Tennessee's Grocery Tax Is Not Going Away on July 1. Here's Why - And What's Next

Tennessee shoppers were hoping July 1 would bring relief at the register.

It won't.

Advocacy groups lobbied aggressively to include a partial elimination of Tennessee's 4% grocery tax in the 2026 state budget. The final document emerged from the legislative committees without any language addressing the retail grocery tax. Sales Tax Institute

Despite bipartisan support, multiple competing bills, and months of public debate — Tennessee's grocery tax survives into fiscal year 2027 unchanged.

Here's how it happened, why it matters, and what comes next.

The Most Unusual State Tax Situation in America Right Now

Tennessee finds itself in a genuinely strange position.

Tennessee has no income tax — the Hall Tax on investment income was eliminated in 2021, making Tennessee one of only nine states with no income tax of any kind. 10TV

The trade-off: Tennessee's 7% state sales tax rate ties for the highest in the country alongside Indiana and Mississippi, and local additions push most residents to pay 9.25% to 9.75% on most purchases.

And unlike most states, Tennessee taxes food.

A family spending $800 a month on groceries in Memphis pays roughly $48 a month — or $576 a year — in sales tax on groceries alone. That cost would be zero in Florida or Texas.

Tennessee is one of only about ten states in the country that still imposes a statewide sales tax on groceries. That distinction has become politically toxic in both parties — which is exactly why so many bills were filed this session. Fox 59

What Was Actually Proposed

The volume of grocery tax legislation introduced in 2026 was remarkable. Multiple bills. Multiple approaches. Both parties.

At least three bills sought to eliminate Tennessee's 4% state sales tax on food and food ingredients entirely — HB 1530, HB 1842, and HB 2007. All three would have taken effect July 1, 2026.

But that wasn't all. Some proposals would limit exemptions to specific populations — exemptions for WIC-eligible items and income-qualified families. At least two new food tax holidays were introduced — one would exempt groceries for consumers aged 65 or older, another would exempt groceries on the fifth day of every month. Avalara

The most unusual proposal: HB 1722/SB 1695 would establish a sales tax holiday for food and food ingredients one day per month — specifically exempting grocery sales between 12:01 a.m. and 11:59 p.m. on the fifth day of any month. The fifth is payday for many Tennessee employees, which appears to explain why that date was chosen. Avalara

Different visions. Different approaches. One common problem — nobody could agree on how to pay for any of them.

Why It Failed: The $800 Million Question

The grocery tax generates serious money.

The grocery tax generates approximately $800 million per year for Tennessee — funding infrastructure, public safety, clean water, and education.

Republicans filed a bill to eliminate the tax but did not include a specific replacement funding mechanism. Democrats filed their own bill but tied it to closing corporate tax loopholes — a mechanism Republicans rejected.

"Removing $800 million from the state budget without replacing it means one thing: cuts," said Rep. Aftyn Behn, D-Nashville. Tax Foundation

That's the fundamental impasse. Everyone agrees the grocery tax is regressive and politically unpopular. Nobody agrees on what fills the $800 million hole it leaves behind.

Republicans argued the state budget has grown nearly 59% under Governor Lee — implying there's room to absorb the loss. Democrats countered that cutting revenue without a replacement plan is irresponsible. Neither side moved.

The result: the final budget document emerged from legislative committees without any language addressing the retail grocery tax. Sales Tax Institute

Nashville's Grocery Tax Fight — A Different Story

While state lawmakers were deadlocked, Nashville's mayor was fighting a separate but related battle — and losing.

Nashville Mayor Freddie O'Connell wants to reduce or eliminate the city's 2.75% local grocery tax, but state law currently prevents metro governments from doing so. Every city in Tennessee is allowed to lower its grocery tax rate — except metro governments like Nashville. WFYI

O'Connell asked state leaders to change that law so the city can reduce or eliminate its local grocery tax. A resolution asking the state legislature to make the change was introduced at Metro Council. WFYI

The irony is striking: Nashville is one of the fastest-growing cities in the country, generates enormous state tax revenue, and its mayor wants to cut a local tax — but a quirk in state law uniquely blocks him from doing what every smaller Tennessee city is legally permitted to do.

That fight didn't advance in 2026 either. It will be back in 2027.

What Tennessee Shoppers Are Actually Paying

To understand the stakes, it helps to see the full picture of what Tennessee residents pay on food.

Groceries in Tennessee are subject to a 4% state sales tax, plus applicable local taxes. The general state sales tax rate is 7% — but the grocery rate is a reduced 4%. Fox 59

Local add-ons vary by county and city. In most parts of the state, the combined grocery tax rate runs between 5% and 6%. In some areas it pushes higher.

Prepared or heated food sold for immediate consumption — restaurant meals, hot bar items, and similar purchases — is taxable at the full standard rates, not the reduced grocery rate.

The distinction matters for retailers that sell both qualifying groceries and prepared foods. Getting the classification wrong — applying the grocery rate to prepared food or vice versa — is one of the most common audit triggers for Tennessee food businesses.

The Compliance Picture for Tennessee Retailers

For grocery retailers, convenience stores, and food businesses in Tennessee, the failure to eliminate the grocery tax means the current compliance framework stays in place — for now.

What you need to know for 2026:

The classification line between "grocery item" and "prepared food" remains the primary compliance risk. Tennessee taxes prepared or heated food sold for immediate consumption at the full standard rates — not the reduced grocery rate. Businesses that sell both — delis, bakeries, gas stations with hot food sections, grocery stores with prepared food departments — need to apply different rates to different items in every transaction.

What Happens Next

The grocery tax fight in Tennessee is not over. It's been deferred — again.

The same dynamics that produced a dozen bills in 2026 will produce them again in 2027. The revenue problem hasn't been solved. The political pressure hasn't eased. And Tennessee remains one of the last southern states still taxing food while neighboring states like Arkansas have already eliminated their grocery taxes entirely.

Tennessee has periodically offered temporary grocery tax holidays — including a three-month suspension from August through October in one recent year — but the base tax has remained in place. The appetite for temporary relief is there. The appetite for permanent elimination is also there. The missing ingredient is a revenue replacement plan that both parties can accept. 10TV

Until that plan exists, Tennessee shoppers keep paying. And Tennessee retailers keep applying two different rates to the two halves of their store.

Running a food business in Tennessee and want to make sure your grocery versus prepared food classifications are set up correctly — or planning for what a future exemption would mean for your compliance system? Book a free consultation with our team at sales.tax. We'll review your product taxability and make sure you're compliant under current rules and ready for whatever 2027 brings.

Utah Just Made It Tax-Free to Buy Food From Your Neighbor. Here's What the Home Cook Exemption Actually Means.

Most sales tax news is about what states are starting to tax.

This one is different.

Utah Governor Spencer Cox signed Senate Bill 217 into law in March 2026, expanding sales and use tax exemptions for locally produced foods — including a brand new exemption for food sold by home cooks. SmartAsset

Effective July 1, 2026, Utah has enacted a state sales tax exemption for sales of food and food ingredients or prepared food sold by a home cook, including homemade food products sold at a direct-to-sale farmers market or direct-to-sale location. The Sales Tax People

It's a small law with a big meaning — and it reflects a broader national shift in how states are thinking about the cottage food economy, local food systems, and the people who quietly feed their communities out of their home kitchens.

What Is a Home Cook Under Utah Law?

The exemption is specifically built around Utah's existing framework for home-based food producers — a category the state has been carefully defining and expanding over the past several years.

Utah's Home Consumption and Homemade Food Act serves as an alternative to the Cottage Food Law for those who want to produce food from their home kitchen. It allows an individual with a business license to sell certain homemade foods without the seller needing to be registered with the Utah Department of Agriculture and Food.

The tradeoff for that lighter regulatory footprint: transparency. Foods produced under the Home Consumption and Homemade Food Act face more restrictions on how and where they can be sold. If selling at a farmers market, products can only be displayed in a separate market section specifically marked with signs that read: "Food items offered for sale in this section of the farmers market are homemade and have not been certified, licensed, regulated or inspected by state or local authorities." TaxHero

The new sales tax exemption builds directly on top of that framework. If you're a home cook selling food under Utah's existing rules — at a direct-to-sale farmers market, at your home, or at other approved direct-to-sale locations — your sales are now exempt from Utah state sales tax as of July 1.

What's Covered

The exemption covers food and food ingredients or prepared food sold by a home cook, including homemade food products sold at a direct-to-sale farmers market or direct-to-sale location. The Sales Tax People

In practical terms, that's a broad category. Home-baked goods, preserves, jams, sauces, dried herbs, homemade pasta, fermented foods, specialty condiments — the kinds of things you find at a farmers market booth run by a neighbor rather than a commercial food producer.

The exemption covers both raw food ingredients and prepared foods sold by home cooks. That's notable because prepared food is typically taxable in most states — the exemption carves home-cook prepared food out of that general rule specifically.

What's Not Covered

The exemption is targeted — it doesn't sweep all food sales into a tax-free category.

In Utah, grocery staples are typically taxed at a reduced rate of 3.0%. Prepared or heated food sold for immediate consumption is generally taxable at the full combined rate. Taxfyle

The home cook exemption is specific to the home cook context — meaning commercially produced food, food sold by licensed food businesses, and standard retail grocery sales don't qualify. It also applies only to the state portion of Utah's sales tax. Local jurisdictions may still apply their own rates, though most of Utah's local sales tax structure mirrors the state's treatment of food.

Why Utah Did This

The bill's intent goes beyond a tax break. It's part of a broader legislative push to support Utah's local food ecosystem and reduce friction for small-scale food producers who are already operating under a lighter regulatory framework.

Senate Bill 217 also removed a signage requirement for direct-to-sale farmers markets and clarified when a producer or producer's designated representative may sell a homemade food product at a direct-to-sale location — making it easier for producers to use representatives to sell their products without being physically present. The Sales Tax People

The sales tax exemption is one piece of a package designed to make it easier, simpler, and less costly to sell homemade food in Utah. For a home cook who is already operating on thin margins — selling $200 worth of jam and baked goods at a Saturday farmers market — even a small tax obligation creates administrative complexity that discourages participation. Removing it entirely reduces the friction to near zero.

The Cottage Food Economy Is Bigger Than Most People Realize

Utah's exemption is niche — but the sector it supports is growing fast nationally.

The cottage food industry — home-based food production sold directly to consumers — has expanded significantly in every state over the last decade. Pandemic-era cooking, the local food movement, and growing consumer interest in knowing where their food comes from have all contributed to more home cooks taking their products to market.

Every state now has some form of cottage food law, though the rules vary enormously on what can be sold, where, to whom, and in what quantities. Utah has been consistently on the progressive end of that spectrum — expanding permissions, reducing barriers, and now eliminating the sales tax burden on these sales entirely.

For a state that still taxes most grocery staples at 3%, zeroing out the rate on home-cooked food is a meaningful statement about where locally produced food fits in Utah's economic and cultural priorities.

What This Means for Home Cooks in Utah

If you sell homemade food in Utah — at a farmers market, from your home, or at other direct-to-sale locations — here's what changes on July 1:

If you're currently collecting sales tax on your home cook sales, update your process before July 1. Continuing to collect state tax after the exemption takes effect means collecting money you're not authorized to keep — which creates its own compliance issue.

The Bigger Picture: States Are Rethinking Food Taxation

Utah's home cook exemption is a small but meaningful data point in a larger national conversation about how states tax food.

As we've covered recently, Arkansas and Illinois both eliminated their state grocery taxes entirely on January 1, 2026. Alabama suspended its grocery tax for May and June. Tennessee is debating elimination. Virginia came close to removing its remaining 1% food tax before pushing the decision to 2027.

Utah's move adds a different dimension — not eliminating a broad grocery tax, but carving out a specific community of small-scale producers and saying: your food sales are different. They support local economies, local relationships, and local food systems. They shouldn't carry the same tax burden as a commercial retailer.

It's a philosophy more states may follow as the cottage food economy grows and legislators look for low-cost, high-goodwill ways to support local food producers.

Are you a home cook in Utah with questions about how the new exemption affects your sales tax obligations? Or a food business trying to understand where the line is between exempt home cook sales and taxable commercial food sales? Book a free consultation with our team at sales.tax. We'll walk through your specific situation and make sure you're set up correctly before July 1.

Alabama Just Suspended Its Grocery Tax. Here's What Shoppers and Retailers Need to Know

If you're buying groceries in Alabama right now, you're paying less at the register.

Governor Kay Ivey signed Act 2026-604 into law, suspending Alabama's 2% state sales tax on SNAP-eligible food items from May 1 through June 30, 2026. Avalara

Two full months. Zero state grocery tax.

But there are rules, exceptions, and a compliance wrinkle that every retailer in the state needs to understand before the next transaction hits the register.

Why This Is a Bigger Deal Than It Sounds

Alabama has one of the most complicated grocery tax histories in the country.

This is the third piece of legislation lowering state sales taxes on groceries in the last four years. In 2022, the state grocery tax was lowered from 4% to 3%. In 2024, it dropped again to 2%. Galvix

Each cut was permanent. This one is temporary — but it's the most aggressive relief yet. A full suspension means the state rate goes to zero for 60 days.

For a family spending $800 a month on groceries, that's $16 back in their pocket this month and next. Not life-changing — but real.

What's Covered

The suspension applies to food as defined under the federal SNAP program — specifically items intended for home consumption.

That includes:

The exemption covers grocery staples such as fruit, vegetables, meat, dairy products, and other items intended for home consumption. Avalara

What's NOT Covered

Not everything in the grocery store qualifies. These items remain taxable even during the suspension:

Food has the same meaning as defined in 7 U.S.C. § 2011 for the purposes of the federal Supplemental Nutrition Assistance Program (SNAP). If it wouldn't qualify for SNAP, it doesn't qualify for the suspension. Shopify

The Part That Trips Up Retailers

Here's where it gets complicated — and where compliance mistakes happen.

The city and county sales and use tax rates on food are not affected by this act. Shopify

That means this is not a blanket grocery tax holiday. It's a state-only suspension running alongside fully active local taxes. Retailers in Alabama are now operating in a split-rate environment for 60 days:

Alabama has hundreds of local jurisdictions with their own grocery tax rates. The state suspension doesn't touch any of them.

Grocers must operate in a split-rate environment for 60 days — no state tax on eligible groceries, but the full local tax is still due at the register. Numeral

What Retailers Must Do Right Now

This isn't a set-it-and-forget-it situation. The Alabama Department of Revenue has issued specific guidance for how retailers must handle this period.

Retailers must still report all gross sales of qualifying food items in their total gross proceeds on the state tax return and then subtract — deduct — the qualifying food sales from the amount used to calculate state sales tax. Avalara

In plain terms:

  1. Update your POS system to stop collecting the 2% state tax on qualifying food items — effective May 1
  2. Continue collecting local taxes on those same items at your jurisdiction's rate
  3. Keep reporting gross food sales on your state return — you're not exempt from reporting, just from the state tax calculation on qualifying items
  4. Separate taxable items — hot foods, alcohol, and tobacco are still fully taxable at both state and local rates
  5. Revert your system on July 1 — the suspension ends June 30 and the 2% state rate comes back

Miss any one of these steps and you're either over-collecting from customers or under-remitting to the state. Both create problems.

The Bigger Picture

Alabama is part of a national trend that's accelerating fast.

States are recognizing that taxing food is politically unpopular and economically regressive. Alabama remains one of only about ten states in the country that still impose a statewide sales tax on groceries. That number has been falling steadily — Arkansas and Illinois made their exemptions permanent on January 1, 2026. Numeral

Alabama's suspension is temporary. But given the legislative trajectory — three cuts in four years — the question isn't whether Alabama will eliminate its grocery tax entirely. It's when.

If you're a retailer in Alabama and need help configuring your systems for the suspension period — or a business in another state trying to track how grocery tax changes affect your compliance obligations — book a free consultation with our team at sales.tax. We'll make sure you're set up correctly before the next return is due.

Grocery Tax Is Disappearing Across the U.S.: What Shoppers and Sellers Need to Know

The grocery tax is on its way out.

As of 2026, 37 states plus the District of Columbia no longer tax most grocery food at the state level. And that number just got bigger.

On January 1, Arkansas and Illinois both eliminated their state-level grocery taxes — joining Kansas, which did the same in 2025, and Oklahoma, which dropped its 4.5% food tax in 2024.

The trend is clear. States are removing taxes on food. But the details matter — especially if you're a seller.

Why States Are Cutting Grocery Taxe

It's simple math for lawmakers.

Grocery taxes hit low-income households hardest. Families who spend most of their income on food pay a bigger share of that income in tax. As grocery prices have stayed elevated, the political pressure to eliminate food taxes has been hard to ignore.

The result: a national rollback that's been building for years and is accelerating fast.

The Illinois Catch

Illinois eliminated its 1% state grocery tax — but it simultaneously gave municipalities the option to impose their own 1% local grocery tax.

The result? Roughly 600 out of 1,300+ Illinois communities opted in.

So for many Illinois residents, the grocery tax didn't disappear. It just changed hands — from the state to their city or county.

If you're an ecommerce seller shipping food products into Illinois, this means your tax obligations now depend entirely on the delivery address. Every ZIP code is potentially different.

Who Still Taxes Groceries

Not every state has followed the trend. As of mid-2026, around ten states still impose a statewide tax on groceries.

Here's where it stands:

States to Watch

Tennessee is the most active right now. In 2026, lawmakers have introduced over half a dozen bills that would reduce or eliminate the state's 4% grocery tax — ranging from a full elimination to a one-day-per-month sales tax holiday on the fifth of each month.

Virginia looked close to eliminating its remaining 1% grocery tax in 2026, but the bill was pushed to the 2027 session.

Hawaii is weighing more than ten separate proposals.

The rollback isn't slowing down.

What This Means If You Sell Food

If you sell food products and ship to customers across multiple states, you have homework to do.

The definition of "groceries" is not universal. Most states exempt basic staples — bread, produce, dairy, meat — but the line between "grocery item" and "prepared food" varies. A bag of chips sold in a family-size package may be tax-exempt in Texas, while the individual-serving version of the same product is taxable.

When states eliminate grocery taxes while preserving local ones — like Illinois — sellers face a compliance patchwork that requires address-level accuracy, not just state-level rules.

This is one of those changes that looks like a simplification on the surface and creates complexity underneath.

Not sure how grocery tax changes affect your business? Book a free consultation with our team at sales.tax. We'll review your product taxability, identify where you have exposure, and help you stay compliant as the rules keep changing.