Adding a "food tax" to the already high cost of groceries places an extra financial burden on many families. According to the U.S. Department of Agriculture (USDA), 13.5 million U.S. households experienced food insecurity during the height of the pandemic. In some areas, the sales tax on groceries soars above 10%. That means some families are spending more than $10 on sales tax for every $100 of groceries they buy. And although most states have done away with the tax on groceries (at least at the state level), 13 states still tax food items.
(Note: Local sales tax may apply to groceries in some states that have exempted groceries at the state level.)
'Food tax': Why states tax groceries
Grocery taxes can provide significant revenue for states, which is often used (at least in part) to fund essential departments, such as education and transportation. Of the 13 states that still tax groceries, eight impose a reduced tax rate.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- Some states offer a grocery tax credit that helps offset taxes paid throughout the year.
- Lawmakers in several states have introduced bills to reduce or eliminate taxes on groceries over the past few years.
Here are the states that still impose a statewide tax on groceries as of October 2023.
Alabama
Alabama still taxes groceries, but the state passed legislation that reduced Alabama’s grocery tax from 4% to 3%. The law went into effect on Sept. 1.
However, the 1% food tax reduction doesn’t apply to local tax jurisdictions. So in areas where the local and combined sales tax rate is 10% (such as Montgomery), Alabama residents still pay a 9% tax when they visit the grocery store.
Arkansas
In Arkansas, the sales tax on groceries is reduced to 0.125%. This is the lowest tax rate of the states that tax groceries.
A bill to eliminate this "food tax" was introduced in March, but it never passed the Arkansas House or Senate.
Hawaii
Although Hawaii doesn’t technically have a sales tax, the state does have an excise tax, which is passed to consumers and reflected in retail prices. This tax applies to groceries. The tax rate averages 4.44% in Hawaii, according to Tax Foundation data.
However, eligible residents may claim a Hawaii grocery tax credit to help offset the tax on groceries. There are several requirements for claiming the state's grocery tax credit, and federal adjusted gross income (AGI) is a factor. For the previous tax year, single filers with an AGI of $30,000 or more ($50,000 for joint filers) couldn't claim the credit.
Idaho
Idaho taxes groceries at the full 6% state sales tax rate. However, the state offers a grocery tax credit. The refund is $100 ($120 for residents 65 or older) for most Idaho residents, according to the Idaho State Tax Commission.
Idahoans may also receive a credit for each qualifying dependent. Part-year residents may receive a partial tax grocery tax credit.
Illinois
Some Illinois taxes increased in July, including the state’s sales tax on groceries. The 1% reduced grocery tax rate was suspended for an entire year, beginning on July 1 of last year.
The expiration of the grocery tax suspension came at a bad time for many state residents since Illinois increased its already high gas tax the same day along with a number of other states that increased gas taxes on July 1.
Kansas
Kansas still taxes groceries, but the state is gradually reducing the tax until it’s completely eliminated in 2025. The first reduction went into effect in last year.
The Kansas grocery tax is now 2% (reduced from 4%), but this reduction does not apply to local tax rates.
Mississippi
Mississippi currently has the highest-taxed groceries in the U.S. The state taxes essential food items at the regular 7% tax rate. Some Mississippi lawmakers proposed reducing the grocery tax, but their efforts haven’t been successful so far.
Efforts to reduce the state’s income tax have been more successful. As a result, some Mississippians will pay less income tax, starting this year.
Missouri
Missouri is another state with a reduced tax on groceries. The state imposes a 1.225% tax, but cities and counties can charge their own sales tax rates.
Local tax rates alone can exceed 8% in some areas of the state, according to the Tax Foundation.
Oklahoma
The statewide sales tax in Oklahoma is 4.5% and so is the tax on groceries, at least until late August, 2024 when the statewide portion of the tax will be eliminated.
Local sales taxes, which can reach as high as 7% in some areas, will still apply once the Oklahoma grocery tax cut takes effect late this summer.
South Dakota
A four-year “tax holiday” reduces South Dakota’s sales tax rate, including the tax on groceries, from 4.5% to 4.2%. This temporary tax cut took effect on July 1.
Some South Dakota lawmakers want to repeal the state’s grocery tax, but that hasn’t happened yet.
Tennessee
Tennessee’s tax on groceries is 4%, which is less than the statewide tax rate of 7%. State residents received a three-month break from this tax, beginning on Aug. 1. Tennessee families were able to buy tax-free groceries until Oct. 31.
Candy and prepared food (heated or served with utensils) were not tax-exempt in Tennessee during the tax holiday.
Utah
Although the state’s portion of the grocery tax is 1.75%, Utah residents are charged a 3% tax on groceries statewide. A bill passed by lawmakers would eliminate the 1.75% state portion of the tax.
However, for this change to take effect, voters would need to approve the measure in November 2024. Even if voters give the OK, Utah residents will still pay the remaining 1.25% food tax.
Honorable Mention: Virgina
Virginia technically eliminated the 1.5% state sales tax on groceries in January, but localities still charge a 1% tax rate. So, residents in the commonwealth aren't completely off the hook.
Republicans previously proposed a bill that would end the local sales tax option on groceries, but efforts to eliminate the food tax at the local level have failed so far.
Related Content
-
Nine of the Biggest Regrets I See as a Financial PlannerCheck out this list of common regrets among older people and see if there’s something you can address in your own life while there’s still time.
-
Three Habits of My Most Successful Wealth Management Clients
Clients are more likely to meet their financial objectives if they’re totally honest, take action in a timely manner and are actively engaged.
-
Types of Income the IRS Doesn't Tax
Income Tax It may feel like the IRS taxes most of your hard-earned money, but some types of income are nontaxable.
-
Why You’ll Still Pay Oklahoma Grocery Tax
State Tax Oklahoma is eliminating state grocery taxes, but that doesn’t mean groceries will be tax-free.
-
Last-Minute Tax Savings Guide for 2023
Tax Savings April 15 is weeks away, so it's not too late to save your 2023 taxes.
-
Why You Should Care About Your 2026 Taxes Now
Tax Planning It's not to early to prepare for the possibility that your taxes will go up in 2026.
-
Capital Gains Tax Exclusion for Homeowners: What to Know
Tax Breaks The IRS capital gains home sale exclusion can be a valuable tax-saving tool if you’re eligible.
-
Save During Alabama’s Severe Weather Preparedness Tax Holiday
Sales Tax Holiday Certain items will be tax-free during the Alabama severe weather preparedness sales tax holiday this year, but there are specific rules to follow.
-
Will Your IRS Refund Be Less This Year?
Tax Refunds Data show federal tax refunds are lower this year than last. Will you get less money back from the IRS this tax season?
-
Four Things You Need to Know About Presidents Day and the IRS
Tax Season The weeks surrounding Presidents Day are a particularly busy tax time for the IRS.
