Sales and use tax; to exempt food from sales and use taxes
Summary
HB336 would eliminate Alabama’s state sales and use tax on food, effective September 1, 2026. The bill amends the state sales tax statutes to remove food from the taxable base and makes a conforming change to the use tax provisions so that food is likewise exempt from state use tax. It also states that the gross proceeds from food sales are exempt from state sales tax.
The bill includes a local option component. County and municipal governments would be allowed to adopt companion exemptions for local sales and use taxes on food, and they could also reduce or later restore the local tax rate on food within limits set by the bill. The measure does not force local governments to exempt food, but it creates authority for them to align local taxes with the state exemption if they choose.
Impact
HB336 would amend Sections 40-23-2, 40-23-40, and 40-23-61 of the Code of Alabama 1975 to remove food from the state sales and use tax structure and to make related conforming changes. It would reduce state tax revenue from food purchases and shift the tax treatment of food to exempt status at the state level beginning September 1, 2026. Local governments would retain discretion to adopt similar exemptions or adjust local food tax rates, subject to the bill’s timing and rate limitations. The bill would directly affect retailers, consumers, and state and local revenue collections, especially the Education Trust Fund and State General Fund, which currently receive portions of certain sales and use tax receipts.
Sentiment
The available record shows the bill was introduced and remained pending in House committee with no recorded votes or committee debate in the provided materials. Based on the bill’s purpose, the measure appears consumer-relief oriented, aiming to lower the cost of groceries and other food purchases by removing the state tax. Because there are no transcripts or votes, there is no documented formal opposition or support in the supplied context, but the proposal is significant enough to affect state and local revenue policy.
Contention
The main policy tension in HB336 is between tax relief for consumers and the loss of sales tax revenue for the state and potentially for local governments. Supporters would likely emphasize reducing the tax burden on food, while opponents or fiscal skeptics would likely focus on the impact to the Education Trust Fund and General Fund, as well as the possibility that local governments may be pressured to follow the state exemption. Another point of contention is the local opt-in structure: counties and municipalities may choose whether to exempt food locally, which could create uneven tax treatment across jurisdictions.