The Alabama Retail Association will have a seat on a task force Gov. Robert Bentley created Tuesday, Feb. 21, to “analyze and make recommendations regarding Alabama’s sales taxes on groceries.”
In a news conference, the governor said his goal for the task force is “to remove 4 percent off food items and put that money back in the pockets of Alabamians who need it the most.” The governor also said he has “no plans to replace (the state sales tax on food) with another tax.”
Executive Order No. 28, however, asks the task force to review “whether lost revenue from reducing or eliminating the sales tax on groceries should be replaced.” It gives the 14 or more members until June 1 to make recommendations.
Alabama Revenue Commissioner Julie Magee, who will serve as chairman of the task force, said the 4 percent state sales tax on groceries generates about $350 million annually for the Education Trust Fund. A fiscal note on earlier legislation estimated $405 million is generated by the state sales tax on food.
Alabama Retail Association President Rick Brown has chosen Terry Shea, co-owner and vice president of Wrapsody in Hoover and Auburn as well as an Alabama Retail board member, as his appointment to the task force. Greg Gregerson, president of Gregerson’s Foods Inc. in Gadsden who served as Alabama Retail’s 1998-1999 chairman, will also serve on the task force. Gregerson was appointed by the Alabama Grocers Association.
Besides Magee, Shea and Gregerson, the task force members include; Finance Director Clinton Carter; Agriculture and Industries Commissioner John McMillan; Rep. John F. Knight Jr., D-Montgomery; Rep. Matt Fridy, R-Montevallo; two state senators; the director of the Alabama Rural Development Office; an economist, a licensed dietitian; a Heart Association representative; a citizen representative and additional members as the governor deems necessary.
Four bills are pending in the current legislative session related to removing or reducing the sales tax on groceries. None have been scheduled for consideration.
Remove, No Replacement
As he has been for more than two decades, Knight is the sponsor of current legislation that would remove the state tax on groceries. HB44 proposes that sales and use tax on basic groceries be eliminated by Sept. 1 of this year. Knight’s bill offers no revenue-raising measure to replace the eliminated taxes and allows cities and counties to continue to tax food. His legislation uses the same definition of food as is used in the federal Supplemental Nutrition Assistance Program (SNAP), a provision the Alabama Retail Association has insisted on in previous sessions. HB44 has been assigned to the House Ways and Means Education Committee.
Remove by Raising State Sales Tax on Other Items
Sen. Gerald Dial, R-Lineville, introduced legislation Tuesday, Feb. 21, that would reduce the sales tax on food as defined by SNAP to zero while increasing the state’s 4 percent sales tax to 4.7 percent on other items. While the average combined sales tax paid in Alabama is 9 percent, increasing sales tax by almost 1 percent would drive up sales taxes in many places in the state to 11 percent. Alabama already has the highest average local sales tax in the nation – 5 percent, according to the Tax Foundation. SB227 calls for phasing out the tax on food by Sept. 1, 2018. The bill also requires the Legislature to review this change in the 2019 regular session to ensure it is revenue neutral. The bill has been assigned to the Senate Finance and Taxation Education Committee.
Remove Taxes on Groceries and Over-the-Counter Drugs by Reducing Deduction for Federal Income Taxes Paid
Also Tuesday, Sen. Hank Sanders, D-Selma, introduced a constitutional amendment (SB232) that would reduce by 1 percent the federal income taxes paid deduction allowed on state income tax returns for:
- single taxpayers with an annual adjusted gross income of more than $100,000 for each $500 of adjusted gross income in excess of $100,000.
- married couples making more than $200,000 for each $1,000 in adjusted gross income beyond $200,000.
The constitutional amendment also would exempt food and over-the-counter drugs from state sales tax. Prescription drugs are already tax free in Alabama. City and county sales taxes on food could remain intact. Sanders’ amendment is also assigned the Senate education budget committee.
Reduce by 1 Percent
On Thursday, Feb. 23, Rep. Tim Wadsworth, R-Arley, introduced HB303, which would reduce the state sales tax on food by 1 percent, starting Oct. 1. City and county sales taxes on food would remain the same. The bill has been assigned to the House education budget committee.
Alabama is one of seven states that tax food at the same rate as other products. The others are Hawaii, Idaho, Kansas, Mississippi, Oklahoma and South Dakota.
This article is part of the Alabama Retail Report, a communication for Alabama Retail Association members. Not a member? Join us!