Alabama Tax Tribunal Provides Clarification on Refund Statute of Limitations

In an Opinion and Preliminary Order in SLJ Holdings, Inc. v. State of Alabama Department of Revenue; Docket Nos. S. 23-618-LP, S. 24-0469-LP, and  S. 24-0470-LP (December 11, 2025), the Alabama Tax Tribunal concluded a taxpayer was entitled to the reduced machine rate on certain purchases of propane and oxygen, and also provided clarification on the applicable statute of limitations for refund claims for sales tax.

SLJ Holdings, Inc., formerly Jordan Scrap, Inc., filed a refund petition for sales tax on propane and oxygen purchases from February 2020 to October 2022. The Alabama Department of Revenue denied the refund, citing a two-year statute of limitations and the determination that the gas purchases did not qualify for the reduced machine rate.

The Department argued that about half of the refund claims were outside of the two-year statute of limitations that the Department applied, since the Taxpayer did not and was not required to file a return for the tax at issue. The Department’s position was that the three-year statute of limitations could not apply. Under Alabama law, the statute of limitations for filing a refund petition is either three years from the date the return is filed or two years from the date of payment of the tax, whichever is later. 

The Tribunal disagreed with the Department and held that the Taxpayer had three years from the date of filing of the return by the gas vendors, if timely, to file the refund claims. However, the burden of proving timely filing is on the Taxpayer.

The Tax Tribunal then examined whether the propane and oxygen purchases qualified for the machine rate, which applies to items used in manufacturing processes. The propane purchased was used in a piece of equipment similar to a blow torch, and the Department determined the torch to be a hand tool, not a machine. The Department understood the torch to be used to dismantle large structures, such as bridges, buildings, and boats, and not for manufacturing. Also at issue were taxes paid on purchases of oxygen, which was used in the same process as the propane purchased.

The Taxpayer argued the tools were used to cut metal for marketability, which constitutes processing, and that equipment used for dismantling structures did not involve the gas purchases for which refunds were sought. The Tribunal concluded that the gas purchases qualify for the machine rate, reversing the Department's denial related to the application of the machine rate. However, the Tribunal noted the Taxpayer must provide proof of timely filing of the tax returns in order to avail itself of the three-year refund window.

To read the full Opinion and Preliminary Order, click here.