Taxes, Sales

Plain English Breakdown

The official source material does not provide detailed information on how much revenue will be affected by this act, only an estimated maximum permissive decrease in local revenue.

Tennessee Act for Metropolitan Governments' Sales Tax on Food

This bill allows metropolitan governments in Tennessee to levy sales taxes on food and food ingredients at a lower rate or exempt them from city tax rates, with certain conditions.

What This Bill Does

• Allows metropolitan governments to set a lower sales tax rate for food and food ingredients within their jurisdiction.
• Permits metropolitan governments to exempt the sale of food and food ingredients from city taxes while still collecting surcharges for transit purposes.
• Requires metropolitan governments to send certified copies of adopted resolutions to the Department of Revenue before implementing changes in tax rates or exemptions.
• Specifies that any reduced tax rate or exemption becomes effective 60 days after the department receives a certified copy of the resolution.

Who It Names or Affects

• Metropolitan governments within Tennessee
• Residents and businesses within metropolitan government jurisdictions

Terms To Know

metropolitan government

A local government that combines an urban area with surrounding suburban areas, often found in larger cities.

local option transit surcharge

An additional tax collected by a metropolitan government on the sale of food and food ingredients to fund public transportation services.

Limits and Unknowns

• The exact decrease in local revenue due to this bill cannot be precisely determined as it depends on actions taken by individual metropolitan governments.
• This act applies different effective dates for incorporated cities or towns versus metropolitan governments, with the latter starting from October 1, 2026.

Official Summary Text

Present law authorizes l
ocal governments
to
add their own sales tax of up to 2.75%
through a local ordinance or resolution.

However,
they can only apply that tax to the first $1,600 of the price of any single item
of personal property
.

If a county has
not
maxed out its local sales tax
of
2.75%,
then
a city
or town
inside
the county
can add its own tax to reach the maximum.

That city
or town

may
then decide to either tax food at a lower rate or not at all.

Once the
incorporated
city
or town
passes the o
rdinance
to charge a local tax
and sends
a certified copy
to the
department of revenue
, the change
becomes effective
after 60 days
.

METROPOLITAN GOVERNMENTS

This bill
authorizes metropolitan government
s
to levy a tax
in the same way a city or town is permitted to, as outlined above. A
metropolitan government
may

either tax
food and food ingredients for human consumption
at a
lower rate
,
or
e
xempt from the city tax rate the retail sale of food and food ingredients
,

within the
metropolitan government. However, such an
exemption does not affect the continued collection by a metropolitan government of a
local option transit
surcharge levied on the retail sale of
food and food ingredients.

This bill requires the
metropolitan government
to

send
a certified copy of the adopted
resolution

to the department of revenue.

The reduced tax rate or exemption becomes effective 60 days after the department receives the certified copy
.
For metropolitan governments,
t
he reduced tax rate or exemption applies only to tax periods beginning on or after October 1, 2026.

Current Bill Text

HOUSE BILL 1893
By Hemmer

SENATE BILL 1702
By Yarbro
SB1702
010316
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 7 and
Title 67, relative to taxes levied by metropolitan
governments.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 67-6-702, is amended by deleting
subdivision (a)(1)(B) and substituting:
(B)
(i) As used in this subdivision (a)(1)(B), "city tax rate" means:
(a) With regard to a city or town that is located within a county
that has not adopted the maximum rate of two and three-quarters percent
(2.75%) as set forth in subdivision (a)(1)(A), a rate adopted by the city or
town that is equal to the difference between the county rate and the
maximum rate as authorized by § 67-6-703; or
(b) With regard to a metropolitan government, the rate of taxation
established under subdivision (a)(1)(A).
(ii) A city or town or metropolitan government that has adopted a city tax
rate may:
(a) Levy a tax on the retail sale of food and food ingredients, as
described in § 67-6-228(a), within the jurisdiction of the city or town or
metropolitan government at a rate lower than the city tax rate levied for
other privileges, goods, and services; or
(b) Exempt from the city tax rate the retail sale of food and food
ingredients, as described in § 67-6-228(a), within the city or town or

- 2 - 010316

metropolitan government. This exemption does not affect the continued
collection by a metropolitan government of a surcharge levied pursuant to
§ 67-4-3202 on the retail sale of food and food ingredients.
(iii) The incorporated city or town shall furnish a certified copy of the
adopted ordinance or metropolitan government shall furnish a certified copy of
the adopted resolution authorized in subdivision (a)(1)(B)(ii) to the department of
revenue. The reduced tax rate or exemption becomes effective on the first
calendar day of the month occurring at least sixty (60) days after the department
receives the certified copy. The reduced tax rate or exemption applies:
(a) For incorporated cities or towns, only to tax periods beginning
on or after October 1, 2024; or
(b) For metropolitan governments, only to tax periods beginning
on or after October 1, 2026.
SECTION 2. This act takes effect upon becoming a law, the public welfare requiring it.