The bill amends Sections 40-23-210 and 40-23-230 of the Code of Alabama 1975 to require the Department of Revenue to adjust the dollar value of certain "covered items" based on changes in the Consumer Price Index (CPI). Starting in calendar year 2026, the Department will adjust the dollar amounts for covered items, which include clothing, computers, school supplies, and other specified items, by the percentage change in the CPI from December 2006 to December 2024, with subsequent adjustments occurring every five years. The bill also increases the number of days local governments have to pass resolutions or ordinances to adopt exemptions for local sales taxes. Additionally, it clarifies the definition of "covered items" and introduces new language to define clothing and school supplies, while detailing exclusions for certain items.

Moreover, the bill establishes a framework for sales tax exemptions during designated periods, allowing counties and municipalities to exempt covered items from local sales and use taxes during specific weekends, provided that resolutions or ordinances are adopted at least 30 days prior. The language "paying" is removed from existing law to simplify the phrasing around tax exemptions. The bill specifies that exemptions must align with state sales tax holiday terms and prohibits exemptions outside designated holiday periods. The effective date for this act is set for October 1, 2025, with the amendments aimed at streamlining the process for local governments to implement sales tax holidays while ensuring tax thresholds adjust with inflation.

Statutes affected:
Introduced: 40-23-210, 40-23-230
Enrolled: 40-23-210, 40-23-230