The bill to potentially cut in half the state sales tax on groceries in Alabama would also prevent cities and counties from raising their sales taxes on store-bought food.
It also gives local governments the option of cutting their sales taxes only on groceries, but that’s a political football local leaders likely don’t want.
County and municipal associations are hoping as Senate Bill 257 works its way through the legislative process, lawmakers will opt to leave them out of the legislation.
“We’re going to advocate for amending it to allow municipalities to set and administer their local tax rates,” Greg Cochran, executive director of the Alabama League of Municipalities, told Alabama Daily News. “(We hope the Legislature) will allow municipalities to continue to control their tax rates now and in the future.”
Local communities’ authority to collect taxes is provided through state law, which the new legislation would amend.
Filed last week by Sen. Andrew Jones, R-Centre, and co-signed by all 34 of his Senate colleagues, the bill would cut the state’s 4% sales tax on groceries by .5% each year for four years.
But legislators don’t want to cut the sales tax on food only to see local municipalities “backfill” it, eliminating the savings for Alabamians, Jones told Alabama Daily News.
“There would be a freeze in effect,” Jones said.
The bill has two provisions that could apply to local governments. One says any county or municipal body can reduce the general or retail sales tax on food, allowing them to carve out food items from their general sales tax.
It also says that if the law goes into effect, their local sales tax on food can stay in effect, “but no additional county or municipal sales and use taxes on food may be levied.”
Under current law, municipalities can’t apply sales taxes to certain items, it has to be across the board on purchases. So even if lawmakers reduced the state sales tax, cities could not pass an increase only on food items. They’d have to raise the tax on all items.
Jones’ bill “unhinges” groceries from other items as it applies to sales taxes.
In parts of the state, people pay more in local sales tax than they do state sales tax. According to the nonprofit Tax Foundation, the average local sales tax rate in Alabama in 2020 was 5.44%, one of the highest in the nation.
Sonny Brasfield, executive director of the Association of County Commissions of Alabama, said counties “aren’t interested in the Legislature addressing a reduction in county revenue, unless they provide us a way to make us that revenue.”
Should Jones’ bill become law, Brasfield said he expects calls for the reduction of local taxes on food.
“(This bill) puts counties under pressure to remove the local sales tax, but this debate has always been about the state sales tax,” Brasfield said. “It’s never been about the local sales tax.”
Meanwhile, counties can’t raise any taxes without legislative approval, so if they lost revenue by untaxing groceries, making it up would be difficult.
“For the most part, taxes that county commissions levy are taxes that go to education,” Brasfield said. “So I’d hope the education community would be just as concerned about this as we are.”