Alabama lawmakers passed a bill that will reduce grocery taxes by another 1-percent. 

The bill reduced the state tax rate on groceries from 3-percent to 2-percent and gave municipalities the option to reduce local grocery taxes as well. Alabama Gov. Key Ivey signed the bill into law on Friday. The bill will go into effect Sept. 1. The legislature had previously reduced the tax from 4- to 3-percent in September 2023. 

State Rep. Marcus Paramore said the original bill passed in 2023 tied the reduction in the grocery tax to revenue growth in the Education Trust Fund Budget, which gets most of the state’s grocery tax money. 

“We really approached this from a conservative standpoint [in 2023],” Paramore said. “We decided to phase in the reduction of the grocery tax so the Education Trust Fund Budget didn’t take a huge hit. We felt like there was enough growth in the Education trust Fund that we could pass this bill without tying the reduction to the growth of the trust fund.”

Even with a 2-percent reduction in the grocery tax since 2023, Alabama remains one of the few states with a tax on groceries. AARP listed Alabama (2-percent), Arkansas (.125-percent), Hawaii (4-percent General Excise Tax, Grocery Tax Credit is available for qualified recipients), Idaho (6-percent, Grocery Tax Credit is available for qualified recipients), Illinois (1-percent, grocery tax will be removed in 2026), Mississippi (7-percent, 5-percent beginning July 1, 2025), Missouri (1.225-percent on SNAP items), South Dakota (4.2 percent), Tennessee (4-percent)  and Utah (3-percent) as the only states with grocery taxes. 

“This bill was part of a $190 million tax credit we passed,” Paramore said. “It’s good for the consumer. We’ve got some pushes to completely eliminate the grocery tax. And we’ve also got some people pushing for the elimination of a grocery tax on certain items. That’s something we’ll address in the future. We felt like the 1-percent reduction in the grocery tax was something we could do this year and not have a big impact on the Education Trust Fund Budget.”

Paramore said the bill also gave municipalities the option to reduce local grocery taxes as well. Alabama allows for municipalities to charge up to 3 percent tax for groceries. Paramore said the bill did not allow municipalities to increase the grocery tax.