Alabama Senate Bill SB257

Alabama 2023 Regular Session

• Introduced: 4/27/23
• Refer: 4/27/23

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 financial implications for state laws include the potential for decreased revenue from the sales tax on food over time, as the tax rate is expected to drop to ultimately 2%. The gradual reduction of this sales tax may alleviate financial pressure on households, especially those in lower income brackets. However, the dependency of future tax rate reductions on the growth of the Education Trust Fund introduces a degree of uncertainty on how sustainable these tax changes will be in the long term, factoring in economic fluctuations and budget needs for education funding.

Summary

SB257 aims to revise Alabama's sales tax structure specifically concerning food. This bill defines 'food' for the purposes of sales and use tax and establishes a plan to gradually phase-out the state sales tax applied to food starting on September 1, 2023. It also stipulates that any further tax reductions will depend on specific growth targets being met in the Education Trust Fund. This structure redefines how food is categorized in sales transactions, likely resulting in significant shifts in taxation revenues, particularly for low-income individuals who spend a higher proportion of their income on food.

Contention

The bill brings forth discussion around local government autonomy, as county and municipal governing bodies will retain the authority to levy their own sales and use taxes on food but cannot impose new taxes beyond what is already established. Critics may argue that this limits a municipality's ability to respond to local economic conditions and enforce necessary tax policy for their communities. Supporters argue this centralization creates a more streamlined tax code and provides consistent policies across jurisdictions, potentially simplifying the compliance process for residents and businesses alike.