The bill amends the Code of Alabama 1975 to significantly reduce the state sales and use tax rate on food, establishing a new two-cent tax rate effective September 1, 2025. This change aims to enhance food affordability for residents. The bill also revises provisions that previously restricted county or municipal governing bodies from reducing their sales and use tax on food, eliminating the prior limitations on the extent of the rate cut and the requirement for growth in the Education Trust Fund. The amendments to Sections 40-23-2, 40-23-40, 40-23-61, and 40-23-62 reflect these changes, providing local governments with greater flexibility in managing their food tax rates. Additionally, the bill outlines a phased reduction of the sales tax on food from four percent to three percent on September 1, 2023, and further down to two percent on September 1, 2024. It removes the previous requirement that tax reductions be contingent upon growth in the Education Trust Fund. The bill also clarifies the definition of "food" for tax purposes and allows local governing bodies to reduce their sales tax rates on food if their general fund growth exceeds two percent from the previous year, while prohibiting new local taxes on food. Furthermore, it specifies exemptions from the tax for certain tangible personal property and is set to take effect on June 1, 2025.

Statutes affected:
Introduced: 40-23-2, 40-23-61
Engrossed: 40-23-2, 40-23-61
Enrolled: 40-23-2, 40-23-40, 40-23-61, 40-23-62