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Understand Sales Tax for Food & Beverage
Is food taxable in Alabama?
byAugust 4, 2020
Every US state makes their own rules and laws around the taxability of certain products. For example, groceries are taxable at the normal rates in Alabama, but totally exempt in Arizona.
This post will explain grocery, meal and beverage taxability in Alabama.
Are groceries taxable in Alabama?
Alabama is one of only three states to fully tax sales of groceries, not giving any sort of tax break. Combining the state’s 4% sales tax with local taxes can drive the total tax rate to 10% or 11% in some areas of the state. Read more about how groceries are taxed in Alabama here.
However, all food purchases made with Food Stamps are exempt from taxation. More on that here.
Are meals taxable in Alabama?
In most cases, prepared food to be consumed on or off the premises is fully taxable in Alabama at 4%. However, counties and jurisdictions may charge an additional local sales tax of up to 7%, for a maximum possible combined sales tax of 11%. For food retail sales made through a coin-operated vending machine, the sales tax rate is 3%.
Are beverages taxable in Alabama?
In Alabama, beverages are taxed depending on where they are sold. However, it just so happens that grocery items and prepared food are taxed the same rate at 4% statewide rate plus any local rates. So a drink ordered at a restaurant is considered prepared food and is therefore taxed the same as a drink purchased at a grocery store.
How to Always Collect the Correct Amount of Sales Tax in Alabama
Do you sell groceries, meals or beverages? Are you required to collect sales tax in Alabama? Then this may sound like a huge headache.
That’s where TaxJar can help.
With the TaxJar API, you can be sure you’re collecting the right amount of sales tax on every transaction. Our product tax codes ensure you do collect sales tax on that soft drink but don’t collect sales tax on that plain coffee drink.
Not to mention, most eCommerce businesses have nexus in multiple states. For example, groceries are taxable in some states, but non-taxable in others. Or, like Illinois, they are taxable at a reduced rate. With TaxJar, you’ll collect the right amount of sales tax from every customer, in every state, every time.
Further food and meal taxability resources:
- Sales Tax by State: Are grocery items taxable?
- Sales Tax by State: To-Go Restaurant Orders
- Is the food I sell on my food truck taxable?
- Alabama Sales Tax Guide for Businesses
Ready to automate sales tax collection, reporting and filing? Click here for more on how TaxJar can take the headache out of sales tax in your food & beverage business.
Your food taxability checklist
Food and beverage taxability is complicated, and collecting and filing correctly can be difficult. Use this checklist to make sure you’re compliant.Download the checklist