Alabama drops sales tax on groceries to 3%

MONTGOMERY, Ala. (AP) — Alabama families are paying slightly less at the grocery store after a 1% reduction in the state sales tax on food took effect this month.

State lawmakers in June approved legislation to gradually remove half of the 4% state sales tax on food, capping decades of fruitless attempts at such a tax cut. The tax dropped from 4% to 3% on Sept. 1.

“This change is especially meaningful for families who are struggling to make ends meet and working hard to keep food on the table,” Chris Sanders, a spokesperson for Alabama Arise, an advocacy group for low-income families, said in a statement. He said the organization remains committed to working for the entire removal.

Alabama was one of only three states that taxed groceries at the same rate as other purchases. Advocates had long argued that taxing food at such a rate placed an unfair burden on families in the poor Southern state, where 16% of the people live in poverty and the median household income hovers around $54,000.

Legislation to remove the sales tax on food had been proposed unsuccessfully in Montgomery since at least the early 1990s but never came to fruition, partly because of concern about the loss to education funding. The effort gained traction this year amid a budget surplus and soaring grocery prices.

The state grocery tax will drop to 2% on Sept. 1, 2024, but only if tax collections to the Education Trust Fund rise at least 3.5% to offset the loss. If that growth requirement isn’t met, the tax will be reduced the next year that the growth requirement is satisfied.

One retailer reported problems with the initial rollout of the tax reduction. Some Walmart and Sam’s Club customers on Friday were mistakenly charged both the old 4% grocery tax and the new 3% tax, the retail giant reported. The retailer said the problem had been corrected and that customers who paid cash can bring receipts, showing the double sales tax amounts, in for a refund. The retailer said customers who used credit cards and other payment methods will receive an automatic refund.