Gulf Shores, Ala. — (GSN) — The debate surrounding the elimination of the sales tax on groceries has been a central theme in political campaigns and election ads across Alabama. Understanding why the tax exists, how it compares nationally, and what shoppers pay locally provides key context to this ongoing discussion.

Alabama relies heavily on sales tax because it maintains some of the lowest property tax rates in the nation. To fund essential public services—most notably the state's Education Trust Fund (ETF)—the state heavily taxes retail purchases, including grocery staples.

Unlike many states that exempt food, Alabama historically applied its full general sales tax rate to groceries to ensure a consistent, non-cyclical stream of tax revenue for public schools.

Nationwide, only 8 states still levy a state sales tax on groceries. Most U.S. states completely exempt grocery staples from sales tax or offer tax credits to low-income households. Alabama remains among the minority of states that tax groceries, though recent legislation has cut the state rate in half.

Alabama’s general sales tax was established in 1937 during the Great Depression to secure dedicated funding for public education. Groceries were included in the tax base from the beginning without a baseline exemption.

• State Revenue Impact:
• At the historical 4% state rate, the grocery tax generated over $500 million annually for the Education Trust Fund.
• In September 2023, the state reduced its grocery sales tax rate from 4% to 3% (via House Bill 479), returning approximately $152 million per year to taxpayers.
• In September 2025, the state implemented a second cut under House Bill 386, lowering the state grocery tax rate to 2%. This second 1% reduction saves consumers an additional $121M–$122M annually.
• Combined, the state's 50% reduction in the grocery tax (from 4% to 2%) leaves more than $270 million per year in residents' pockets while reducing ETF revenue by the same amount.

What Is the Grocery Tax Rate in Gulf Shores and Orange Beach?

Breakdown at Checkout:

• State Grocery Rate: 2.0%
• Baldwin County Sales Tax: 3.0%
• City Sales Tax (Gulf Shores or Orange Beach): 3.0%

Total Combined Grocery Tax Rate: 8.0% at the register in both Gulf Shores and Orange Beach (compared to the 10.0% general sales tax rate on non-grocery items).

For Baldwin County, Gulf Shores, or Orange Beach to remove or reduce their local portion of the grocery tax (currently 3% for the county and 3% for the cities), their respective governing bodies would need to pass dedicated ordinances or resolutions to opt into the exemption. Because local governments rely heavily on these revenues to fund municipal services, infrastructure, and public safety, local leaders have not eliminated their portion of the tax.

For decades, politicians across Alabama have campaigned on promises to completely eliminate the state’s sales tax on food, pitching relief at the register as a winning message for working families. Yet, nearly a century after its creation in 1937, the tax remains firmly embedded in the state's revenue framework. While recent incremental rate cuts mark significant progress, full repeal continues to stall over the complex challenge of replacing hundreds of millions of dollars in dedicated education revenue. Until state leaders agree on a permanent alternative to fund public schools, the grocery tax endures as both a reliable political talking point and an unavoidable daily cost for Alabama shoppers.