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Alabama
Employee Obligations (Which Returns YOU Must File)
Since South Dakota has no income tax, you won't face double taxation. However, if you physically work in Alabama, you may owe Alabama income tax (2%-5%) and need to file a nonresident Alabama return.
Employer Obligations (What Your Employer Must Withhold & Remit)
Alabama's Convenience of Employer rule may require withholding Alabama tax even if the South Dakota employee works 100% remotely. Register for Alabama withholding and unemployment. May need to withhold AL tax for a remote MN employee due to the COE rule. Unemployment is approximately 2.7% on the first $8,000 of wages.
City & Local Income Taxes (Extra Filings Beyond the State Return)
Over 25 Alabama cities charge occupational taxes on nonresidents. Birmingham 1%, Gadsden 2%, Opelika 1.5%, Auburn 1%, and others range from 0.5% to 2%.
Remote Work Tax Risk — Convenience of Employer (COE) Rule
Alabama has a full Convenience of Employer rule that affects South Dakota residents. If your employer is based in Alabama and you work remotely from South Dakota, Alabama may tax your entire paycheck as if you worked there.
Related guides
More from South Dakota · Cross-State Work
- South Dakota → New York
- South Dakota → Ohio
- South Dakota → Oklahoma
- South Dakota → Oregon
- South Dakota → Pennsylvania
Moving to Alabama from elsewhere · Cross-State Work
This is general information, not tax or legal advice. Laws change frequently. Always consult a licensed CPA or tax attorney for your specific situation. All information researched as of March 21, 2026.