Tennessee Takes a Grocery Tax Holiday

Shoppers can buy groceries tax-free for 3 months after passage of 1 of largest tax cuts in state's history

4/28/2023

Tennessee shoppers will be able to buy groceries tax-free for three months after the General Assembly passed one of the largest tax cuts in the history of the state.

Tennesseans won’t have to pay taxes on groceries from August through October, thanks to a three-month grocery tax holiday. This is part of the Tennessee General Assembly’s approval of more than $400 million in tax cuts for Tennessee families and businesses through the Tennessee Works Tax Act, marking one of the largest tax cuts in Tennessee history.

“Decades of smart fiscal stewardship have enabled Tennessee to maintain a balanced budget while cutting taxes for Tennessee families and businesses,” said Gov. Bill Lee. “We are proud to continue that legacy this year by putting dollars back in the pockets of Tennesseans and supporting future economic growth across Tennessee, and I thank the General Assembly for its partnership to promote future growth and opportunity for our state.”

The legislation includes a three-month grocery tax holiday spanning from August to October. During this time, Tennesseans will not pay tax on food and food ingredients sold in grocery stores. On average, each Tennessee family will save more than $100 in taxes, according to the Tennessee Department of Revenue. The current tax rate for foods in Tennessee is approximately 5%. Additionally, local governments will be reimbursed by the state for any tax revenues lost during the period.

Tennessee, like the rest of the nation, has been dealing with high food bills for more than two years, due to various pandemic disruptions, the war in Ukraine and other factors. However, American shoppers saw a little relief at the grocery store last month. The latest Consumer Price Index (CPI) data from the U.S. Bureau of Labor Statistics showed that food-at-home prices declined 0.3% in March, the first monthly decrease in that index since September 2020.

The CPI for meat, poultry, fish and eggs slipped 1.4%, with the index for the egg category dropping 10.9% last month. The index for fruits and vegetables was 1.3% lower in March, while dairy and related products ticked slightly downward by 0.1%.

That said, the CPI for other food products remained high. Cereals and bakery rose 0.6% in the same time frame, while the nonalcoholic beverage category ticked up 0.2%. The index for the “other food at home” category edged 0.4% higher.

Meanwhile, in addition to tax-free groceries, the Tennessee Works Tax Act also includes an optional paid family leave tax credit for companies to support Tennessee families. Additionally, it provides tax relief for Tennessee businesses and increases the state’s economic competitiveness through several changes to Tennessee’s tax laws.

The Tennessee Works Tax Act (SB275/HB323) was carried by Senate Majority Leader Jack Johnson (R-Franklin), House Majority Leader William Lamberth (R-Portland) and House Assistant Majority Leader Mark Cochran (R-Englewood).