Will Tennessee exempt groceries from sales tax?

• The Tennessee Legislature is considering multiple bills that would reduce or eliminate state and/or local sales taxes on groceries starting July 1, 2026.

   

• Some of the bills under consideration would limit tax exemptions to specific populations. Proposals include exemptions for WIC-eligible items and income-qualified families.

   

• At least two new food tax holidays have been introduced. One would exempt groceries for consumers aged 65 or older, another would exempt groceries on the fifth day of every month. Both pose compliance challenges.

   

At least three bills (HB 1530, HB 1842, and HB 2007) seek to eliminate Tennessee’s 4% state sales tax on food and food ingredients for human consumption starting July 1, 2026. None of these bills impact local sales taxes on food.

According to the fiscal analysis for HB 1530, exempting food and food ingredients from the state sales tax would decrease state revenue an estimated $885,627,106 in FY26–27.

Similar but different, SB 1837/HB 1792 would create a state sales tax exemption for food and food ingredients that are voucher eligible under the Supplemental Food Program for Women, Infants, and Children (WIC), “and any subsequent federal legislation.” If enacted, the exemption would take effect July 1, 2026.

HB 1767/SB 1829 establish a state sales tax exemption for food and food ingredients sold to eligible families, defined as:

• A family with an annual household income that does not exceed 300% of the amount required for a student to qualify for free or reduced-price lunch; and

   

• A family with a qualifying child or qualifying relative

   

If enacted, the exemption would take effect on July 1, 2026.

SB 1835 and its companion HB 2059 would lower the state sales tax rate on food from 4% to 2% as of July 1, 2026. All applicable local food taxes would remain as they are.

Alternatively, SB 1702/HB 1893 would allow qualifying cities to reduce the local tax on food and food ingredients or exempt food from local tax altogether. This would take effect upon becoming law and likely complicate sales tax compliance for businesses that sell groceries in multiple parts of the state. There’s a similar policy in Illinois, where roughly 600 out of about 1,300 communities opted to levy the local tax on food.

HB 1486/SB 1785 would establish a sales tax holiday for food and food ingredients from July 1 through September 30, 2026, but only for food sold to a person aged 65 or older. Sales from a micro market, vending machine, or device would not qualify for this sales tax holiday. Exactly how businesses would ensure they only make exempt sales to qualifying consumers is unclear, especially for online food purchases.

Tax-free food, one day per month

Perhaps the most unusual proposal in the mix comes from HB 1722/SB 1695, which essentially establishes a sales tax holiday for food and food ingredients, one day per month starting July 1, 2026.

The legislation is an exercise in discretion. It simply exempts the retail sale of food and food ingredients “if sold between 12:01 a.m. and 11:59 p.m. on the fifth day of any month.” The exemption does not apply to sales from a micro market, vending machine, or device. The 5th is a payday for many Tennessee employees, which could explain why the fifth day of the month was chosen.

Should this peculiar sales tax holiday be enacted, businesses would need to make sure their point of sale and ecommerce systems are set up to account for it.

Several Tennessee lawmakers have introduced legislation to reduce or eliminate the sales tax on groceries in 2026. Whether there’s appetite in the state to follow through on any of these proposals remains to be seen.

Businesses that sell groceries in Tennessee should monitor the discussions taking place in Nashville and have a strategy to comply with any new sales tax policies that emerge. Some of the proposed changes, such as the one-day-per-month sales tax holiday, could create a sales tax compliance burden for businesses.

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