Tennessee House Bill HB2007

Tennessee 2025-2026 Regular Session

• Introduced: 1/22/26
• Refer: 2/4/26

Caption

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

Summary

HB2007, titled the “End the Grocery Tax Act,” would eliminate Tennessee’s state sales tax on retail sales of food and food ingredients, subject to existing exceptions referenced in the bill. The measure amends multiple provisions of the Tennessee Code to remove food and food ingredients from taxable sales categories and to conform related tax and licensing language to the new exemption. The bill also revises how the state and local governments are treated financially after the exemption takes effect. It deletes a provision that earmarked a portion of the grocery tax for the state general fund and K-12 education, and it replaces the local distribution formula with a requirement that counties and municipalities receive an amount substantially equal to what they would have received absent the exemption, based on exempt sales data and other information the commissioner deems relevant. The bill takes effect July 1, 2026.

Impact

HB2007 would significantly change Tennessee’s sales tax structure by exempting food and food ingredients from the state sales tax and conforming related statutes in Titles 57 and 67. It would also alter revenue allocation provisions tied to grocery-tax collections, including removing a K-12 earmark and directing the state to make local government distributions that approximate prior revenue levels. The bill further updates alcohol licensing provisions that currently reference whether a business derives a certain share of taxable sales from food sales, replacing those references with broader food-sales language.

Sentiment

Based on the bill title and text, the measure appears to be framed as a consumer tax relief proposal and likely reflects support for reducing the cost of groceries for Tennessee residents. No committee transcripts or recorded votes were provided, so there is no direct evidence of debate, amendments, or formal support/opposition in the available context. The overall tone of the bill is policy-driven and reform-oriented, with a clear focus on tax elimination rather than incremental adjustment.

Contention

The main likely points of contention are revenue loss and fiscal backfill. Eliminating the grocery tax would reduce state sales tax receipts and could affect the dedicated K-12 funding stream that currently receives a portion of the tax, making education funding a central issue. Local governments may also be concerned about whether the replacement distribution formula fully preserves their revenue and how the commissioner’s discretion in using exempt-sales data will work in practice. Supporters would likely emphasize household savings and tax fairness, while opponents would likely focus on budget impacts and the reliability of replacement funding.