Local Option- Sales Tax Abatement for Renewable Energy Facilities

July 27, 2020


State of Alabama provides the option for local governments to provide exemptions or abatement for sales and use tax for qualifying renewable energy facilities in the State.  The state has a general sales tax of 4%, however, the renewable energy facilities qualify for 1.5% rate provision that is set for manufacturing and farm machinery. In addition to State sales tax, the local governments may also impose an additional sales or use tax. 

The exemption or abatement for both state and local sales/use tax are provided by the local granting authority. The local granting authority could be a city, county, or other local governing body depending on the site of the facility. The sales and use tax abatement shall not extend beyond the date the project is placed in service. The abatement only applies to the noneducational portion of the state and local tax. The incentive is available until the end of 2018. 


The Renewable Energy Facility is defined as any plant, property or property that either produces electricity from biofuels, or from renewable energy resources, including- wind, biomass, black liquor, tidal or ocean current, geothermal, solar energy, small irrigation, municipal solid waste, and hydrogen when derived or produced from some other renewable energy resource. Hydropower is exempted from the definition of eligible resource. 

Program Overview

Implementing Sector: State
Category: Financial Incentive
State: Alabama
Incentive Type: Sales Tax Incentive
Web Site: http://revenue.alabama.gov/taxincentives/abatecover.cfm
Administrator: Alabama Department of Revenue
Start Date:
Eligible Renewable/Other Technologies:
  • Solar Water Heat
  • Solar Photovoltaics
  • Wind (All)
  • Biomass
  • Municipal Solid Waste
  • Tidal
  • Ocean Thermal
  • Hydroelectric (Small)
  • Geothermal Direct-Use
Incentive Amount: 100% of the noneducational portion Sales and Use tax during construction


Name: Section 40-9B-1 "Tax Incentive Reform Act of 1992"
Expiration Date: 12/31/2018


Name: Alabama Department of Revenue
Phone: (334) 242-1175

This information is sourced from DSIRE; the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. Established in 1995, DSIRE is operated by the N.C. Clean Energy Technology Center at N.C. State University.