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HB0021 • 2026

Taxes, Sales

AN ACT to amend Tennessee Code Annotated, Title 57, Chapter 3 and Title 67, relative to taxation.

Education Taxes
Active

The official status still shows this bill as active or still awaiting another formal step.

Sponsor
Davis, Watson
Last action
2025-04-09
Official status
Placed on s/c cal Finance, Ways, and Means Subcommittee for 4/14/2025
Effective date
Not listed

Plain English Breakdown

The bill does not provide specific details on how local governments will distribute funds previously allocated to education.

Tennessee Sales Tax Exemption for Food

This bill removes state sales tax on food and food ingredients but keeps a higher tax rate for prepared foods, alcoholic beverages, candy, dietary supplements, and tobacco.

What This Bill Does

  • Removes the 4% state tax on the sale of food and food ingredients.
  • Allows local governments to continue taxing food at up to 2.75%, but removes a requirement that part of this money goes to education funds.
  • Requires the commissioner of finance and administration to distribute money monthly to counties and municipalities based on sales data for exempted food items.

Who It Names or Affects

  • Consumers who buy food and food ingredients in Tennessee.
  • Local governments that collect sales taxes on food items.

Terms To Know

Sales Tax
A tax charged by a government when someone buys goods or services.
Local Governments
The city, county, or other local area that has its own laws and leaders to run the community.

Limits and Unknowns

  • It is unclear how much money will be saved by consumers due to the removal of state sales tax on food.
  • The bill does not specify what happens if local governments do not collect the maximum allowed tax on food items.
  • The impact on education funding, which previously received a portion of taxes from food sales, remains uncertain.

Bill History

  1. 2025-12-17 Tennessee General Assembly

    Sponsor(s) Added.

  2. 2025-07-14 Tennessee General Assembly

    Sponsor(s) Added.

  3. 2025-04-17 Tennessee General Assembly

    Placed on Senate Finance, Ways, and Means Committee calendar for 4/21/2025

  4. 2025-04-14 Tennessee General Assembly

    Placed on Senate Finance, Ways, and Means Committee calendar for 4/15/2025

  5. 2025-04-14 Tennessee General Assembly

    Rule #83(8) Suspended, to be heard in Senate Finance, Ways & Means Committee on 4/15/2025

  6. 2025-04-09 Tennessee General Assembly

    Placed on s/c cal Finance, Ways, and Means Subcommittee for 4/14/2025

  7. 2025-04-09 Tennessee General Assembly

    Placed behind the budget

  8. 2025-04-02 Tennessee General Assembly

    Placed on s/c cal Finance, Ways, and Means Subcommittee for 4/9/2025

  9. 2025-04-02 Tennessee General Assembly

    Action Def. in s/c Finance, Ways, and Means Subcommittee to 4/9/2025

  10. 2025-03-26 Tennessee General Assembly

    Placed on s/c cal Finance, Ways, and Means Subcommittee for 4/2/2025

  11. 2025-03-18 Tennessee General Assembly

    Refer to Senate Finance, Ways & Means Committee w/ negative recommendation

  12. 2025-03-11 Tennessee General Assembly

    Placed on Senate FW&M Revenue Subcommittee calendar for 3/18/2025

  13. 2025-02-25 Tennessee General Assembly

    Refer to Senate Finance, Ways & Means Committee Revenue Subcommittee

  14. 2025-02-12 Tennessee General Assembly

    Sponsor(s) Added.

  15. 2025-02-12 Tennessee General Assembly

    Passed on Second Consideration, refer to Senate Finance, Ways, and Means Committee

  16. 2025-02-10 Tennessee General Assembly

    Introduced, Passed on First Consideration

  17. 2025-02-06 Tennessee General Assembly

    Filed for introduction

  18. 2025-01-28 Tennessee General Assembly

    Assigned to s/c Finance, Ways, and Means Subcommittee

  19. 2025-01-28 Tennessee General Assembly

    Ref. to Finance, Ways, and Means Committee

  20. 2025-01-28 Tennessee General Assembly

    Sponsor(s) Added.

  21. 2025-01-16 Tennessee General Assembly

    Sponsor(s) Added.

  22. 2025-01-15 Tennessee General Assembly

    P2C held on desk, pending appointment of Standing Committees

  23. 2025-01-14 Tennessee General Assembly

    Intro., P1C.

  24. 2025-01-13 Tennessee General Assembly

    Sponsor(s) Added.

  25. 2024-12-17 Tennessee General Assembly

    Sponsor(s) Added.

  26. 2024-12-16 Tennessee General Assembly

    Sponsor(s) Added.

  27. 2024-12-05 Tennessee General Assembly

    Filed for introduction

Official Summary Text

Present law requires that a state tax of 4% be placed on the retail sale of food and food ingredients. This
bill eliminates such tax. However, this bill does not change the tax rate for food and food ingredients sold as prepared food, alcoholic beverages, candy, dietary supplements, and tobacco, which is currently 7%.

Present law authorizes local governments
to levy an additional tax, beyond state tax, for the same privileges, as long as the tax does not exceed 2.75%. This bill authorizes local governments to continue to levy a tax of up to 2.75% on food and food ingredients.

Present law requires revenue ge
nerated from 0.5% of the tax rate on food and food ingredients, and prepared food, alcoholic beverages, candy, dietary supplements and tobacco be deposited in the state general fund and earmarked for education regardless of whether the tax rate for those
i
tems is reduced below 6%. This bill removes this provision.

This bill requires the commissioner of finance and administration to make a monthly distribution to counties and municipalities in an amount substantially equal to the amount that would have b
een allocated to the counties and municipalities but for the exemption from sales tax applicable to the retail sale of food and food ingredients. The allocation must be based on the reporting of exempt sales of food and food ingredients and any other dat
a
or information the commissioner deems relevant.

Current Bill Text

Read the full stored bill text 
SENATE BILL 1367
By Watson

HOUSE BILL 21
By Davis

HB0021
000429
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 57,
Chapter 3 and Title 67, relative to taxation.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. 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
subsections (b) and (c), the retail sale of food and food ingredients shall not be taxed.
SECTION 2. Tennessee Code Annotated, Section 67-6-228, is amended by adding the
following language as a new subsection (c):
Notwithstanding § 67-6-702(a) to the contrary, food and food ingredients are
taxable under part 7 of this chapter.
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

- 2 - 000429

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
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.