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HB647 INTRODUCED
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HB647
3PUFYZE-1
By Representatives Shaw, DuBose, Rehm, Rigsby, Lomax, Hulsey,
Moore (P), Simpson, Robertson, Holk-Jones, Carns, Brown,
Pettus, Marques, Clouse
RFD: Ways and Means Education
First Read: 31-Mar-26
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3PUFYZE-1 03/16/2026 MRF (F)MRF 2026-1365
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First Read: 31-Mar-26
SYNOPSIS:
Under existing law, the state imposes sales or
use taxes upon certain persons, firms, or corporations
at a general rate of four percent. Sales of certain
items are taxed at a reduced rate, including food,
which is taxed at two percent.
This bill would decrease the sales and use tax
rates on food by one-half percent on September 1, 2026,
and for each year after, until September 1, 2029, when
food shall be exempt from state sales and use tax.
This bill would allow counties and
municipalities to adopt local exemptions of food from
sales and use tax.
A BILL
TO BE ENTITLED
AN ACT
Relating to sales and use taxes; to amend Sections
40-23-2, 40-23-40, and 40-23-61, as last amended by Act
2025-305, 2025 Regular Session, Code of Alabama 1975, to
decrease the state sales and use tax rate on food by one-half
percent each year, and to allow counties and municipalities to
adopt local exemptions of food from sales and use tax; and to
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adopt local exemptions of food from sales and use tax; and to
add Section 40-23-4.11 to the Code of Alabama 1975, to exempt
food from state sales and use tax beginning on September 1,
2029.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Sections 40-23-2, 40-23-40, and 40-23-61, as
last amended by Act 2025-305, 2025 Regular Session, Code of
Alabama 1975, are amended as follows:
"§40-23-2
There is levied, in addition to all other taxes of
every kind now imposed by law, and shall be collected as
herein provided, a privilege or license tax against the person
on account of the business activities and in the amount to be
determined by the application of rates against gross sales, or
gross receipts, as the case may be, as follows:
(1) Upon every person, firm, or corporation, (including
the State of Alabama and its Alcoholic Beverage Control Board
in the sale of alcoholic beverages of all kinds, The
University of Alabama, Auburn University, and all other
institutions of higher learning education in the state, whether
the institutions be denominational, state, county, or
municipal institutions, any association or other agency or
instrumentality of the institutions ), engaged or continuing
within this state, in the business of selling at retail any
tangible personal property whatsoever, including merchandise
and commodities of every kind and character, (not including ,
however, bonds or other evidences of debts or stocks, nor
sales of material and supplies to any person for use in
fulfilling a contract for the painting, repair, or
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fulfilling a contract for the painting, repair, or
reconditioning of vessels, barges, ships, other watercraft,
and commercial fishing vessels of over five tons load
displacement as registered with the U.S. Coast Guard and
licensed by the State of Alabama Department of Conservation
and Natural Resources ), an amount equal to four percent of the
gross proceeds of sales of the business except where a
different amount is expressly provided herein. Provided,
however, that any Any person engaging or continuing in business
as a retailer and wholesaler or jobber shall pay the tax
required on the gross proceeds of retail sales of the business
at the rates specified , when his or her books are kept so as
to show separately the gross proceeds of sales of each
business, and when his or her books are not kept he or she
shall pay the tax as a retailer, on the gross sales of the
business.
Where any used part including tires of an automotive
vehicle or a truck trailer, semitrailer, or house trailer is
taken in trade, or in a series of trades, as a credit or part
payment on the sale of a new or rebuilt part or tire, the tax
levied herein shall be paid on the net difference, that is,
the price of the new or used part or tire sold less the credit
for the used part or tire taken in trade, provided , however,
this provision shall not be construed to include batteries.
(2) Upon every person, firm, or corporation engaged or
continuing within this state in the business of conducting or
operating places of amusement or entertainment, billiard and
pool rooms, bowling alleys, amusement devices, musical
devices, theaters, opera houses, moving picture shows,
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devices, theaters, opera houses, moving picture shows,
vaudevilles, amusement parks, athletic contests, including
wrestling matches, prize fights, boxing and wrestling
exhibitions, football and baseball games, (including athletic
contests, conducted by or under the auspices of any
educational institution within this state, or any athletic
association thereof, or other association whether the
institution or association be a denominational, a state, or
county, or a municipal institution, or association or a state,
county, or city school, or other institution, association , or
school ), skating rinks, race tracks, golf courses, or any
other place at which any exhibition, display, amusement, or
entertainment is offered to the public or place or places
where an admission fee is charged, including public bathing
places and public dance halls of every kind and description
within the State of Alabama, an amount equal to four percent
of the gross receipts of any such business. Provided, however,
notwithstanding Notwithstanding any language to the contrary in
the prior portion of this subdivision, the tax provisions so
specified shall not apply to any athletic event conducted by a
public or nonpublic primary or secondary school or any
athletic event conducted by or under the auspices of the
Alabama High School Athletic Association. The tax amount that
would have been collected pursuant to this subdivision shall
continue to be collected by the public or nonpublic primary or
secondary school, but shall be retained by the school that
collected it and shall be used by the school for school
purposes.
(3) Upon every person, firm, or corporation engaged or
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(3) Upon every person, firm, or corporation engaged or
continuing within this state in the business of selling at
retail machines used in mining, quarrying, compounding,
processing, and manufacturing of tangible personal property an
amount equal to one and one-half percent of the gross proceeds
of the sale of the machines. The term "machine," as herein
used, shall include machinery that is used for mining,
quarrying, compounding, processing, or manufacturing tangible
personal property, and the parts of the machines, attachments,
and replacements therefor, that are made or manufactured for
use on or in the operation of the machines and that are
necessary to the operation of the machines and are customarily
so used.
(4) Upon every person, firm, or corporation engaged or
continuing within this state in the business of selling at
retail any automotive vehicle or truck trailer, semitrailer,
or house trailer, or mobile home set-up materials and supplies
including, but not limited to, steps, blocks, anchoring, cable
pipes, and any other materials pertaining thereto, an amount
equal to two percent of the gross proceeds of sale of the
automotive vehicle or truck trailer, semitrailer, or house
trailer, or mobile home set-up materials and supplies ,
provided , however, where a person subject to the tax provided
for in this subdivision withdraws from his or her stock in
trade any automotive vehicle or truck trailer, semitrailer, or
house trailer for use by him or her or by his or her employee
or agent in the operation of the business, there shall be
paid, in lieu of the tax levied in this subdivision, a fee of
five dollars ($5) per year or part thereof during which the
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five dollars ($5) per year or part thereof during which the
automotive vehicle, truck trailer, semitrailer, or house
trailer shall remain the property of the person. Each year or
part thereof shall begin with the day or anniversary date, as
the case may be, of such withdrawal and shall run for the 12
succeeding months or part thereof during which the automotive
vehicle, truck trailer, semitrailer, or house trailer shall
remain the property of the person.
Where any used automotive vehicle or truck trailer,
semitrailer, or house trailer is taken in trade or in a series
of trades, as a credit or part payment on the sale of a new or
used vehicle, the tax levied in this subdivision shall be paid
on the net difference, that is, the price of the new or used
vehicle sold less the credit for the used vehicle taken in
trade.
Sales of automobiles, motorcycles, trucks, truck
trailers, travel trailers, campers, housecars, or semitrailers
that will be registered or titled outside Alabama and that are
exported or removed from Alabama within 72 hours by the
purchaser or his or her agent for first use outside Alabama
are subject to Alabama sales tax in an amount equal to only
the state automotive sales tax rate, unless the sales tax laws
of the state in which the purchaser will title or register the
vehicle allows an Alabama resident to purchase a motor vehicle
for first titling and registering in Alabama without the
payment of tax to that state. However, in no case shall the
amount of Alabama state sales tax due on a motor vehicle that
will be registered or titled for use in another state exceed
the amount of sales tax that would otherwise have been due in
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the amount of sales tax that would otherwise have been due in
the state where the vehicle will be registered or titled for
first use. In order to qualify as a travel trailer, camper, or
housecar that will be registered or titled for use in another
state, the purchaser must provide documentation to the seller
that the purchaser is not a resident of Alabama as required by
the Department of Revenue. No such proof is required in the
sale of an automobile, motorcycle, truck, truck trailer, or
semitrailer, excluding a travel trailer, camper, or housecar.
The tax collected under this export provision shall be Alabama
sales tax and shall exclude county and municipal sales tax. On
January 1, 2016, and each January 1 thereafter, the Alabama
Department of Revenue shall publish to the state's website a
list of states that do not allow drive out provisions to
Alabama residents. Should the list, required by this
subdivision and relied upon by the taxpayer, be incorrect, the
taxpayer shall be relieved from the liability concerning the
miscollection of the state automotive sales tax. Sales of all
other vehicles such as mobile homes, motor bikes, all terrain
vehicles, and boats do not qualify for the export exemption
provision and are taxable unless the dealer can provide
factual evidence that the vehicle was delivered outside of
Alabama or to a common carrier for transportation outside
Alabama. In order for the sale to be exempt from Alabama tax,
the information relative to the exempt sale shall be
documented on forms approved by the Revenue Department of
Revenue .
Of the total two-cent ($.02) two cent ($0.02) tax on
each dollar of sale provided in this subdivision, 58 percent
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each dollar of sale provided in this subdivision, 58 percent
of the total tax generated by this subdivision shall be
deposited to the credit of the Education Trust Fund and 42
percent of the total tax generated by this subdivision shall
be deposited to the credit of the State General Fund.
(5) Upon every person, firm, or corporation engaged or
continuing within this state in the business of selling
through coin-operated dispensing machines, food and food
products for human consumption, not including beverages other
than coffee, milk, milk products, and substitutes therefor,
there is levied a tax equal to three percent of the cost of
the food, food products, and beverages sold through the
machines, which cost for the purpose of this subdivision shall
be the gross proceeds of sales of the business.
(6) Upon every person, firm, or corporation engaged or
continuing within this state in the business of selling food
as defined in Section 40-23-1, there is a tax levied equal to
three percent of the gross proceeds of the sale of food. On
September 1, 2025, the tax rate shall be reduced to two
percent . On September 1, 2026, the tax rate shall be reduced
to one and one-half percent. On September 1, 2027, the tax
rate shall be reduced to one percent. On September 1, 2028,
the tax rate shall be reduced to one-half percent. Beginning
on September 1, 2029, this subdivision shall be void ."
"§40-23-40
(a) On June 15, 2023, the definition of "food" in
Sections 40-23-1 and 40-23-60 shall apply to county and
municipal sales and use taxes. For purposes of county and
municipal sales and use taxes, the sales tax rate on food
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municipal sales and use taxes, the sales tax rate on food
shall be established as the general or retail sales tax rate
in effect in the county or municipality on June 15, 2023,
unless otherwise provided by law. An act of the Legislature or
an ordinance or resolution adopted by a county or municipal
governing body levying a county or municipal sales and use tax
inclusive of food passed or enacted on or before June 15,
2023, shall remain operative, but no additional county or
municipal sales and use taxes on food may be levied.
(b) Any county or municipal governing body, by
resolution or ordinance, may reduce the general or retail
sales tax rate on food for local sales and use taxes. The
ordinance or resolution must be adopted at least 60 days prior
to becoming effective and shall take effect on October 1
following adoption.
(c) A county or municipal governing body that reduces
its general or retail sales tax rate on food for local sales
and use taxes pursuant to this section may subsequently
increase the rate on food not to exceed the rate in effect in
the county or municipality on June 15, 2023, unless otherwise
provided by law.
(d) Beginning on September 1, 2029, any county or
municipal governing body may exempt the gross proceeds from
the sale of food from county or municipal sales and use taxes
in accordance with Section 40-23-4.01. "
"§40-23-61
(a) An excise tax is hereby imposed on the storage,
use, or other consumption in this state of tangible personal
property, not including, however, materials and supplies
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property, not including, however, materials and supplies
bought for use in fulfilling a contract for the painting,
repairing, or reconditioning of vessels, barges, ships, other
watercraft, and commercial fishing vessels of over five tons
load displacement as registered with the U.S. Coast Guard and
licensed by the State of Alabama Department of Conservation
and Natural Resources, purchased at retail on or after October
1, 1965, for storage, use, or other consumption in this state
at the rate of four percent of the sales price of the property
or the amount of tax collected by the seller, whichever is
greater ; provided, however, when . When the seller follows the
Department of Revenue's suggested use tax brackets and his or
her records prove that his or her following the brackets
resulted in a net undercollection of tax for the month, he or
she may report the tax due or tax collected, whichever is
less, except as provided in subsections (b), (c), and (d).
(b) An excise tax is hereby imposed on the storage,
use, or other consumption in this state of any machines used
in mining, quarrying, compounding, processing, and
manufacturing of tangible personal property, purchased at
retail on or after October 1, 1965, at the rate of one and
one-half percent of the sales price of any such machine or the
amount of tax collected by the seller, whichever is greater ;
provided, however, when . When the seller follows the
Department of Revenue's suggested use tax brackets and his or
her records prove that his or her following the brackets
resulted in a net undercollection of tax for the month, he or
she may report the tax due or tax collected, whichever is
less. The term "machine," as used in this subsection, shall
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less. The term "machine," as used in this subsection, shall
include machinery that is used for mining, quarrying,
compounding, processing, or manufacturing tangible personal
property, and the parts of such machines, attachments, and
replacements therefor, which are made or manufactured for use
on or in the operation of such machines and which are
necessary to the operation of such machines, and are
customarily so used.
(c)(1) An excise tax is hereby imposed on the storage,
use, or other consumption in this state of any automotive
vehicle or truck trailer, semitrailer , or house trailer, and
mobile home set-up materials and supplies, including, but not
limited to, steps, blocks, anchoring, cable pipes, and any
other materials pertaining thereto, purchased at retail on or
after October 1, 1965, for storage, use, or other consumption
in this state at the rate of two percent of the sales price of
such automotive vehicle, truck trailer, semitrailer , or house
trailer, and mobile home set-up materials and supplies as
specified above, or the amount of tax collected by the seller,
whichever is greater ; provided, however, when . When the seller
follows the Department of Revenue's suggested use tax brackets
and his or her records prove that his or her following the
brackets resulted in a net undercollection of tax for the
month, he or she may report the tax due or tax collected,
whichever is less. Where any used automotive vehicle or truck
trailer, semitrailer, or house trailer is taken in trade, or
in a series of trades, as a credit or part payment on the sale
of a new or used vehicle, the tax levied herein shall be paid
on the net difference, that is, the price of the new or used
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on the net difference, that is, the price of the new or used
vehicle sold less the credit for the used vehicle taken in
trade.
(2) Of the total two cent ($.02) ($0.02) tax on each
dollar of sale provided in this subsection, 58 percent of the
total tax generated by this subsection shall be deposited to
the credit of the Education Trust Fund and 42 percent of the
total tax generated by this subsection shall be deposited to
the credit of the State General Fund.
(d) An excise tax is hereby imposed on the storage,
use, or other consumption in this state of food as defined in
Section 40-23-60, at the rate of three percent of the sales
price of such food. On September 1, 2025, the tax rate shall
be reduced to two percent . On September 1, 2026, the tax rate
shall be reduced to one and one-half percent. On September 1,
2027, the tax rate shall be reduced to one percent. On
September 1, 2028, the tax rate shall be reduced to one-half
percent. Beginning on September 1, 2029, this subsection shall
be void .
(e) Every person storing, using, or otherwise consuming
in this state tangible personal property purchased at retail
shall be liable for the tax imposed by this article, and the
liability shall not be extinguished until the tax has been
paid to this state ; provided, that a . A receipt from a
retailer maintaining a place of business in this state or a
retailer authorized by the department, under such rules as it
may prescribe, to collect the tax imposed hereby and who shall
for the purpose of this article be regarded as a retailer
maintaining a place of business in this state, given to the
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maintaining a place of business in this state, given to the
purchaser in accordance with Section 40-23-67, shall be
sufficient to relieve the purchaser from further liability for
tax to which the receipt may refer.
(f) An excise tax is hereby imposed on the classes of
tangible personal property, and at the rates imposed on such
classes, specified in subsections (a), (b), (c), and (d) on
the storage, use, or other consumption in the performance of a
contract in this state of any such tangible personal property,
new or used, the tax to be measured by the sales price or the
fair and reasonable market value of the tangible personal
property when put into use in this state, whichever is less ;
provided, that the . The tax imposed by this subsection shall
not apply where the taxes imposed by subsection (a), (b), (c),
or (d) apply."
Section 2. Section 40-23-4.11, Code of Alabama 1975, is
added to read as follows:
§40-23-4.11
Beginning on September 1, 2029, the gross proceeds from
the sale of food, as defined in Section 40-23-1, are exempt
from state sales and use taxes.
Section 3. This act shall become effective on September
1, 2026.
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