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.
- 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 July 2023.
Alabama
Alabama still taxes groceries, but the state recently passed legislation that will reduce Alabama’s grocery tax from 4% to 3%. The law goes 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 will 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 2022, 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, 2022.
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 January 2023.
Kansas’ grocery tax is now 4% (reduced from 6.5%). In 2024, the tax on groceries will decrease to 2%, but these reductions do 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 since the state doesn’t offer a reduced tax on food items.
Some Oklahoma lawmakers pushed to reduce the grocery tax during the 2023 legislative session, but that session has now ended, and the state’s tax on groceries remains unchanged.
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 will receive a three-month break from this tax. The 2023 grocery sales tax holiday in Tennessee will run from Aug. 1 through Oct. 31.
Candy and prepared food (heated or served with utensils) are 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 recent 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.
