Alabama Grocery Shoppers Get Temporary Tax Break
Groceries are currently roughly 30% more expensive than before the pandemic. Although price inflation has slowed some, overall prices remain high, with predictions for the remainder of 2026 showing further, though smaller, increases. That is the bad news.
The good news, or at least the temporary good news, is beginning today and running through the end of June, state sales taxes on groceries will see a temporary pause thanks to the Alabama Legislature. The legislature reduced the grocery tax from 4% to 2% in 2023 but this will be the first time since sales taxes were created in 1939 that Alabama shoppers will not have any state sales taxes applied to their grocery bill. Local city and county sales taxes on food remain in effect.
The USDA website states the average family of four spends around $1,000 a month on groceries. Without the 2 percent tax, that family will save at least $40 by the end of the two-month holiday. It's not much but every little bit helps.
In April, the Alabama legislature passed House Bill 527 and it was signed by Gov. Kay Ivey. It implements a temporary 60-day suspension of the state sales tax on groceries from May 1 to June 30. Lawmakers debated whether or not to eliminate the state grocery tax permanently but compromised on an annual grocery "tax holiday" out of concern for the impact a full repeal would have on the state's Education Trust Fund (ETF). It is estimated that the ETF will lose nearly $83 million from the temporary moratorium on grocery taxes. Currently, sales tax on groceries accounts for nearly $500 million in state revenue.
When the governor signed the tax moratorium, she voiced delight in helping Alabama families, "Any time we can responsibly provide some relief for the hardworking people in our state, I am all for it".
A study by the University of Alabama in Birmingham revealed states which impose taxes on groceries tend to see higher levels of food insecurity, which disproportionately affects lower-income households. In states with a grocery sales tax, the probability of a household experiencing food insecurity rises 3% compared to states without a tax rate.
Alabama is one of only eight states that still taxes groceries and that fact has been the center of serious debate during the last couple of legislative sessions. Another attempt to eliminate the grocery tax is expected next session.
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