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Alabama’s Grocery Tax Poised For Further Reduction This Year

AGA President Ellie Taylor
Ellie Taylor

After more than a decade of hard work, the reduction of Alabama’s grocery tax is finally a reality, according to Alabama Grocers Association President Ellie Taylor. 

Act 2023-554 passed the Alabama legislature, and on Sept. 1, 2023, the grocery tax rate was reduced from 4 percent to 3 percent. Alabama now joins the 47 other states, including its border states of Florida, Georgia and Tennessee, which do not fully tax groceries. 

“Daily, grocers witness hardworking Alabamians unable to purchase the food that they need,” Taylor said. “Despite wages increasing significantly over the last several years, the rising cost of food has outpaced all other household expenses except transportation.”

She added that the tax is scheduled to be lowered to 2 percent on Sept. 1, “if the average of the estimated growth in the total net receipts from all revenue sources to the Education Trust Fund is at least 3.5 percent higher than the previous fiscal year. With Alabama’s budgets experiencing record growth and the EFT revenue growing steadily over the last nine years, it was time to act on reducing this regressive tax.”

AGA’s top legislative priority in 2024 is to allow off-premises alcohol licensees, including supermarkets and convenience stores, to sell spirits-based ready-to-drink products of at least 6 percent alcohol by volume. 

“We are working with a coalition of the grocery industry and have created a campaign called Alabamians Ready for Convenience. Consumers can go to the website AL Ready 4 Convenience – Spirits United and let their legislators know they want these products in their stores.”

In 2023, the state legislature passed a record number of other bills to benefit the grocery industry, according to Taylor. These included bills addressing organized retail theft, curbside alcohol delivery and liquor liability reform.

Labor ‘tremendous issue’

Alabama had an economic surplus of $2.7 billion in 2023, which included rebates for households of $150 for single people and $300 for families. The state also allocated $1.1 billion of the last American Rescue Plan Act funds, which included monies for health care, water, sewer and broadband projects and reimbursement of administrative and reporting costs during the pandemic, according to Taylor. 

Alabama’s economy grew about 2.5 percent in 2023, with employment growing at about 1.8 percent, according to the February Alabama Business Economic Outlook Update from the University of Alabama’s Culverhouse College of Business.

The Cotton State gained 300 jobs in December over the previous month, bringing the total net gain in jobs to 38,100 from December 2022, while the seasonally adjusted unemployment rate stayed flat at 2.6 percent, the report stated. 

During the same period, the seasonally adjusted number of unemployed workers dropped from 59,986 to 65,462 and the labor force participation rate went up from 56.7 percent in December 2022 to 57.2 percent in December 2023.

Alabama’s State of the Budget Report predicts the economy will be stable in 2024, Taylor said. There will be some decline noted, due to increased interest rates. 

Alabama’s overall gross domestic product grew by 2.4 percent in 2023 and likely will increase by about 1.4 percent in 2024. The labor market is tight, with about three times as many job openings as unemployed workers, and the jobless rate standing at 2.3 percent.

Looking at the state’s grocery industry, Taylor said she believes overall it is relatively flat. “Supply chain continues to get better, but labor, inflation and crime continue to be huge challenges,” she said, adding that labor remains a “tremendous issue.”

“I am hearing retailers are overscheduling due to workers not showing up, and they are now targeting younger high school-age students and retired workers to fill the gap.”

As for inflation, Taylor said all reports show it is declining though it continues to be a problem. 

“The expectation is the Federal Reserve will decrease interest rates in the third and fourth quarter, but we will see if that makes a difference in 2024,” she said.

To address the issue of retail theft, the Alabama legislature passed the Retail Crime Prevention Act in 2023. It applies to retail and organized retail theft.

“It allows retailers to sign out warrants for arrests without leaving their stores, gives convicted thieves and their organizers real jail time plus monetary consequences and provides training for prosecutors and law enforcement agencies,” Taylor said. 

“Retail theft and organized retail theft violators will be prosecuted in circuit or district court, not municipal court. A coalition of associations, including the Alabama Grocers Association, worked with the District Attorneys Association to ensure this bill would produce results in our state.”

One of the biggest challenges independent grocers in the state face is the loss of additional P-SNAP and pandemic dollars, Taylor said, which has led to a decline in sales, especially in underserved areas.

Offering resources

Taylor said AGA has several resources available to members to help deal with various issues. 

As a result of retailer concerns over healthcare costs, the association created the AGA Health and Welfare Trust, which is a healthcare plan with medical, dental and vision insurance options. Members can go to www.agabenefits.com to learn more.

To be competitive in the labor market, AGA has partnered with Merrill Lynch and TransAmerica for its Multi-Employer 401(k) Plan. Benefits include no annual audit, cost savings on investments, no individual 550 reporting, flexible plan features and customizable plan design options. 

AGA has also partnered with the ACCS Innovation Center, a division of the Alabama Community College System, to provide meat cutter classes for the food industry. The training from Skills for Success is offered at no cost, thanks to legislative appropriations that allow for the development and deployment of training statewide. 

A unique feature of Skills for Success is how quickly it can be completed, Taylor said. Part of the training is offered online with self-paced interactive learning. 

Upon completing the online portion of the course, students then complete hands-on training with qualified instructors at any of the 24 community colleges around the state. The in-person labs simulate real work experience and test students for mastery of skills.

The association also offers scholarships and tuition reimbursement through its Alabama Grocers Education Foundation, which has awarded more than $1.4 million to date. For information, visit alabamagrocers.org/foundation.

Read more association news from The Shelby Report.

Alabama Grocers Association Offers Optimistic Economic Outlook In 2022

About the author

Treva Bennett

Senior Content Creator

After 32 years in the newspaper industry, she is enjoying her new career exploring the world of groceries at The Shelby Report.

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