The US is experiencing the highest inflation rates in almost 40 years. Thankfully Tennesseans can feel a little relief when grocery shopping in the month of August. This tax holiday allowing for Tennessee tax free groceries is a government incentive program offering a tax reduction or elimination during an approved period. Certain items, in this case, food or food ingredients, can be purchased tax-free. Some restrictions apply.
During this month-long tax holiday that started right on the heels of tax free weekend in Tennessee, food and food ingredients are tax-free. However, the grocery tax holiday does not include everything in the grocery store.
A Brief Understanding of Inflation Rates
At the end of July 2022, the annual inflation rate in the US was reported as 8.5%. The inflation rate reflects an average price increase over a given period. 8.5% is the highest inflation increase reported since November 1981, according to US Inflation Calculator.
The rate reported by US Inflation Calculator is based on the Consumer Price Index (CPI). The CPI measures the change in consumer prices based on eight categories that make up a representative basket of goods and services over time.
- food and beverages
- medical care
- Communication and other goods and services
Tax-Free Holidays in Tennessee
- Clothing, School Supplies & Computers July 29th - 31st, 2022
- Food and Food Ingredients August 1st - August 31st, 2022
- Gun Safes and Safety Equipment July 1st, 2022 - June 30th, 2023
What Can You Buy Tax-Free?
Food or Food Ingredients
The official definition of "food or food ingredients" as it applies to the TN Grocery Tax Holiday from the TN Department of Revenue: "liquid, concentrated, solid, frozen, dried or dehydrated substances that are sold to be ingested or chewed by humans and are consumed for their taste or nutritional value."
Food or food ingredients are unprepared (not ready to eat) fresh or packaged items typically taxed at the 4% sales tax rate plus the acceptable local sales tax rate.
The following items are not exempt from taxes and are subject to sales tax at check out:
- Alcoholic beverages
- Dietary supplements
- Prepared food items
These non-exempt items are taxed at 7% plus the acceptable local sales tax rate.
Where can you purchase eligible tax-free grocery items?
Tennessee residents may buy food and food ingredients eligible for tax-free purchase at grocery stores (Publix, Kroger, Aldi, etc.), including big super stores like Walmart, Costco, Target, and the like. Online grocery purchases of eligible items should also be tax-free from legitimate online retailers. If a legitimate online retailer sells eligible items, those items should be tax-free at check out. For example, Amazon is a legitimate retailer that collects state taxes for each purchaser's State where eligible. Therefore, Amazon should honor the tax-free shopping for eligible items during a state tax holiday.
Food and Food Ingredients are STILL taxable at These Locations.
You may be wondering, are there any locations or situations where food and food ingredients are still subject to sales tax during the tax holiday? Yes! Food or food ingredients purchased at micro markets or vending machines are still taxable.
What is a Micro Market?
In Tennessee, a micro-market is defined as an unattended food establishment with one or more market displays, kiosks, or other electronic payment methods for self-check-out. These markets may have a controlled entry and provide commercially prepackaged, ready-to-eat foods.
How to Plan and Save During the Grocery Tax Holiday
Groceries in Davidson, County, Tennessee are typically taxed between 6.25% - 9.25% depending on the items purchased. These are combined estimated using the state tax rate of 4% or 7% and the local tax rate of 2.25%.
The Grocery Tax-Free Holiday only applies to listed food and food ingredients regularly taxed at the 4% rate. Shoppers can see significant savings when planning and shopping during the tax holiday.
Tips from Ms. Cheap, Mary Hance, from the Main Street Journal:
- Make a list of what items are tax exempt
- Make a plan for what you can buy and freeze or shelf-stable items for the pantry
- Plan for Holiday meals now and buy things you can save to use during Holiday meals
If you are inclined and able to give to help those in need, it is a great time to purchase items to help stock food pantries.
Check to See if Your State has any Sales Tax Holidays in 2022
Federal Tax Administrators 2022 Sales Tax Holiday List (alphabetical by State)