Governor Ivey signs Food Sales Tax, Essential Items Tax Bills

Alabama Governor Kay Ivey signed two bills on Friday, May 9 that will reduce the state tax burden on all Alabamians. The bills will be especially beneficial to low- and middle-class residents.

Alabama House Bill 386 (HB386) reduces the state's sales tax on food from 3% to 2%, effective as of September 1, 2025. This follows a previous reduction in 2023 from 4% to 3%.

HB386 also allows counties and municipalities to reduce their local sales and food use taxes at their discretion. If necessary, the bill allows them to return them to the levels in effect June 15, 2023.

The previous 2023 food sales tax reduction had been tied to growth of the Education Trust Fund (ETF) of 3.5%. HB386 removes that requirement, allowing the food tax cut to proceed regardless of ETF growth.

HB386 is expected to save Alabama taxpayers $121 million annually.

Alabama House Bill 152 (HB152) creates a temporary exemption from the state's 4% sales and use tax for specific essential personal care items from September 1, 2025, to August 31, 2028.

Items that are exempt from the 4% state sales and use tax include:

• Baby formula
• Baby bottles
• Baby wipes
• Breast milk pumping equipment and breast pumps
• Diapers
• Maternity clothing
• Menstrual hygiene products (including tampons, pads, liners, menstrual sponges, and cups)
• Adult diapers

The tax exemption only applies to state sales taxes. Local governments may choose to follow the state’s lead by local ordinance or resolution, as they decide.

HB152 is expected to save Alabama taxpayers some $13 million while the exemption is in effect. If all local governments follow suit, taxpayers would save another $14.4 million.

These bills reflect a growing trend in Alabama to reduce the tax burden on essential goods to alleviate financial pressures on residents, especially those in low- and moderate-income brackets.