§ 40-12-223 — Exemptions

There are exempted from the computation of the amount of the tax levied, assessed, or payable under this article all of the following:
(1) The gross proceeds accruing from the leasing or rental of a film or films to a lessee who charges, or proposes to charge, admission for viewing the film or films.
(2) The gross proceeds accruing from any charge in respect to the use of docks or docking facilities furnished for boats or other craft operated on waterways.
(3) The gross proceeds accruing from any charge made by a landlord to a tenant in respect of the leasing or furnishing of tangible personal property to be used on the premises of real property leased by the same landlord to the same tenant for use as a residence or dwelling place, including mobile homes.
(4) The gross proceeds accruing from the leasing or rental of tangible personal property to a lessee who acquires possession of the property for the purpose of leasing or renting to another the same property under a leasing or rental transaction subject to this article.
(5) The gross proceeds accruing from any charge made by a landlord to a tenant in respect to the leasing or furnishing of tangible personal property to be used on the premises of any room or rooms, lodging, or accommodations leased or rented to transients in any hotel, motel, inn, tourist camp, tourist cabin, or any other place in which rooms, lodgings, or accommodations are regularly furnished to transients for a consideration.
(6) The gross proceeds accruing from the leasing or rental of tangible personal property which the state is prohibited from taxing under the Constitution or laws of the United States or under the Constitution of Alabama of 2022.
(7) The gross proceeds accruing from the leasing or rental of nuclear fuel assemblies together with the nuclear material contained therein and other nuclear material used or useful in the production of electricity and assemblies containing ionizing radiation sources together with the ionizing radiation sources contained therein used or useful in medical treatment or scientific research.
(8) A transaction in which the lessor leases a truck or tractor-trailer or semitrailer for operation over the public roads and highways and such lessor furnishes a driver or drivers for each vehicle, and the transaction shall be deemed to constitute the rendition of service and not a “leasing or rental” within the meaning of this article.
(9) The gross proceeds accruing from the leasing or rental of vehicles in interchange between regulated motor carriers on a per diem basis.
(10) The gross proceeds accruing from the leasing or rental of all structures, devices, facilities, and identifiable components of any thereof acquired primarily for the control, reduction, or elimination of air or water pollution, and the gross proceeds accruing from the leasing or rental of all materials used or intended for use in structures built primarily for the control, reduction, or elimination of air and water pollution.
(11) The gross proceeds derived by the lessor, which term includes a sublessor, from the leasing or rental of tangible personal property when the lessor and lessee, which term includes a sublessee, are wholly-owned subsidiary corporations of the same parent corporation or one is the wholly-owned subsidiary of the other; provided, that the appropriate sales or use tax, if any was due, has been paid on the item of personal property; and provided further, that in the event of any subsequent subleasing of the tangible personal property to any person other than any sister, parent, or subsidiary corporation, any privilege or license tax due and payable with respect to that subsequent subleasing under the provisions of this article shall be paid.
(12) The gross proceeds accruing from a transaction that involves the leasing or rental of vessels or railroad equipment which are engaged in interstate or foreign commerce, or both.
(13) The gross proceeds accruing from the leasing or rental of aircraft, replacement parts, components, systems, sundries, and supplies affixed or used on the aircraft and all ground support equipment and vehicles used by or for the aircraft to or by a certificated or licensed air carrier with a hub operation within this state, for use in conducting intrastate, interstate, or foreign commerce for transporting people or property by air. For the purpose of this subdivision, the words “hub operation within this state” shall be construed to have both of the following criteria:
a. There originates from the location 15 or more flight departures and five or more different first-stop destinations five days per week for six or more months during the calendar year.
b. Passengers, property, or both are regularly exchanged at the location between flights of the same or a different certificated or licensed air carrier.
(14) The gross proceeds derived by the lessor, which term includes a sublessor, from the leasing of tangible personal property under all of the following conditions:
a. Prior to being leased under the lease subject to this exemption, the leased tangible personal property shall have been owned, or considered to be owned, for either Alabama or federal income tax purposes or both, or subject to acquisition pursuant to a binding contract, by the lessee or by a corporation, partnership, or other entity controlled by, or under common control with, the lessee.
b. The leased tangible personal property, or the right to ownership thereof, shall have been acquired by the lessor from the lessee or a corporation, partnership, or other entity controlled by, or under common control with, that lessee and leased back to the lessee under a lease that is considered a lease and not a sale for either Alabama or federal income tax purposes, or both, and that has a term of not less than 15 years, except that the lessor and the lessee may agree in the lease or any subsequent amendment thereof for the termination of the lease on any date through purchase of the leased tangible personal property by the lessee, which right to purchase the property shall be exercisable solely at the option of the lessee.
c. The appropriate sales or use tax levied by the state shall have been paid with respect to the acquisition or use of the leased tangible personal property, or, alternatively, the acquisition or use of that property shall be exempt by law from such sales or use tax.
d. The leased tangible personal property shall be installed in or about an industrial plant or other real property that was specially constructed or modified for the location and use of the tangible personal property and that is owned, or considered to be owned, for either Alabama or federal income tax purposes, or both, by a corporation, partnership, or other entity controlled by, or under common control with, the lessee of such tangible personal property.
e. The leased tangible property shall be used only by a lessee engaged in the iron and steel industry, and the exemption from the tax levied by this article shall apply only to the gross proceeds derived from leases that become binding contracts of the parties thereto within 180 calendar days following the date on which the act adding the exemption contained in this subdivision shall become effective.
(15) The gross proceeds accruing from a motor vehicle lease transaction for a duration of at least 180 days with the federal government, or any state, county, or municipal entity within the state, including a public school board or an individual public school, or any entity eligible for a sales tax exemption under federal law or Section 40-23-5.
(16)a. The gross receipts from the leasing or rental of aircraft replacement parts, components, systems, sundries, and supplies affixed to, used on, or that became part of, aircraft brought into the state and used, or to be used, by a certified or licensed air carrier to undergo conversion, reconfiguration, or general maintenance while temporarily within this state.
1. Under this subdivision, an aircraft shall be considered not permanently domiciled in Alabama during the term of the lease if either of the following non-exclusive conditions are true:
(i) The hanger, airstrip, or other housing unit in which the aircraft is primarily based, departs from, and returns to in its normal operation is located outside of Alabama; or
(ii) The purchaser’s headquarters is not in Alabama on the date of purchase, and the aircraft will be operated by either: (1) a certificated air carrier holding certificate of public convenience under 49 U.S.C. § 40102; or (2) a foreign air carrier or intrastate air carrier, as defined by 49 U.S.C. § 40102.
b. The exemption provided in this subdivision shall not apply to county or municipal rental or lease taxes unless approved by resolution or ordinance adopted by the local governing body.
c. The exemption provided in this subdivision shall be effective from September 1, 2025, to August 31, 2030.

Legislative History

(Acts 1971, 1st Ex. Sess., No. 96, p. 166, §3; Acts 1973, No. 1130, p. 1906; Acts 1979, No. 79-336, p. 544; Acts 1986, No. 86-214, p. 282, §4; Acts 1988, 2nd Ex. Sess., No. 88-982, p. 705; Act 2021-221, §1; Act 2025-240, §4.)