HB479 Alabama 2023 Session

Summary

Primary Sponsor

Danny GarrettRepresentative

Republican

Session

Regular Session 2023

Title

Relating to sales and use taxes; to amend Sections 40-23-1, 40-23-2, 40-23-60, and 40-23-61, Code of Alabama 1975, to define "food" and begin reducing the state sales and use tax on food on September 1, 2023; to require certain growth targets in the Education Trust Fund for future sales tax reductions on food; to establish the sales and use tax rate on food for purposes of county and municipal sales and use taxes as the existing general or retail sales and use tax rate; and to provide for the levy of sales and use tax on food by counties and municipalities.

Summary

HB479 defines 'food' for Alabama taxes and starts phasing down the state sales tax on food, with future cuts based on Education Trust Fund growth, while letting counties and municipalities set or adjust local food taxes.

What This Bill Does

Defines 'food' for tax purposes and sets a plan to reduce the state sales tax on food from 4% to 3% on Sept 1, 2023 and to 2% on Sept 1, 2024 if certain growth targets are met. The growth target is tied to total Education Trust Fund receipts for the fiscal year ending Sept 30, 2025 and must be certified by the Director of Finance and the Legislative Fiscal Officer. For local governments, the act requires that the local food tax rate follow the county or municipality's general/retail rate as of the act’s effective date, and it allows counties or towns to cut local food taxes by up to 25% in years with more than 2% growth in their general fund, with the ability to later increase back up to the act’s baseline rate. Revenue from the new food tax would be split with 58% going to the Education Trust Fund and 42% to the State General Fund.

Who It Affects

• Alabama consumers: will see gradual reductions in the state sales tax on food over time, and may experience changes to local food taxes depending on local decisions.
• Counties and municipalities: may set or reduce local food taxes (up to 25% reduction in years with >2% fund growth) and may later increase, but not beyond the act’s baseline rate; must adopt by ordinance or resolution and follow defined timing rules.
• Retailers and sellers of food: must collect and remit the state tax on food at the new rates and comply with local tax changes; records and reporting may be affected by the rate changes.
• Education and state finances: Education Trust Fund would receive a large portion of the new food tax revenue (58%), with the remainder funding the State General Fund; the Department of Revenue and fiscal officers monitor growth targets and certify eligibility.
• State agencies and officials: the Department of Revenue defines 'food' and administers the tax; the Director of Finance and the Legislative Fiscal Officer certify growth targets used to trigger rate changes.

Key Provisions

• Definition of Food: The bill defines 'food' using federal SNAP guidelines, with a provision to create a new definition by general law if SNAP is removed in the future.
• State sales tax on food: Sets a 4% tax on food with reductions to 3% on September 1, 2023 and 2% on September 1, 2024, contingent on meeting growth targets.
• Growth targets and certification: The 2024 reduction to 2% hinges on the average annual growth in total net receipts to the Education Trust Fund for the fiscal year ending 9/30/2025 being at least 3.5% higher than the prior year, as certified by the Director of Finance and the Legislative Fiscal Officer.
• Local rate alignment: On the act’s effective date, the county/municipal food tax rate will be the county/municipality’s existing general/retail rate; local governments may not levy new food taxes beyond that base unless they act.
• Local reduction option: Counties and municipalities may reduce their local food tax rate by 25% in any year in which the growth in the local general fund exceeds 2% over the prior year, with the change taking effect Oct 1 after adoption.
• Local rate adjustment option: Local governments may later increase the local food tax rate, but not beyond the rate in effect on the act’s effective date.
• Revenue distribution: Of the tax revenue generated by the new food tax, 58% goes to the Education Trust Fund and 42% goes to the State General Fund.
• Effective date: The act becomes effective immediately upon the Governor’s approval, with certain local provisions taking effect later (Oct 1) after adoption.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.