HB427 Alabama 2025 Session

Summary

Primary Sponsor

Mary MooreRepresentative

Democrat

Session

2025 Regular Session

Title

Sales and use taxes; rate on food eliminated effective September 1, 2025

Summary

HB427 would phase out and ultimately eliminate the state sales and use tax on food in Alabama by September 1, 2025, with timing tied to Education Trust Fund revenue growth.

What This Bill Does

The bill lowers and then removes the state tax on food (sales and use) by 2025, using growth in Education Trust Fund revenues as a condition for timing; if growth targets are met, the food tax would be reduced to zero by the target date. It also adjusts or adds taxes on other items and activities (such as coin-operated food machines, places of amusement, certain machinery, and motor vehicles) with revenue allocated between the Education Trust Fund and the State General Fund. In addition, there are export rules for motor vehicles used outside Alabama, special school-related exemptions from amusement taxes, and administrative details about how taxes are collected and reported; the act becomes effective June 1, 2025.

Who It Affects

• Alabama residents who buy food: they would pay less in state sales and use taxes on food, ultimately reaching zero by September 1, 2025, subject to revenue growth conditions.
• Retailers and other businesses that collect or are affected by these taxes (food retailers, amusement venues, sellers of vehicles and mining equipment): they would see changes in tax rates and collection rules, and some revenues would be redirected to the Education Trust Fund and the State General Fund; schools may keep certain taxes collected from athletic events.

Key Provisions

• Elimination of the state sales tax on food by September 1, 2025, with the use tax on food also targeted for elimination by that date, contingent on Education Trust Fund growth targets.
• Maintenance and adjustment of other taxes in the bill, including a 3% tax on coin-operated machines selling food, a 4% tax on gross receipts for amusements, 1.5% on mining-related machinery, and 2% on sales of motor vehicles and related setup materials (with specific trade-in and documentation rules).
• From certain vehicle-related tax revenues, 58% would go to the Education Trust Fund and 42% to the State General Fund.
• A special export provision allowing Alabama to tax motor vehicles sold for use outside Alabama at the state automotive rate, with documentation requirements and without applying county or municipal taxes, plus protections for purchasers and exemptions for certain exports.
• An amusement-tax carve-out: athletic events conducted by public or private schools are exempt from the amusement tax, with the collected tax retained by the school for school purposes.
• A $5 annual fee (or part-year equivalent) applies to withdrawals from stock in trade for certain vehicles, to be used during the period the vehicle remains the property of the seller.
• Effective date for the act is June 1, 2025.

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

Subjects

Taxation & Revenue