Shoppers in 14 states are taking advantage of sales tax holidays in August.
Tennessee’s back-to-school tax-free event was in late July. But Volunteer State shoppers have another way to escape sales taxes this month. And in September. And in October, too.
Tennessee’s new Grocery Tax Holiday began at 12:01 a.m. on Aug. 1. Food and food ingredients are exempt from sales tax until 11:59 p.m. Oct. 31.
During the three-month grocery tax holiday, shoppers won’t have to pay the state’s 6.75 percent state and local option sales tax on food and food ingredients.
The Tennessee Department of Revenue defines food and food ingredients as “liquid, concentrated, solid, frozen, dried, or dehydrated substances that are sold to be ingested or chewed by humans and are consumed for their taste or nutritional value.”
Of course, there are items that aren’t tax-exempt. Purchases of alcoholic beverages, tobacco, candy, dietary supplements, and prepared food will remain taxable during Tennessee’s Grocery Tax Holiday.
You can read more on what products sold in grocery stores are and aren’t tax exempt in the state’s official Notice 17-20.
Tasty tax savings: The food-related tax holiday will benefit many more Tennessee residents than a brief sales tax holiday for school-related products, and not just because it’s longer.
Even with a tax break, there’s a realistic limit on the items that typically are tax-exempt at retail stores. But most of us spend a lot of our disposable income on groceries.
Three months of no taxes on the bulk of items filling our grocery carts will be very welcome to every Tennessee resident.
Easy but unfair tax policy: Even before I worked for a major grocery goods manufacturer (in its Washington, D.C., government relations office, not in a factory), I thought taxing food was bad tax policy.
I know it’s easy money. We all eat, so there’s a built-in, continual flow of revenue to state treasuries.
But because we all must eat to survive, it seems, at best, callous.
And it’s particularly unfair to those with limited incomes. The money they lose to taxes could be used to buy more food products.
Research by the Center on Budget and Policy Priorities found that states that the lowest-income families spend almost double the share of their annual income on food as the highest-income sector, 10.3 percent versus 5.7 percent. These low-income households are also disproportionately comprised of people of color, which again raises the issue of racial tax discrimination.
However, more than a dozen states disagree with my assessment of their food tax policies.
13 states tax groceries: Five states can be crossed off the food, and all items, sales tax list. They don’t have a statewide sales tax.
The no-sales-tax states are Alaska, Delaware, Montana, New Hampshire, and Oregon in don’t levy a state sales tax. Note, however, that while Alaska shoppers don’t have to worry about a state sales tax on anything, the Final Frontier does allow local governments to assess sales taxes as they see fit.
In the other 45 states and District of Columbia, state sales taxes are a big revenue source. That includes sales tax on food these 13 states: Alabama, Arkansas, Hawaii, Idaho, Illinois, Kansas, Mississippi, Missouri, Oklahoma, South Dakota, Tennessee, Utah, and Virginia.
Of course, since we’re talking taxes, and specifically state taxes, there are differences.
In some states, including Tennessee, grocery items are taxed at a reduced rate. Shoppers also pay a lower sales tax rate on food products in Arkansas, Illinois, Missouri, Utah, and Virginia.
Some places exempt food purchase from the state tax, but allow local jurisdictions to collect on grocery sales. A handful of states offset their food tax, at least partially, with a tax credit available to their lower-earning taxpayers. And in Maine, the tax is limited to what the state defines as grocery staples.
Regardless of the amount of tax, any savings are welcome, especially if you’re on a tight budget.
If these states can’t do away with food taxes, they should at least consider following Tennessee’s example and offering a substantial grocery tax holiday.
You also might find these items of interest:
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- Hungry for some football watching food? Your Super Bowl party budget better include party snack taxes
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