Photo by Jon Anderson
A shopper checks out at the Walmart Neighborhood Market on Lorna Road in Hoover, Alabama, on Sept. 13, 2023.
Taxes on groceries in Hoover were scheduled to go down by half a percentage point today as a result of a vote by the Hoover City Council a year ago, but it didn’t happen as planned.
Hoover officials today said they were informed by the Alabama Department of Revenue this summer that the ordinance passed by the Hoover City Council a year ago did not actually comply with state law.
Hoover’s ordinance called for the city sales tax on groceries to drop from 3.5% to 3% on Oct. 1, 2024, but state law only allows for the sales tax to be lowered by 25%, which would have required Hoover’s sales tax to drop to 2.625%, city officials said.
Hoover officials had interpreted the state law to say that the tax could be lowered by “up to 25%,” but the Alabama Department of Revenue said if reductions occur, they must be in 25% increments with no leeway, said Councilman Casey Middlebrooks, who initiated the tax reduction a year ago.
Additionally, the state requires that revenues in a city’s general fund must grow by at least 2% in order for a city to be eligible to cut its sales taxes on groceries, and Hoover’s general fund did not meet that standard, Middlebrooks said.
The councilman said he was disappointed the tax reduction, which was designed to take some of the edge off inflation, did not go into effect.
Council President John Lyda said he is disappointed that the city’s revenues are not growing enough to meet the state’s requirement. However, in the future, if revenues grow to the point that a sales tax reduction could be undertaken, it would allow the council to revisit the matter, he said.
“Time will tell. Everything has to be looked at in accordance with where the economy is at at the time,” Lyda said.
Middlebrooks said he doubts the city would be in a position to lower the sales tax groceries anytime in the near future because of obligations the city has taken on since its vote a year ago. Tax breaks and incentives for projects such as Riverwalk Village in Riverchase have obligated the city to payments, he said.
“Until that comes off, I really can’t see being able to reduce the grocery tax by 25%,” he said.
Lowering the city sales tax on groceries from 3.5% to 3 would have cost the city an estimated $2.5 million to $3 million in revenue, but lowering the tax to 2.625% would cost the city $3.5 million to $4 million, he said.
The reduction in Hoover sales taxes on groceries, at the time it was approved, was expected to save the average Hoover resident $17.65 per year.
The state Legislature cut the state sales tax from 4% to 3% on Sept. 1, 2023. It would have dropped to 2% on Sept. 1, 2024, if there had been at least 3.5% growth in the Education Trust Fund, but that did not happen, so the state sales tax on groceries remains at 3% for now.
Including county taxes, the current overall sales and use tax rate on groceries is 7.5% in the Shelby County part of Hoover and 8.5% in the Jefferson County part of Hoover.
However, sales taxes on items other than groceries have not been impacted. Total sales taxes on other items in Hoover remain at 8.5% in the Shelby County part of Hoover and 9.5% in the Jefferson County part of Hoover.
