SB177 Alabama 2023 Session

Summary

Primary Sponsor

Arthur OrrSenator

Republican

Session

Regular Session 2023

Title

Relating to sales taxes; to amend Section 40-23-1, as last amended by Acts 2022-199 and 2022-291, 2022 Regular Session, Code of Alabama 1975, Section 40-23-2, as last amended by Act 2022-346, 2022 Regular Session, Code of Alabama 1975, Section 40-23-60, as last amended by Act 2022-199, 2022 Regular Session, Code of Alabama 1975, and Section 40-23-61, Code of Alabama 1975; to define "food" and begin phasing-out 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 authorize a county and municipality to reduce the sales and use tax rate or exempt food from local sales and use taxes.

Summary

The bill defines 'food' for Alabama sales taxes, starts phasing out the state tax on food starting 9/1/2023, ties future reductions to Education Trust Fund growth, and lets counties and cities adjust local food taxes.

What This Bill Does

It defines what 'food' includes (with a special rule for WIC foods and a fallback to general law if WIC ends). It starts reducing the state tax on food from 4% to 3% by 9/1/2023 and then allows further 1 percentage point cuts on 11/1/2025 and every odd-numbered year thereafter until the tax reaches zero, but only if Education Trust Fund growth meets a 5% threshold. It sets the local (county/municipal) food tax to match the county/municipal general or retail rate as of the act’s effective date and lets local governments reduce or exempt food from local taxes by ordinance or resolution, with a 60-day advance notice. It also requires the Welfare/WIC-related definition of 'food' to be updated by general law if the federal WIC program no longer exists.

Who It Affects

• Consumers who buy food in Alabama, who would pay the state food tax at the defined rates and see gradual reductions over time depending on Education Trust Fund growth.
• Counties and municipalities, which would have the authority to reduce or exempt local food taxes and must align local rates to the statewide general/retail rate as of the act’s effective date.

Key Provisions

• Defines 'food' for sales taxes and includes a fallback mechanism: if the federal WIC program ends, the definition of 'food' will be set by general law.
• Begins phasing out the state sales tax on food: initial rate four percent, reduced to three percent on September 1, 2023, with further reductions by one percentage point on November 1, 2025 and on every odd-numbered November 1 thereafter until the rate reaches zero, contingent on Education Trust Fund growth of at least five percent over the prior two fiscal years.
• Local food tax rate: the tax at the county/municipal level for food will be the same as the county/municipal general or retail rate on the act’s effective date; counties and municipalities may reduce the local rate or exempt food from local taxes by ordinance or resolution with at least 60 days’ notice.
• Effective date: September 1, 2023.
• Other definitions and terms related to how the tax is administered and calculated are clarified in the bill (e.g., 'food' includes WIC-listed items and the definition can be updated by general law if needed).

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