Alabama Grocery Tax Reduction Begins September 2023

by Marissa Sheldon, MPH
Alabama Grocery Tax

Part of the Food Policy Snapshot Series

Policy name: Alabama HB 479

Overview: Alabama’s grocery tax rate will drop from 4 percent to 3 percent in September 2023. 

Location: Alabama

Population: 5.1 million

Food policy category: Food services, food supply and distribution, food security 

Program goals: To make food more affordable. 

How it works: Starting on September 1, Alabama’s state sales tax rate on groceries will be reduced from 4 percent to 3 percent. The sales tax reduction does not apply to prepared foods or to personal hygiene or cleaning items sold in grocery stores. 

In cities and counties where the overall local sales tax is greater than 4 percent, the grocery sales tax will be reduced by one percent. For example, in Mobile and Montgomery, where the local sales tax is 10 percent, the grocery tax will be reduced to 9 percent. 

On September 1, 2024, the grocery tax will be reduced again to 2 percent so long as contributions to the Alabama Education Trust Fund (ETF) are projected to rise by 3.5 percent. If the growth rate does not increase enough, the additional one percent tax reduction will not occur until the next year when contributions do reach 3.5 percent.

Progress to date: Grocery tax cut legislation has been proposed in Alabama since the early 1990s but never passed, partly due to concerns about reduced contributions to the ETF. The 4 percent grocery tax currently contributes around $600 million to the ETF. The legislation finally passed this year because the ETF’s surplus is the highest it has ever been, and the state can, therefore, afford to reduce the tax. 

Why it is important: Fifteen percent of Alabama residents participated in SNAP in 2022, compared to 12 percent nationally, and 17 percent of adults and 23 percent of children in Alabama experience food insecurity. 

Alabama is one of 13 states that have any tax at all on groceries, and one of three – along with Mississippi and South Dakota – that tax groceries at the full state sales tax rate. When the state tax is combined with local taxes, residents of some cities and counties are paying a total of 10 percent tax on groceries. Furthermore, as a result of inflation, food prices across the U.S. have increased by 6.7 percent in the past year. A reduction in the grocery tax rate will help to make food more affordable for all Alabama residents. 

Program/Policy initiated: Governor Ivey signed the bill into law on June 15, 2023, and the policy will go into effect on September 1. 

Point of contact: N/A

Similar practices: Virginia has also passed legislation reducing the state’s grocery tax. Kansas will completely eliminate its grocery tax by 2025. Tennessee will have a three-month grocery tax holiday from August 1 through October 31, 2023. 

Evaluation: A formal evaluation measuring the effects of the legislation has not yet been conducted. However, the bill passed in both the Alabama House and Senate without opposition

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