Taxes

Plain English Breakdown

The official source material does not provide specific details about how schools and other programs funded by these taxes will manage without this income, nor does it detail potential budget challenges for counties and municipalities.

End Grocery Tax by Closing Corporate Loopholes Act

This bill removes the sales tax on groceries in Tennessee and changes how revenue from taxes is used.

What This Bill Does

• Eliminates the 4% sales tax on food items for human consumption, but not on alcohol, tobacco, candy, dietary supplements, or prepared foods.
• Removes a requirement that part of grocery tax money be put into the state fund for education purposes.
• Stops allocating revenue to counties and cities based on exempted grocery sales during a specific period in 2023.
• Updates several sections of Tennessee's tax laws to reflect these changes.

Who It Names or Affects

• People who buy groceries in Tennessee will no longer pay the 4% sales tax on food items for human consumption.
• Schools and education programs that rely on funds from grocery taxes may lose some funding.
• Counties and municipalities that receive revenue based on exempted grocery sales during a specific period in 2023 will no longer get this money.

Terms To Know

Commissioner of Revenue

The person responsible for managing the state's tax system and collecting taxes.

State General Fund

A fund that holds money collected by the state government to be used for various purposes, including education.

Limits and Unknowns

• The bill does not specify what will happen to the revenue lost from removing grocery taxes.
• It is unclear how schools and other programs funded by these taxes will manage without this income.
• Counties and municipalities that rely on the allocation of funds based on exempted grocery sales may face budget challenges.

Official Summary Text

This bill enacts the
"End the Grocery Tax by Closing Corporate Loopholes Act
," which generally eliminates the 4% sales tax on
the retail sale of food and food ingredients

for human consumption
("groceries"). However, "
food and food ingredients
"
does not include alcoholic beverages, tobacco, candy, dietary supplements, or prepared
food
.

REVENUE IMPLICATIONS

Education

Present law requires the
commissioner of revenue
("commissioner") to
deposit
r
evenue generated from 0.5%
of the tax rate
placed on groceries

into
the state general fund
and earmark it for
education purposes
for

kindergarten through grade twelve (K-12) regardless of whether the tax rate
on groceries
is reduced below 6%.
This bill removes this provision.

Counties and Municipalities

Present law requires the commissioner to
allocate and distribute to counties
and municipalities an amount substantially equal to the amount that would have been allocated but for the temporary exemption from sales tax applicable to the retail sale of
groceries
between 12:01 a.m. on August 1, 2023, and 11:59 p.m. on October 31, 2023
.
The allocation provided

must be based on the reporting of exempt sales of
groceries
during the exemption period and any other data or information the commissioner deems relevant.
This bill removes the temporary nature of this provision and makes the al
location permanent.

Current Bill Text

SENATE BILL 2
By Oliver

HOUSE BILL 2
By Behn

HB0002
000212
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 57
and Title 67, relative to taxation.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. This act is known and may be cited as the "End the Grocery Tax by
Closing Corporate Loopholes Act."
SECTION 2. Tennessee Code Annotated, Section 67-6-228(a), is amended by deleting
the subsection and substituting instead the following:
(a) Notwithstanding this chapter to the contrary, except as otherwise provided in
subsection (b), the retail sale of food and food ingredients shall not be taxed.
SECTION 3. Tennessee Code Annotated, Section 67-6-103(c)(2), is amended by
deleting the following language:
Revenue generated from one-half percent (0.5%) of the tax rate provided in § 67-6-228
shall continue to be deposited in the state general fund and earmarked for education
purposes in kindergarten through grade twelve (K-12) regardless of whether the tax rate
provided in § 67-6-228 is reduced below six percent (6%).
SECTION 4. Tennessee Code Annotated, Section 67-6-103(u), is amended by deleting
the subsection and substituting instead the following:
(u) Notwithstanding the allocations provided for in subsection (a), there must be
allocated and distributed to the counties and municipalities an amount substantially
equal to the amount that would have been allocated to the counties and municipalities
under subdivision (a)(3) but for the exemption from sales tax applicable to the retail sale
of food and food ingredients. The allocation provided in this subsection (u) must be

- 2 - 000212

based on the reporting of exempt sales of food and food ingredients and any other data
or information the commissioner deems relevant.
SECTION 5. Tennessee Code Annotated, Section 67-6-329(a), is amended by adding
the following as a new, appropriately designated subdivision:
( ) Food and food ingredients;
SECTION 6. Tennessee Code Annotated, Section 67-6-329(a)(18), is amended by
deleting the language "or food and food ingredients".
SECTION 7. Tennessee Code Annotated, Section 67-6-229, is amended by deleting the
language "food and food ingredients or".
SECTION 8. Tennessee Code Annotated, Section 57-3-802(1), is amended by deleting
the language "that derives at least twenty percent (20%) of its sales taxable sales from the retail
sale of food and food ingredients for human consumption taxed at the rate provided in § 67-6-
228(a)" and substituting instead the language "that derives at least twenty percent (20%) of its
sales from the retail sale of food and food ingredients for human consumption".
SECTION 9. Tennessee Code Annotated, Section 57-3-806(d)(1), is amended by
deleting the language "must maintain a minimum of twenty percent (20%) of the licensee's sales
taxable sales from the retail sale of food and food ingredients for human consumption taxed at
the rate provided in § 67-6-228(a)" and substituting instead the language "must maintain a
minimum of twenty percent (20%) of the licensee's sales from the retail sale of food and food
ingredients for human consumption".
SECTION 10. This act takes effect July 1, 2025, the public welfare requiring it.