Gov. Kay Ivey signs grocery tax cut into law
Alabama Gov. Kay Ivey delivers the State of the State address in the Old House Chamber at the Alabama State Capitol on Feb. 4, 2025 in Montgomery, Alabama. (Will McClelland for Alabama Reflector)
Gov. Kay Ivey Friday signed a bill reducing the state sales tax on groceries.
HB 386, sponsored by Rep. Danny Garrett, R-Trussville, will cut the state share of the tax from 3% to 2% effective Sept. 1.
'When we can reduce taxes in Alabama and provide some relief to the hardworking people of this state, I am all for it. I was pleased to sign House Bill 386 to take another notch off our state grocery tax,' Ivey said in a statement.
Alabama is one of just a few states that still taxes groceries. Until September 2023, the state taxed groceries at the full 4% state sales tax that's been around since 1939. Combined with local taxes, the total tax on food in Alabama ran as high as 10% in some places. In Montgomery, a family spending $600 a month on groceries could pay up to $60 in taxes.
The Legislature in 2023 reduced the state sales tax on groceries from 4% to 3%. But it also required growth of at least 3.5% in the Education Trust Fund (ETF), which gets most of the grocery tax.
Compared to the previous fiscal year, the current 2025 ETF has grown 3.28% this year, compared to the 2024 ETF at the same point, but budget chairs indicated they were comfortable with moving forward.
Under the new legislation, the tax bill on $600 worth of groceries in Montgomery will go from $54 to $48.
Lawmakers also changed the bill to allow local governments to reduce their sales and use tax on groceries, effectively combining HB 387 with the legislation — which the House passed in March and a Senate committee in late April.
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