Alabama Senate Bill SB177

Alabama 2023 Regular Session

• Introduced: 4/5/23
• Refer: 4/5/23

Caption

Relating to sales taxes; to amend Section 40-23-1, as last amended by Acts 2022-199 and 2022-291, 2022 Regular Session, Code of Alabama 1975, Section 40-23-2, as last amended by Act 2022-346, 2022 Regular Session, Code of Alabama 1975, Section 40-23-60, as last amended by Act 2022-199, 2022 Regular Session, Code of Alabama 1975, and Section 40-23-61, Code of Alabama 1975; to define "food" and begin phasing-out the state sales and use tax on food on September 1, 2023; to require certain growth targets in the Education Trust Fund for future sales tax reductions on food; to establish the sales and use tax rate on food for purposes of county and municipal sales and use taxes as the existing general or retail sales and use tax rate; and to authorize a county and municipality to reduce the sales and use tax rate or exempt food from local sales and use taxes.

Impact

The implementation of SB177 will have significant implications for both state and local tax revenues. Local governing bodies will maintain their power to set sales tax rates on food, although they cannot impose additional taxes beyond the state’s cap. This could lead to variations in how food is taxed across different municipalities, potentially affecting local budgets, particularly if local governments rely on food tax revenue. Advocates highlight that lowering food taxes could increase access to essential items for low-income residents, thereby contributing to public welfare. However, the bill also raises concerns regarding the potential reduction in tax revenue for vital state education funding if growth targets are not consistently met.

Summary

SB177 is a legislative bill introduced to amend Alabama's sales tax laws, specifically focusing on the taxation of food items. The bill seeks to define the term 'food' for tax purposes and initiate a gradual phasing out of the state sales and use tax on food starting September 1, 2023. According to the provisions, the current sales tax rate of four percent on food will be reduced to three percent, with further reductions planned for subsequent odd-numbered years, provided certain growth targets in the Education Trust Fund are met. This approach aims to relieve the financial burden on consumers purchasing food, while also linking future reductions directly to the economic performance of the state.

Contention

Notable points of contention stem from the balance between state regulation and local autonomy. Some legislators argue that the bill centralizes control over sales tax regulations, while others believe it provides necessary relief to consumers. Opponents worry that if the reductions are connected solely to economic growth metrics, it may create instability in food pricing and availability for residents who rely on these essential purchases. The discussions around SB177 may also reflect broader debates on the role of state taxation and local governance in Alabama.