(a) In addition to all other taxes now imposed by law, there is hereby levied and imposed a tax on the taxable income, as defined in this chapter, which tax shall be assessed, collected, and paid annually at the rate specified herein and for each taxable year as hereinafter provided. Persons and subjects taxable under this chapter are:
(1) Every individual residing in the State of Alabama.
(2) Every corporation domiciled in the State of Alabama or licensed or qualified to transact business in the State of Alabama.
(3) Every corporation doing business in the State of Alabama or deriving income from sources within the State of Alabama, including income from property located in the State of Alabama.
(4) Every nonresident estate or nonresident trust receiving income from property owned or business transacted in the State of Alabama.
(5) Every resident estate and resident trust.
(6) Every nonresident individual receiving income from property owned or business transacted in the State of Alabama, except as provided in Section 40-18-2.2.
(b) Every natural person domiciled in the State of Alabama, and every other natural person who maintains a permanent place of abode within the state or spends in the aggregate more than seven months of the income year within the state, shall be presumed to be residing within the state for the purposes of determining liability for income taxes under this chapter.
(Acts 1935, No. 194, p. 256; Code 1940, T. 51, §373; Act 98–502, p. 1083, §1; Act 2006-114, p. 173, §2; Act 2025-334, §1.)
Notes of Decisions
Prince v. State Dep't of Revenue, 55 So. 3d 273 (Ala. Civ. App. 2010).
· cites it 6× “net's sale of its assets, rather than by the sale of Prince's Zebra.net stock. Prince does not argue, and, thus, he has failed to demonstrate, that, when so characterized, the income he received was not derived "from property owned or business transacted in Alabama.”
CSX Transp., Inc. v. Alabama Dep't of Revenue, 888 F.3d 1163 (11th Cir. 2018).
“See Ala. Code § 40-18-2 (a). For these reasons, the State's reliance on Lawrence is misplaced and the federal excise tax on diesel fuel does not justify the exemption of water carriers from the State's sales and use tax on diesel fuel used for the interstate shipment of freight.”
Brown v. Bd. of Educ. of Montg. Cnty., 863 So. 2d 73 (Ala. 2003).
· cites it 2× “662 prohibit any such tax! Today, all occupational tax ordinances relying on Estes or Nachman that levy a tax on the gross receipts of individual earnings or on gross receipts of a business are "income taxes" under Amendments No.”
Lanzi v. Alabama Dept. of Revenue, 968 So. 2d 18 (Ala. Civ. App. 2006).
“Under § 40-18-2(6), "[e]very nonresident individual receiving income from property owned or business transacted in Alabama" is subject to an annual tax on that individual's "taxable income," a term that means "gross income" minus any deductions allowed to individuals (see §…”
Alabama Great S. R.R. Co. v. Eagerton, 541 F. Supp. 1084 (M.D. Ala. 1982).
“Each of the plaintiffs pays annually to the State of Alabama the following taxes: state ad valorem taxes imposed by § 40-7-1, Code of Alabama 1975; local (county and municipal) ad valorem taxes imposed by § 40-7-1, Code of Alabama 1975; state income taxes imposed by § 40-18-2,…”
Alabama Great S. R.R. v. Eagerton, 501 F. Supp. 1044 (M.D. Ala. 1980).
“Each of the plaintiffs pays annually to the State of Alabama the following taxes: state ad valorem taxes imposed by § 40-7-1, Code of Alabama 1975; local (county and municipal) ad valorem taxes imposed by § 40-7-1, Code of Alabama 1975; state income taxes imposed by § 40-18-2,…”
Brown v. Bd. of Educ., 863 So. 2d 73 (Ala. 2003).
· cites it 2× “662 prohibit any such tax! Today, all occupational tax ordinances relying on Estes or Nachman that levy a tax on the gross receipts of individual earnings or on gross receipts of a business are “income taxes” under Amendments No.”
Presley v. Dalton Logistics, 167 So. 3d 337 (Ala. Civ. App. 2014).
· cites it 2× “Although, by statute, Alabama resident individuals who derive income from sources both within and outside the state are allowed a credit for any income taxes actually paid to other states, see Ala.Code 1975, § 40-18-21(a), such extraterritorial income is nonetheless taxable to…”
CSX Transp., Inc. v. Alabama Dep't of Revenue, 886 F.3d 974 (11th Cir. 2018).
“See Ala. Code § 40-18-2 (a). For these reasons, the State's reliance on Lawrence is misplaced and the federal excise tax on diesel fuel does not justify the water carrier exemption from the State's sales and use tax.”
Alabama Dep't of Revenue v. Sonat, Inc., 752 So. 2d 1206 (Ala. Civ. App. 1997).
“*1210 Relying upon a literal construction of § 40-18-35(a)(14) in pari materia with §§ 40-18-2(2) and 40-18-2(3), Ala.Code 1975, Sonat argues that the dividends it received from SODI are deductible.”
State of Alabama v. William Ray Norris (Ala. Crim. App. 2023).
“Code 1975; and one count of a willful attempt to evade paying Alabama income tax, see §§ 40-18-2 and 40-29-110, Ala. Code 1975.”
— Ala. Code § 40-18-2(2) — 1 case
Alabama Dep't of Revenue v. Sonat, Inc., 752 So. 2d 1206 (Ala. Civ. App. 1997).
“*1210 Relying upon a literal construction of § 40-18-35(a)(14) in pari materia with §§ 40-18-2(2) and 40-18-2(3), Ala.Code 1975, Sonat argues that the dividends it received from SODI are deductible.”
— Ala. Code § 40-18-2(6) — 1 case
Lanzi v. Alabama Dept. of Revenue, 968 So. 2d 18 (Ala. Civ. App. 2006).
“Under § 40-18-2(6), "[e]very nonresident individual receiving income from property owned or business transacted in Alabama" is subject to an annual tax on that individual's "taxable income," a term that means "gross income" minus any deductions allowed to individuals (see §…”
— Ala. Code § 40-18-2(a)(1) — 1 case
Presley v. Dalton Logistics, 167 So. 3d 337 (Ala. Civ. App. 2014).
“Although, by statute, Alabama resident individuals who derive income from sources both within and outside the state are allowed a credit for any income taxes actually paid to other states, see Ala.Code 1975, § 40-18-21(a), such extraterritorial income is nonetheless taxable to…”
— Ala. Code § 40-18-2(a)(6) — 1 case
Prince v. State Dep't of Revenue, 55 So. 3d 273 (Ala. Civ. App. 2010).
“net's sale of its assets, rather than by the sale of Prince's Zebra.net stock. Prince does not argue, and, thus, he has failed to demonstrate, that, when so characterized, the income he received was not derived "from property owned or business transacted in Alabama.”
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