Local 2.5% Sales Tax on Food Will Not Be Lost During Holiday
By now you’ve likely noticed your grocery bills are a little lighter—by about 6.25%—during this three-month long sales tax holiday on food that expires on Halloween, October 31.
But have you figure out for sure which items are taxed and which are not, or wondered how this holiday might affect local tax revenues?
In a nutshell: “food and food ingredients” that are “sold to be ingested or chewed by humans and are consumed for their taste or nutritional value” are tax free, according to the bill passed by the Tennessee legislature and signed into law by Governor Lee.
These “food and food ingredients” may be fresh, liquid, concentrated, solid, frozen, dried, or dehydrated “substances…sold to be ingested or chewed by humans and are consumed for their taste or nutritional value.”
Not tax free but often sold in grocery stores: alcoholic beverages, tobacco, candy, and dietary supplements.
Tennessee—which is one of only thirteen states that still taxes groceries at all—has the sixth highest grocery sales tax in the nation at 4%, which represents an already recently cut-back rate. In Perry County and in her two cities, tack on the local 2.5%, the rate that has been in effect since January of 1997.Thirty-nine other government entities in Tennessee also levy a 2.5% charge.
The local sales tax of 2.5% is almost at the state cap of 2.75%, and a full point above the state’s lowest rate of 1.5% levied in 1989 by Johnson County and Mountain City in far eastern Tennessee.
Cannon County and her two cities, Woodbury and Auburntown, have the second lowest local sales tax at 1.75%.
Fourteen local governments have rates of 2.0%, and 128 have a 2.25% local sales; county and municipal governments already maxed out at 2.75% number 351.
Locally, all other purchases (not the defined food or food items) are subject to a 9.5% sales tax.
The tax holiday is expected to cost the state about $288 million in revenue, and save the average Tennessee family about a hundred bucks over the three-month period.
Perry County, Lobelville, and Linden, along with other counties and municipalities across the state, will not suffer a revenue reduction. According to County Mayor John Carroll, the state will reimburse local governments for any losses caused by the holiday.
A memo from the state tells retailers to report separately all sales and all tax-exempt sales, then the state will base the reimbursements on those figures.
Mayor Carroll told the Review: “I anticipate this coming back like a normal sales tax payment but I don’t know that for a fact. Even if there is a short delay in reimbursement, we will be ok as our fund balances are healthy enough to support that today. I just wouldn’t want it to take too long.”