Alabama Senate passes bill to reduce sales tax on groceries

Yahoo

07-05-2025

General Manager Brian Horak walks down an aisle at Post 60 Market in Emerson, Nebraska. The Alabama Senate Thursday approved a bill to cut the state grocery tax from 3% to 2%. (Kevin Hardy/Stateline)
The Alabama Senate Tuesday passed a bill to cut the state sales tax on groceries from 3% to 2%.
HB 386, sponsored by Rep. Danny Garrett, R-Trussville, will fast-track a tax reduction on groceries by taking the next cent off the state sales tax on groceries. Lawmakers passed similar legislation in 2023 that would have made the cut if the Education Trust Fund (ETF), which pays for public education in the state and gets most of the grocery tax revenue, grew 3.5%.
'We took off the first cent. The second cent was going to come off when we hit a growth metric of 3.5%. We have not met that, but our budget chairman feels comfortable in going ahead and moving forward,' said Sen. Andrew Jones, R-Centre, who presented the bill to the Senate.
SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
Alabama is one of only 13 states that taxes groceries, and until September 2023, it had taxed groceries at the full state sales tax rate of 4% since the sales tax was implemented in 1939. With the addition of local taxes, the total tax on groceries in the state could reach as high as 10%. In Montgomery, a family would pay up to $60 in taxes if they spent $600 on groceries monthly.
Under the bill passed Tuesday, the bill would reduce the levies on $600 of groceries from $54 to $48.
The bill passed 34-0 with little discussion and went to the House for concurrence on the Senate amendment. Finance and Taxation Education Trust Fund Budget Chair Sen. Arthur Orr, R-Decatur, said it was a clarifying amendment from the Department of Revenue to ensure sales and use taxes are equal.
The Senate also changed the bill to allow local governments to reduce their sales and use tax on groceries, effectively combining HB 387 with the legislation. The House passed HB 387 in March, and a Senate committee approved the bill in late April.
'This bill just basically takes [HB] 387, puts it into [HB] 386. So, in this one grocery tax bill, we're cutting the tax 1%, and also allowing locals to reduce their taxes when they want to,' Garrett said to the House during concurrence.
The House concurred 102-0 with Senate changes, and the bill went to Gov. Kay Ivey.
The bill carries a fiscal note of $121.9 million.
State budget officials said last September that growth in the ETF was expected to be below the 3.5% required under the 2023 law to cut the state share of the grocery tax. Garrett was previously reluctant to support additional reductions to the grocery tax because of the potential impact on the ETF.
Efforts to eliminate the grocery tax traditionally came from Democrats but had typically been unsuccessful due to concerns about the effect on the state's education budget.
Alabama Arise, a left-leaning organization working on poverty issues, celebrated the bill's passage, saying that the first reduction was an 'essential first step toward tax justice' and said this legislation 'continues that momentum.'
'The grocery tax drives many families deeper into poverty, and Arise remains committed to the goal of eliminating it entirely,' said Robyn Hyden, executive director of Arise, though she added that it's important to ensure the grocery tax reduction is sustainable in the future, suggesting that the state cap or end the state income tax deduction for federal income tax payments.
'Alabama is the only state to allow this full deduction, which overwhelmingly benefits the wealthiest households. Closing this skewed loophole would protect funding for public schools and ensure Alabama can afford to end the state sales tax on groceries forever,' Hyden said.
SUPPORT: YOU MAKE OUR WORK POSSIBLE