Tennessee House Bill HB0021

Tennessee 2025-2026 Regular Session

• Introduced: 12/5/24
• Refer: 1/28/25

Caption

AN ACT to amend Tennessee Code Annotated, Title 57, Chapter 3 and Title 67, relative to taxation.

Summary

HB0021 would exempt the retail sale of food and food ingredients from Tennessee sales tax, while preserving tax treatment for certain food sales under the state’s liquor-by-the-drink tax provisions. The bill amends multiple sections of the Tennessee Code to remove food and food ingredients from the general sales tax base, add a new provision clarifying that those items remain taxable under part 7 of the tax chapter, and conform related definitions and licensing rules for establishments such as restaurants and other licensees that derive a minimum share of sales from food. The bill also revises how state and local revenues are handled to account for the loss of sales tax on groceries. It deletes a prior provision that earmarked a portion of the sales tax rate on food for K-12 education and replaces local distribution language so counties and municipalities receive an amount substantially equal to what they would have received absent the food tax exemption, using exempt-sales reporting and other data the commissioner deems relevant. The act is scheduled to take effect July 1, 2025.

Impact

This bill would significantly change Tennessee’s sales tax statutes by removing food and food ingredients from taxation under Title 67’s general sales tax provisions, while preserving certain taxation and reporting rules elsewhere in the code. It would also alter revenue allocation formulas for the state general fund, K-12 education earmarks, and local government distributions, and it would require conforming changes to alcohol licensing statutes that reference food-sales thresholds.

Sentiment

No committee transcripts or recorded votes were provided, so there is no direct evidence of debate or formal support/opposition in the available record. Based on the bill’s structure, it appears to be a broad tax-relief measure aimed at reducing the cost of groceries, with administrative and revenue-offset provisions designed to soften the fiscal impact on state and local governments.

Contention

The likely points of contention are fiscal: the loss of sales tax revenue on food, the removal of the K-12 earmark tied to the food tax rate, and whether the proposed local reimbursement formula would adequately replace lost county and municipal revenue. Another possible issue is the interaction with liquor-by-the-drink licensing rules and the continued taxation of food under part 7, which may require careful interpretation and implementation by the Department of Revenue and affected businesses.