The Ultimate Guide on Sales Tax on Food

Is there a tax on food? When it comes to sales tax, food items are a challenging category, as every state in the United States deals with sales tax on grocery items in various ways. Some states, like Texas, exempt grocery items completely, while others partially or fully charge sales tax at either full or reduced rates.

As selling food online has rapidly grown in the US, you must know the answer to, “Is there a tax on food in this state?” Whether you sell through a marketplace facilitator or have an independent platform, it is equally important to understand how sales tax on food works. This guide will walk you through different food categories and state guidelines on sales tax for grocery food items.

 

Different Categories of Taxable Food Items

All types of consumable items intended for human consumption are called food items. They include raw and prepared foods such as vegetables, fruits, meat, dairy products, grains, and other consumable items.

To understand the taxability of food items, we can classify them into the following broad categories. 

• Grocery items – these food items are commonly sold in grocery stores and include a wide range of products. Everyday grocery items include non-prepared food, canned products, packaged snacks, spices, and beverages. 
• Prepackaged food – these are food items that are processed, packaged, and made ready for sale to customers. They include canned drinks, bottled beverages, packaged snacks, frozen meals, and canned products. 
• Prepared food – refers to processed food products prepared after cooking or assembling various ingredients for immediate consumption. They include meals from restaurants and food establishments available for dine-in and takeaway. 

 

State-by-State Guide to Grocery Sales Tax

The table below outlines the taxability of non-prepared grocery food by state. Most states that exempt grocery food exclude soft drinks, candy, and confections. States also charge sales tax for prepared food in restaurants and grocery stores as it is a meal.

Out of 45 states that impose some sales tax, 13 impose statewide sales tax on groceries.

Note: Sales tax regulations keep changing frequently. Bookmark this table to keep yourself updated about the latest developments regarding sales tax on grocery food.

STATE ARE GROCERIES TAXABLE?  SALES TAX RATE REDUCED GROCERY RATE  EXEMPTIONS (IF ANY) Alabama Yes 4% 3% In accordance with Act 2023-554, the state sales and use tax rates on food was reduced effective September 1, 2023. Alaska not applicable 0% – None. There is no sales tax in this state. Arizona No n/a – Some grocery food purchases may be subject to local sales tax. Arkansas Yes 6.50% 0.125% Food and food ingredients are taxed at a reduced rate of 0.125% plus the applicable local rate. California No n/a – Certain meals are taxed. Colorado No n/a – Carbonated water, chewing gum, cold sandwiches, plants to grow food, candy, drinks, and beverages served in unsealed cups Connecticut No n/a – Delaware  not applicable 0% – None. There is no sales tax in this state. Florida No n/a –  Georgia No n/a – Hawaii Yes 4% – Food purchased with federal food coupons or vouchers is exempt. Idaho Yes 6% – You can claim an average $100 income tax credit for purchasing grocery items in this state if you are a resident of Idaho. Illinois Yes 6.25% 1% Food consumed off the premises until July 1, 2023, is exempt. After July 1, 2023, the tax rate on items will go back to 1%. Indiana No n/a – Iowa No n/a – Kansas Yes 6.50% 4% Certain exceptions may apply. The state plans to reduce this rate yearly to get grocery items exempt from sales tax. Kentucky No n/a – Tobacco, alcoholic beverages, candy, prepared food, dietary supplements, soft drinks, and food sold through vending machines are not exempt. Louisiana No n/a – Food sold for preparation and consumption at home is exempt. Maine No n/a – The exemption is limited to “grocery staples”(i.e., vegetables, meats, fish, dairy, bread, canned and boxed food products). Maryland Yes 6% – Sales of food to patients in a hospital, on vehicles operating in interstate commerce, etc., may be exempt Massachusetts No n/a – Michigan No n/a – Food or salad bars, bottled or canned beverages, candy bars, cookies, and potato chips are not exempt. Minnesota No n/a – Mississippi Yes 7% – Only state sales tax and no local sales tax on groceries. Missouri Yes 4.225% 1.225% Montana  not applicable 0% – None. There is no sales tax in this state. Nebraska No n/a – Nevada No n/a – New Hampshire  not applicable 0% – None. There is no sales tax in this state. New Jersey No n/a – New Mexico No n/a – New York No n/a – Carbonated beverages, sandwiches, confectionery, and candy are not exempt. North Carolina No n/a – Sales of food are subject to local taxes. North Dakota No n/a – Ohio No n/a – Oklahoma Yes 4.50% – The governor of Oklahoma has signed a bill that will eliminate the state sales tax on food and food ingredients. The effectivity of the date is yet to be announced. Additionally, the bill prohibits any changes to local sales taxes from impacting the taxation of food and food ingredients until June 30, 2025. Oregon  not applicable 0% – None. There is no sales tax in this state. Pennsylvania No n/a – It depends on the type of food and the location of where the food is sold. Rhode Island No n/a – South Carolina No n/a – Unprepared food bought with federal food stamps is exempt from state sales tax but might still be subject to local sales tax. South Dakota Yes 4.50% – Tennessee Yes 7% 4% Grocery sales tax holiday (August 2023 – October 2023) Texas No n/a – Utah Yes 4.85% 1.75% Taxed at a reduced rate. Utah is looking to remove state sales and use tax for food and food ingredients beginning January 1, 2025, if approved by voters. Vermont No n/a – Virginia Yes 4.30% 1% Seeds & plants used to grow food, alcoholic beverages, and tobacco are not exempt. Washington No n/a – West Virginia No n/a – Wisconsin No n/a – Some food snacks are excluded from this exemption. Wyoming No n/a –

*The data included in the table is based on statewide sales tax and does not consider local sales tax rates.

 

Grocery Tax by States – Key Takeaways

Here are some quick takeaways from the “grocery tax by states” table.

• Of the 45 states with sales tax, 32 states and the District of Columbia do not apply sales tax on groceries, while 13 states charge sales tax on groceries.
• Seven states: Alabama, Hawaii, Idaho, Kansas, Mississippi, Oklahoma, and South Dakota, levy standard sales tax on grocery food.
• Six states: Arkansas, Illinois, Missouri, Tennessee, Utah, and Virginia, levy reduced sales tax rates.
• Of seven states that levy ordinary sales tax rates on groceries, four states: Hawaii, Idaho, Kansas, and Oklahoma, offer credit to low-income households. 
• Mississippi charges the highest sales tax rate on groceries (7%) with no credits. 
• Arkansas charges the lowest sales tax rates on groceries (0.125%). 
• Only food prepared for off-premises consumption is tax-exempt. 
• Arizona, Colorado, Georgia, Louisiana, North Carolina, and South Carolina exempt groceries from state-level sales tax but impose local sales tax on various food items.

 

Is there Tax on your Food Business?

Sales tax on food, especially grocery, has always been contentious. Each state strives to simplify rules about sales tax on food, making it easier for people to comply. However, online sellers may need help to keep up with the constantly changing requirements for food tax compliance.

TaxHero is your solution. We take the sales tax burden off your shoulders so you can concentrate on baking those goods or perfecting your product. Talk to us and have an expert guide you to success.