Alabama Lowers Grocery Sales Tax to 2% | Cheaper Food Shopping for Residents
A new tax cut saves Alabamians $121.9 million annually, easing the burden of high food prices.
Grocery shopping just became more affordable in Alabama this week, after a new reduction in the state sales tax on essential food items went into effect. The decision, expected to save residents nearly $121.9 million annually, positions Alabama in the middle of U.S. states that vary widely in their taxation policies on groceries, according to Newsweek.
The law, passed by the state legislature and signed by Governor Kay Ivey, lowered the sales tax from 3% to 2%, following earlier steps that began in September 2023 when the rate was cut from 4% to 3%. With this move, Alabama has now enacted its second tax cut in three years, responding to public pressure amid persistently high food prices.
Alabama Cuts Grocery Tax to 2%
Robyn Hyden, executive director of the civil rights organization Alabama Arise, described the measure as “great news for all Alabamians, as it will help families meet their basic needs at a time when grocery prices remain significantly high.”
States differ widely in how they handle grocery taxes. Most exempt food for home consumption entirely, while 10 states still impose varying forms of taxes. At the high end, Idaho charges 6%, followed by Mississippi at 5%, with Hawaii and Tennessee both at 4%, and South Dakota at 4.2%.
Alabama now sits at 2%, just above Utah at 1.75%, Missouri at 1.2%, and Illinois at 1%—which plans to fully eliminate the tax by 2026. Arkansas is at the bottom with a symbolic rate of only 0.0125%.
One notable exception is New Mexico, where a “gross receipts tax” is applied to businesses, but eligible food sales are effectively exempt—meaning consumers don’t see a direct tax, although some stores may factor the costs into their retail prices as part of operating expenses.
This patchwork of policies reflects the diverse economic and political philosophies across the United States. Some governments view food as an essential need that should be shielded from extra costs, while others maintain grocery taxes—even at reduced levels—to preserve state revenues.
