Gov. Kay Ivey signs grocery tax cut into law
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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