Alabama

Home Services Buying Guide

How a Homeowner Can Navigate Contractor Licensing in Alabama

A white silhouette of the state of alabama on a black background.

For homeowners in Alabama, understanding contractor licensing is critical, as the state has distinct requirements for residential versus commercial projects, and specific thresholds for project costs. Additionally, Alabama's sales tax applies broadly to tangible goods, which includes materials used in home service projects, while labor is generally exempt.


Licensing Requirements for Home Service Contractors in Alabama


Alabama operates a dual licensing system for contractors, distinguishing between residential and commercial/industrial work, each overseen by a separate state board. Specific trades also have their own licensing boards.


Residential Contractor Licenses (Home Builders Licensure Board - HBLB):

  • Any individual or company engaged in the construction, remodeling, repair, or improvement of a residential structure where the cost, including labor and materials, exceeds $10,000, must hold a license from the State of Alabama Home Builders Licensure Board (HBLB).
  • There are different types of residential licenses:
  • Unlimited License: For residential work costing more than $10,000 that involves more than one trade or affects structural integrity. This also qualifies the contractor for residential roofing work.
  • Limited License: For residential work costing more than $10,000 that does not involve more than one trade and does not affect structural integrity (e.g., a contractor specializing solely in interior finishing that doesn't involve structural changes).
  • Roofers License: For roofing work costing more than $2,500.
  • Key Requirements for HBLB Licenses:
  • Must be at least 18 years old.
  • Submit a completed application and required fees.
  • Provide a business-related credit report.
  • For some license types, proof of general liability and/or workers' compensation insurance may be required.
  • No state exam is typically required for HBLB licenses, but a background check is performed.
  • Licenses are renewed annually.


Commercial General Contractor Licenses (Alabama Licensing Board for General Contractors - LBGC):

  • While primarily for commercial and industrial projects, if a residential project's scope blurs into larger-scale or non-residential elements, or is part of a larger mixed-use development, a license from the Alabama Licensing Board for General Contractors (LBGC) might be required.
  • This license is mandatory for prime contractors on projects of $50,000 or more (including labor and materials). Subcontractors on projects over $50,000 to a licensed prime contractor also need a subcontractor license from the LBGC.
  • Key Requirements for LBGC Licenses:
  • Proof of experience in commercial projects with three references.
  • Formation and registration of a business entity with the state.
  • Minimum financial requirements ($10,000 net worth/working capital for bid limits).
  • Proof of current liability insurance.
  • Passing a Business and Law exam and a Trade exam specific to the classification of work.


Specialized Trades Require State Licenses:

  • Regardless of the project's overall cost or whether it falls under residential or commercial general contracting, certain specialized trades are regulated by their own state boards.
  • Electricians: Licensed by the Alabama Electrical Contractors Board (AECB). Licenses include Journeyman and Master Electrician, requiring experience and passing exams.
  • Plumbers and Gas Fitters: Licensed by the State of Alabama Plumbers and Gas Fitters Examining Board (PGFB). Licenses include Journeyman, Master, and Medical Gas Plumber/Gas Fitter, requiring experience and exams.
  • HVAC/R Contractors: Licensed by the Alabama Board of Heating, Air Conditioning & Refrigeration Contractors (HACR). Requires passing a state exam and meeting experience criteria.


Local Business Licenses and Permits: In addition to state licenses, contractors must also obtain a local business license from the city or county where they operate and where the project is located. Furthermore, all necessary building permits must be secured from the local building department before starting work. These permits ensure compliance with local building codes and allow for inspections.


It is illegal for an unlicensed contractor to perform work that requires a license in Alabama. Homeowners should verify licenses to ensure consumer protection and proper project execution.


How Sales Tax Applies to Home Service Projects in Alabama


Alabama has a state sales tax rate of 4%, and most cities and counties impose additional local sales taxes, bringing the combined rate significantly higher (often ranging from 8% to 11% or more, depending on the specific location). The application of sales tax to home service projects in Alabama primarily centers on the tangible personal property (materials) used.

  • Materials are Taxable:
  • Generally, contractors in Alabama are considered the "consumers" of the materials they purchase and use in fulfilling a construction or home improvement contract.
  • This means the contractor pays the state and local sales tax to their suppliers when they purchase the building materials (e.g., lumber, drywall, plumbing fixtures, electrical wiring).
  • Since the contractor has already paid the sales tax on the materials, they do not then separately collect sales tax from the homeowner on the material portion of the contract. The sales tax paid on materials is factored into the contractor's overall project pricing.
  • There can be exceptions for specific projects, like those for tax-exempt government entities, where the contractor may be able to make tax-exempt purchases and then remit use tax on specific components. However, for typical residential projects, the "contractor as consumer" rule applies to materials.
  • Labor (Services) is Generally Not Taxable:
  • The charge for labor related to the installation, fabrication, or repair of real property (i.e., construction services) is generally NOT subject to Alabama sales tax, provided it is separately stated from the cost of materials.
  • This exemption covers the labor involved in building, remodeling, or making improvements that become a permanent part of the real estate.


What this means for homeowners:

  • For most home service projects in Alabama, you should not expect to see a separate sales tax charge on your invoice for either materials or labor. The sales tax on materials is paid by the contractor when they purchase the goods from their suppliers and is implicitly included in the overall project price.
  • Your invoice should typically reflect the total project cost, with materials and labor often combined, or if itemized, the labor portion should not have sales tax applied.
  • Always obtain a detailed, written contract and invoice to understand exactly what you are being charged for.


How to Verify Licensing in Alabama


Verifying a home service contractor's license in Alabama requires checking with the appropriate state board based on the type and cost of work, as well as specific trade boards.


State of Alabama Home Builders Licensure Board (HBLB) - License Search:

  • This is the primary source for verifying licenses for residential builders, remodelers, and roofers for projects over $10,000 (or $2,500 for roofing).
  • Website: Visit the HBLB website: https://hblb.alabama.gov/. Look for a "Licensee Search" or "Verify a License" tool.
  • Search Options: You can typically search by license number or contractor name.
  • Information Provided: This will show the license status (active, inactive, expired), license number, type, and contact information.

Alabama Licensing Board for General Contractors (LBGC) - License Roster Search:

  • This board primarily licenses commercial and industrial contractors, but also subcontractors whose contract on a project is $50,000 or more. While less common for typical residential projects, it's relevant for larger or mixed-use endeavors.
  • Website: Go to the LBGC website: https://genconbd.alabama.gov/. Look for "License Roster Search" or "Search for a Licensed Contractor."
  • Search Options: You can search by license number, company name, or qualifying individual name.
  • Information Provided: Displays license status, classification, and other details.

Alabama Electrical Contractors Board (AECB) - License Search:

  • For verifying electrical contractor licenses.
  • Website: Visit the AECB website: http://www.aecb.state.al.us/. Look for a "License Search" feature.

State of Alabama Plumbers and Gas Fitters Examining Board (PGFB) - Licensee Search:

  • For verifying plumber and gas fitter licenses.
  • Website: Go to the PGFB website: https://pgfb.alabama.gov/. Look for "Licensee Search" under "Public Records" or "Resources."

Alabama Board of Heating, Air Conditioning & Refrigeration Contractors (HACR) - Licensee Search:

  • For verifying HVAC/R contractor licenses.
  • Website: Visit the HACR website: https://hacr.alabama.gov/. Look for "Licensee Search" under "Public Records" or "Licensees/Forms."

Alabama Secretary of State - Business Entity Search:

Local City/County Building Departments:

  • Always contact your specific city or county's building department to confirm any local business license requirements and to ensure the contractor is authorized to pull permits for your project. This is crucial for ensuring code compliance and inspections.

Proof of Insurance: Always request current Certificates of Insurance for general liability and workers' compensation (if they have employees). Contact the issuing insurance companies directly to verify coverage.


Performing these multiple verification steps is crucial to ensure you hire a legally compliant and reputable home service contractor in Alabama.


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