Tennessee Senate Bill SB1367

Tennessee 2025-2026 Regular Session

• Introduced: 2/6/25

Caption

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

Summary

SB1367 would exempt the retail sale of food and food ingredients from Tennessee sales tax, with a limited exception for taxes imposed under part 7 of Title 67, Chapter 6. The bill rewrites the state sales tax statute so that groceries and similar food items are generally not taxed, while also making conforming changes to related provisions that reference taxable food sales. The measure also adjusts how state and local revenues are handled to account for the loss of sales tax on food. It removes a prior provision that earmarked a portion of the food tax rate for the state general fund and K-12 education, and it replaces the local distribution formula so counties and municipalities receive an amount substantially equal to what they would have received absent the food tax exemption, based on exempt sales data and other information the commissioner considers relevant. In addition, the bill updates several alcohol-related licensing provisions so that eligibility thresholds for certain licensees are measured by total food sales rather than taxable food sales. These changes appear intended to preserve the operation of existing licensing rules after food is removed from the sales tax base. Because there were no committee transcripts or recorded votes provided, the available context does not show formal debate or a documented vote count. Based on the bill text alone, the overall policy direction appears consumer-friendly and tax-relief oriented, with the main practical concern being how the state and local governments would replace or redistribute revenue lost from exempting food purchases.

Impact

SB1367 would significantly narrow Tennessee’s sales tax base by exempting retail sales of food and food ingredients, while preserving any separate taxation that may apply under other parts of the sales tax chapter. It would also revise revenue-allocation statutes to prevent a reduction in local government distributions tied to the new exemption and would remove language that previously directed a portion of food-tax revenue to the state general fund for K-12 education. Related alcohol licensing statutes would be conformed to the new tax treatment by changing references from taxable food sales to total food sales.

Sentiment

No committee discussion or voting history was provided, so there is no recorded legislative sentiment to summarize from debate or roll calls. From the bill’s structure, the proposal reads as a tax-relief measure aimed at reducing the cost of groceries for consumers, while also attempting to hold counties and municipalities harmless. The absence of recorded opposition or support in the supplied materials means the broader political reception cannot be determined from this record alone.

Contention

The main likely point of contention is fiscal: exempting food from sales tax would reduce state revenue and alter the flow of funds that previously supported the general fund and education. Another likely issue is the local government hold-harmless provision, which depends on administrative calculations and exempt-sales reporting, potentially raising questions about accuracy, implementation, and long-term funding stability. Stakeholders most likely to focus on these concerns would be state budget officials, education interests, and local governments, while consumers and tax-relief advocates would likely support the exemption.