HUNTSVILLE, Ala. (WHNT) — On Friday, September 1st, a 1% tax cut on groceries went into effect in Alabama – meaning Alabamians will now be taxed at 3% on grocery items, rather than 4%.

However, the rollout of the tax cut had a few bumps along the road, and now many shoppers are taking a closer look at their receipts.

For example, on Friday, people who shopped at Walmart stores across Alabama were “incorrectly overcharged sales tax.” Shoppers were taxed the old state sales tax rate and the new state sales tax grocery rate, on all items. In Madison County, that means shoppers were taxed at 9% and 8% when you factor in the additional county & city taxes.

Walmart has now corrected the error, and is offering $5 gift cards to impacted shoppers through September 18th. To get a gift card, simply take your receipt from Friday, September 1st to the customer service desk at any Walmart.

If you’ve shopped at a Walmart, or any other retailer that sells food items since Friday and have noticed two different tax lines, it is not a mistake.

The Alabama Department of Revenue says “most” retailers will separate items that were taxed with the statewide 4% rate and items that were taxed at the grocery rate of 3%. So, if you buy a combination of food and non-food items you will see two different tax lines on your receipt from now on.

What qualifies as a grocery item? According to the Alabama Retail Association, the new tax follows the SNAP guidelines. So if you can purchase an item with SNAP benefits, it will be taxed as a grocery item.

SNAP benefits can be used on:

• Fruits and vegetables;
• Meat, poultry, and fish;
• Dairy products;
• Breads and cereals;
• Other foods such as snack foods and non-alcoholic beverages; and
• Seeds and plants which produce food for the household to eat.

There are a few notable exceptions to what is SNAP eligible, and therefore those items are not taxed as grocery items. “Heated foods, hot foods, and cold prepared foods” are typically not eligible for SNAP, and therefore not taxed as a food item.

The “heated foods” category includes foods “cooked or heated on-site by the retailer before or after purchase, regardless of whether cooking/heating is provided for free or at a cost.” The USDA says examples of this include:

• pizza (sold cold and then baked or heated);
• chicken (sold cold, frozen, or uncooked and then cooked or heated ); and
• seafood, such as fish, shrimp, crabs, or other shellfish (sold cold, frozen, or live and then cooked, steamed, or heated).

News 19 has noticed rotisserie chicken as well as deli chicken was not taxed as a grocery item on receipts shown to the news team. Those items would apply to the “heated foods” exception.

If you are still wondering what items on your receipt are taxed under the grocery category, take a look at each item. On Walmart receipts, items that were taxed at the 3% grocery rate, have an F next to the product number and to the left of the price.

A screenshot of a Walmart receipt from Saturday, September 2nd, 2023.

In the above screenshot of a Walmart receipt, you can see Dawn dish soap and bananas. The ‘F’ on the end the product number for the bananas signifies that it was taxed as a grocery item at 8%. The Dawn dish soap was taxed at 9%.

The Alabama Department of Revenue says if you believe you were incorrectly taxed on purchases to first take it up with the customer service department of the store you purchased the items from. You can also reach out to the Alabama Department of Revenue to report any issues.