business would pay inside the city.³

Each city sets its own fee schedule. A council can establish minimum and maximum amounts and different rate categories, so one municipality might charge a flat fee to small retailers and calculate larger businesses’ fees as a percentage of gross receipts. Two identical businesses in two different Alabama cities can pay very different amounts.

How to Apply

The 2006 reform created a standardized application form every municipality must accept. Cities can add supplemental instructions, but they cannot force you to start from scratch with an entirely different form when you cross a city line.²

The form asks for:

Business identity: legal name, trade name if different, form of ownership, and federal employer identification number.
Contact details: physical address, mailing address, phone, email, and a designated contact.
Ownership information: names, addresses, Social Security numbers (unless publicly traded), and titles of owners, partners, or the top five officers.
Operational details: a short description of your business, the date operations began (or will begin) in the municipality, number of local employees, and business type.
Tax information: Alabama tax account number, applicable tax types, and filing frequency.

An owner, partner, or officer signs the form. When the license fee depends on capital invested, stock values, or gross receipts, the city can require a sworn statement of those figures.²

What It Costs

Two separate charges appear on a municipal business license. The license tax is the substantive amount tied to your business category and size. The issuance fee is an administrative charge collected when the city actually issues the license.

The statute originally capped the issuance fee at $10 using 2006 as a base year. Every five years, the Alabama Department of Revenue adjusts that cap upward with the Producer Price Index. The current maximum issuance fee is $14.⁴ Some cities charge less, some charge nothing at all.

License terms cannot exceed one license year, so the license tax is an annual bill even when your fee is small.²

The Small Vendor Discount

Municipalities may (but are not required to) offer a reduced-cost small vendor license. If a city offers it and your gross receipts inside the municipality were $15,000 or less in the preceding license year, you may qualify. You also have to meet all of these:

You held a business license from the same municipality the prior year.
You made at least one sale or provided services in the municipality during every calendar quarter of the prior year.
You do not qualify for a delivery license under Section 11-51-194.

Where the classification is offered, the fee cannot exceed one percent of your local gross receipts for the prior year. On $12,000 in local receipts, that ceiling is $120.²

Important: a city that does not offer the small vendor category can still require a standard annual license from a business earning under $15,000 locally. The small vendor rule is a discount, not an exemption.

Renewal and Deadlines

Business licenses renew annually. Municipalities must mail or otherwise transmit a renewal reminder to every business that held a license during the previous year, to the taxpayer’s last known address, by December 31.¹

Renewals are typically due January 1. The delinquency date, when the late penalties kick in, varies by city and by license type. General business licenses in some cities do not become delinquent until mid-February, while alcohol licenses often carry earlier cutoffs.

Not receiving the reminder does not excuse a late renewal. If you moved, changed your business name, or got a new tax ID during the year, tell the city so notices reach you.

Penalties for Operating Unlicensed or Paying Late

Alabama treats unlicensed business activity as a criminal offense. Each violation is punishable by a fine of up to $500, imprisonment up to six months, or both, and every day of unlicensed operation counts as a separate offense.¹

Late payment carries automatic financial penalties. Miss the due date and the city adds 15 percent to the tax owed. If the tax and penalty still are not paid within 30 days of the original due date, that penalty rises to 30 percent. The two are not stacked; you pay one or the other.¹

Cities can also suspend or revoke the license of a business that is out of compliance, which shuts down the right to operate until things are resolved.

Businesses That Do Not Need a Municipal License

Alabama exempts a specific list of activities from municipal licensing. The main ones:

Farmers selling farm products they produced.
Farmers’ cooperatives organized under Alabama law that pay the required annual state fee.
State-licensed auctioneers.
Credit unions, which are exempt from all taxation other than property tax.
Small farm wineries, for sales or deliveries.
Charitable, civic, nonprofit, and educational institutions on the state’s exempt list.
Persons merely traveling through a municipality without operating a branch office or conducting business there.

The travel-through exemption, added by Act 2018-411, matters for trucking companies, delivery services, and traveling salespeople. Passing through town on the highway alone does not trigger a license requirement.⁵

Delivery License Instead of a Full License

Businesses that deliver goods into a municipality but keep no physical presence there can buy a delivery license under Section 11-51-194 instead of a full business license. Distributors and online retailers shipping into a city without an office, store, or warehouse are the typical users. The issuance fee for a delivery license is capped at $10.

Branch Offices

If your business operates a branch in a different municipality from your main location, the branch needs its own license. Alabama sets six criteria and requires all of them for a location to qualify as a branch office:²

A real physical facility (store, office, showroom, warehouse) outside the police jurisdiction of your principal office’s municipality, staffed by employees or contractors during normal hours.
Books that reasonably segregate or allocate gross receipts to that location.
Separate telephone listings, signage, or other public indicators of independent operation.
An employee or representative handling billing or collection for the branch, on-site or not.
All business claimed by the branch actually transacted through it; you cannot attribute revenue to a branch that did not generate it.
Proof that every applicable local license for the branch has been obtained.

Fail any of the six and the revenue gets attributed back to your principal location, which usually means a bigger fee at that address.

How Gross Receipts Are Calculated

Since so many license fees ride on gross receipts, the definition matters. Alabama treats gross receipts as all receipts from any source, to the maximum extent law allows. A few categories are pulled out:

Pass-through taxes such as sales tax, use tax, and utility gross receipts tax that you collect for a government and remit.
Capital transactions: proceeds from selling a capital asset, borrowing money, issuing stock, receiving capital contributions, or repayment of loan principal.
Investment income of parent companies: dividends and distributions from subsidiaries, plus undistributed subsidiary earnings.

Your fee for a given year is calculated on the prior license year’s gross receipts. New businesses starting mid-year project the receipts for the remainder of that year; if the projection runs too high or too low, the difference adjusts the following year’s calculation.¹

The State Business Privilege Tax Is a Separate Bill

A municipal business license and Alabama’s state Business Privilege Tax are two different obligations. Holding one does not satisfy the other. The BPT is an annual state tax owed by corporations, LLCs, and other entities doing business in Alabama. For tax years beginning after December 31, 2022, the minimum BPT for most taxpayers is $50, plus a $10 Secretary of State annual report fee for corporations, with larger entities paying more based on net worth.⁶ Handle both; paying one tells the other agency nothing.

1
Alabama Department of Revenue. Municipal Business License Reform Act of 2006
2
Alabama Legislature. Alabama Code 11-51-90 – Municipal Business Licenses; Branch Offices; Application
3
Alabama Legislature. Alabama Code 11-51-91 – Licenses for Business, Etc., Done Within Police Jurisdiction but Outside Corporate Limits
4
Alabama Department of Revenue. Five-Year Adjustment to Municipal Business License Issuance Fees
5
Alabama Department of Revenue. NOTICE: Municipal Business Licenses
6
Alabama Department of Revenue. Business Privilege Tax