Alabama Grocery Tax Reduction

A bag of groceries on a white bakground

Grocery shopping will be slightly less expensive for Alabamians starting this September. A new law, HB479, was signed by Governor Kay Ivey on Thursday, June 15 that reduces the state tax on certain groceries by two 1% decreases over the next few years.

Alabama Grocery Tax

The first tax decrease will go into effect on September 1, 2023 when the 4% state tax on groceries will be decreased to 3%. Then, on September 1, 2024, the tax will be reduced to 2% if the revenue to the Education Trust Fund (ETF) budget increases by at least 3.5%. If the ETF budget has not reached the increase by September 2024, the second reduction may take place in the year it is reached.

Alabama lawmakers have tried to remove this tax for decades. Until now, Alabama was one of only three states that tax groceries at the same rate as other purchases. (The other two states are Mississippi and South Dakota.)

A visual showing the decrease of Alabama's grocery tax

Items Eligible for Reduced Grocery Tax

The tax reduction applies only to Supplemental Nutrition Assistance Program (SNAP) items. SNAP includes fruits, vegetables, meat, poultry, fish, dairy, breads, cereals, snack foods, non-alcoholic beverages and seeds/plants that produce food. Pre-made foods (like rotisserie chicken or deli salad/sandwiches) and alcohol are not included. Food from restaurants, even a restaurant inside a grocery store, is not eligible for the tax reduction.

Alabama Local Tax

Local and county taxes will still apply as usual, however, this legislation freezes local taxes on groceries once the state decrease takes place. Sales taxes differ from city to city, but let’s consider Fairhope. The 2023 sales tax rate for Fairhope, Alabama is a combined minimum of 9% – with 4% of that being state and 5% local. Starting in September, the state grocery tax will decrease to 3% and the 5% can’t increase, which means the total Fairhope sales tax will become 8%. 

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Heather Brackin

As a Project Coordinator on our team, Heather has experience working with all of our service lines. She is also earning a degree in accounting and enjoys learning as much as she can about the changing laws and rules that will affect our clients.

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