Alabama Legislature votes to slash the grocery tax by 33 percent

May 6, 2025 – MONTGOMERY, AL – The Alabama Senate passed legislation that would reduce the state grocery tax in Alabama from three percent to just two percent.

House Bill 386 (HB386) is sponsored by state Representative Danny Garrett (R-Trussville). It was carried in the Senate by Senator Arthur Orr (R-Decatur).

Alabama is one of the few states in the country to tax food. The Legislature addressed this issue a couple of years ago when they lowered the sales tax on food 25 percent from four percent to three percent. If state revenues met certain very optimistic targets in revenue growth, there was supposed to be another cut on groceries this year. We did not grow state revenues fast enough to trigger the automatic reduction in grocery taxes.

HB386 would go ahead and slash the grocery tax 33% to two percent.

The legislature's eventual goal is to eliminate the state sales tax on groceries altogether.

The legislature did not do that, instead opting for a wait and see approach on the direction of the macro economy and state revenue growth in particular.

On Tuesday the Senate voted to pass HB386 34 to 0.

Since the Senate amended the bill, so it had to go back to the House of Representatives for consideration of the Senate changes.

Garret urged the House to concur with the Senate change. The House voted to concur in a 102 to 0 vote.

This move will cost the state an estimated $121.9 million a year.

Garret insists that the state's finances are strong enough to absorb this hit and still weather any future economic turbulence.

"We are in a good fiscally responsible situation," said Garrett. "We are the only state to show improvement in the last education report card."

The state of Alabama takes in over $14 billion in revenue annually – not counting federal matching dollars.

HB386 is on the governor's desk awaiting her signature.

The Legislature will return on Wednesday for Day 30 of the 2025 regular session – their final day.