Alabama state grocery tax drops 1%

Grocery shopping is slightly cheaper in Alabama.

A law cutting the state’s sales tax on groceries eligible for the Supplemental Nutrition Assistance Program (SNAP) went into effect on Friday, the first reduction in the levy since the state sales tax was introduced in 1939.

Under a law signed by Gov. Kay Ivey in June, the state share of the tax will drop from 4% to 3%. If revenues to the Education Trust Fund (ETF) — which receives most state income and sales tax revenue — grow 3.5% next year, the state tax will drop to 2%.

The law freezes local grocery taxes at their current rates but does not cut them.

Most food sold in grocery stores is eligible for SNAP. Exceptions include alcohol (not including cooking ingredients or extracts that include alcohol); “hot foods” like broiled chicken sold at deli counters, and food prepared for consumption on premises.

Alabama is one of only 13 states that taxes food, and until Friday was one of only three states that fully taxed it. Combined, state and local taxes could add up to as much as an additional 10% cost on groceries. A family in Montgomery purchasing $500 worth of groceries a month would pay $50 in taxes.

The cut that went into effect lowers that slightly, to $45.

The grocery tax is widely unpopular in the state, and critics say it burdens the poorest Alabamians and contributes to food insecurity. But legislators for decades were reluctant to cut it because of the potential impact on the ETF. The tax brought in over $600 million annually to the school budget, roughly 7% of the total. Democrats for years proposed making up the losses by repealing a 1965 constitutional amendment allowing people to deduct taxes paid to the federal government on their state taxes, a provision that heavily favors the wealthiest Alabamians. Republicans generally opposed the proposal.

Grocery tax repeal was not expected at the start of legislative session in March. But record tax revenues in the ETF this year, as well as a push to cut the tax from groups like the left-leaning Alabama Arise and the right-leaning Alabama Policy Institute, led legislators to consider the measure.