Tennessee House Bill HB0002

Tennessee 2025-2026 Regular Session

• Introduced: 11/6/24
• Refer: 1/28/25

Caption

AN ACT to amend Tennessee Code Annotated, Title 57 and Title 67, relative to taxation.

Summary

HB0002 would eliminate Tennessee’s state sales tax on retail sales of food and food ingredients, effectively repealing the grocery tax for most purchases of groceries. The bill amends the sales tax code so that food and food ingredients are no longer taxed, while also revising related provisions that currently direct a portion of grocery-tax revenue to the state general fund and K-12 education. To offset the loss of revenue and preserve local government funding, the bill requires the state to allocate to counties and municipalities an amount substantially equal to what they would have received from the exempted food sales, using exempt-sales reporting and other data the commissioner considers relevant. It also makes conforming changes to alcohol licensing provisions so that eligibility thresholds tied to food sales are measured by total food sales rather than taxable food sales.

Impact

The bill would materially change Tennessee’s sales tax structure by exempting food and food ingredients from taxation under Title 67, while also removing statutory language that earmarks a portion of the grocery tax for K-12 education. It would require new administrative calculations for local revenue distributions and would update related alcohol licensing statutes in Title 57 to reflect the new tax treatment of food sales. The effective date is July 1, 2025.

Sentiment

The available legislative history suggests the bill has generated interest but not yet broad advancement, as it was deferred to summer study in the House Finance, Ways, and Means Subcommittee by a 10-3 vote. That vote indicates some support for the concept of ending the grocery tax, but also notable hesitation about the fiscal and policy implications. No committee transcript is available, so the recorded vote is the main indicator of sentiment.

Contention

The main points of contention are likely the fiscal tradeoffs of eliminating grocery tax revenue and the loss of the existing K-12 earmark, which the bill expressly deletes. Supporters appear to frame the measure as relief for consumers and a way to end a regressive tax, while opponents or skeptics likely focus on the impact on state revenue, education funding, and the mechanics of replacing local government distributions. The 10-3 deferment to summer study suggests unresolved concerns about implementation and budget effects.