Sales tax on groceries can be a real pain for consumers and businesses alike. Subsistence items like bread, milk, and fresh produce are tax-exempt in most states, but there are numerous exceptions. Prepared foods, candy, soda, and local option taxes can slip through the cracks.
Failing to collect the tax or charging the wrong rate can have grave consequences – customer complaints, emergent audits, or best case scenario, penalty-free, hassle.
By the end, you will understand do you pay sales tax on groceries within different jurisdictions, with the help of new technology and our Sales tax automation tool to help stay compliant.
Do You Pay Sales Tax on Groceries?
The answer to this question varies depending on the region(ZIP code). Many states categorize groceries as essential items and do not apply a general sales tax on them. However, there are exceptions.
- Most states bypass taxation on unprepared grocery items such as bread, milk, fruits, and vegetables.
- Exemption for unprepared food only (Missouri 1.225%).
- Groceries prepared and served in restaurants are considered taxable during consumption (Mississippi 7%).
- Certain local governments can impose taxes, even when statewide exemptions exist.
- Local jurisdictions can increase their own taxes, even in regions with broad exemptions.
Why it Matters
- Consumers have to shoulder the burden of overpriced groceries in regions with taxes, which severely impacts families living below the poverty line.
- Retailers need to accurately set up point-of-sale systems to ensure they are not losing amounts of money or receiving sums of money above expected.
- Through constantly changing definitions of businesses (over receipt of sales), keeping tabs on paid taxes too frequently leads to issues such as “Do you pay sales tax on groceries in Washington state? The answer is no- statewide exemption on Michigan grocery tax on sale does not exist.
Taxpayers automatically treating taxable prepared food as exempt- or vice versa- risk incurring assessments and penalties of uncollected tax alongside interest, leading to fines of up to 50% of collected tax.
States That Charge Sales Tax on Groceries (2025)
This list offers a comprehensive overview of regions charging a grocery tax. Also listed are reduced tax rates per jurisdiction. Make sure to have your local county or city tax listed.
| State | Taxable ? | Rate on Groceries | Notes |
|---|---|---|---|
| Alabama | Yes | 3.0% | Local taxes may apply on top. |
| Arkansas | Yes | 0.125% | City/county rates vary. |
| Hawaii | Yes | 4.0% | County GET adds up to 0.5%. |
| Idaho | Yes | 6.0% | Grocery credit offsets cost on returns. |
| Illinois | Yes | 1.0% | Exempt after Jan 1, 2026; local still tax |
| Mississippi | Yes | 7.0% | Full general rate, no credits. |
| Missouri | Yes | 1.225% | Only SNAP-eligible items; local addl’s. |
| South Dakota | Yes | 4.2% | Voters rejected full exemption in 2024. |
| Tennessee | Yes | 4.0% | Local taxes may apply. |
| Utah | Yes | 3.0% | 1.75% state + 1.25% local. |
Tip: Even if your state exempts groceries at the state level, local jurisdictions often impose a separate sales tax on food. Always verify the combined rate.
States That Exempt Groceries from Sales Tax
These states do not impose taxes on most grocery items at the state level. Local taxes may still apply in some.
| State | Exempt ? | Notes |
|---|---|---|
| Arizona | Yes | No state tax; some cities impose local tax. |
| California | Yes | Groceries fully exempt; prepared foods taxed. |
| Connecticut | Yes | Exempts food; includes some dietary supplements. |
| Colorado | Yes | Local option taxes may apply. |
| Delaware | Yes | No general sales tax; gross receipts apply. |
| Florida | Yes | Exempts digital & physical; communications tax on streaming. |
| Georgia | Yes | State exempt; Cherokee County example above. |
| Indiana | Yes | Prepaid grocery items exempt; prepared taxed. |
| Iowa | Yes | Food exempt; diet shakes taxed. |
| Kansas* | Yes | Food exempt; local rates may apply. |
| Kentucky | Yes | Groceries exempt; prepared taxed. |
| Louisiana | Yes | Exempts grocery; includes baby formula. |
| Maine | Yes | Food exempt; prepared food taxed at 8%. |
| Maryland | Yes | Exempts food; grocery credit for low-income. |
| Massachusetts | Yes | Food exempt; restaurant meals taxed at 6.25%. |
| Michigan | Yes | Exempt food; prepared taxed at 6%. |
| Minnesota | Yes | Most food exempt; candy & soda taxed. |
| Nebraska | Yes | Exempts food; local may apply. |
| Nevada | Yes | No state food tax; local rates vary. |
| New Hampshire | Yes | No general sales tax. |
| New Jersey | Yes | Exempts food; prepared taxed at 6.625%. |
| New Mexico | Yes | Gross receipts; food exempt in most cities. |
| New York | Yes | Exempts grocery; prepared & snack taxed. |
| North Carolina | Yes | Food exempt; prepared taxed at 6.75%. |
| North Dakota | Yes | Exempts food; prepared taxed. |
| Ohio | Yes | Exempts food; non-prepared taxed at 5.75%. |
| Oklahoma* | Yes | Grocery exempt; local may apply. |
| Pennsylvania | Yes | Food exempt; candy & soda taxed. |
| Rhode Island | Yes | Exempts food; prepared taxed. |
| South Carolina | Yes | Food exempt; restaurant taxed at combined rate. |
| Texas | Yes | Exempt food; prepared taxed at 1%. |
| Vermont | Yes | Exempts food; prepared taxed at 7%. |
| Virginia* | Yes | State exempt; local option up to 1%. |
| Washington* | Yes | No state grocery tax. |
| Washington, D.C. | Yes | Exempts grocery; prepared taxed at 10%. |
| West Virginia | Yes | Exempts grocery; prepared taxed. |
| Wisconsin | Yes | Exempts food; candy & soda taxed. |
| Wyoming | Yes | Food exempt; local may apply. |
- Kansas repealed the food tax on January 1, 2025
- Oklahoma repealed the food tax on August 29, 2024
- Virginia repealed the state share on January 1, 2023
- Washington does not charge tax on groceries.
Special Rules on Grocery Taxes in Specific States
While the state tables furnish a ready reference, many add additional detailed rules.
Candy and Soda Cut-Outs
- Minnesota & New Jersey: Consider candy (per SST definition) and soda as non-grocery items. Fully taxable.
- Pennsylvania & Wisconsin: Tax candy and soft drinks despite an exemption for food.
Price Threshold Exemptions
- Massachusetts: Exempt prepared foods under $2.75 from taxation as grocery ingredients.
- New York City: Exempt prepared meals under $2.50 from taxation if sold without utensils.
SNAP Description of Groceries
- Some states explain exempt grocery items as those that can be purchased using SNAP benefits. This may include items such as seeds, baby food, and cereals, but does not exclude pet food, alcoholic beverages, and tobacco.
Prepared Food and Grocery Distinction
States have “ready-to-eat” definitions:
- Cutlery test: Contains cutlery- taxable; does not contain cutlery- exempt.
- Heating test: Rotary-cooked heated foods (rotisserie chicken) are taxable; cold pack foods may be exempt.
Local Option Taxes
- Even in exempt states, counties/cities tend to add 1%–3% over grocery sales tax to fund local services and facilities.
Can You Deduct Sales Tax on Groceries?
Consumers tend to wonder: Can you deduct sales tax on groceries? The answer is in your itemized federal deductions and the state policies.
Federal SALT Deduction
- Itemized Deduction: One of the choices you can make is to deduct state income taxes or state and local general sales tax (not both).
- Grocery Purchases: Count towards your total sales tax deduction.
- SALT Cap: Is capped at $10,000 per return; married couples filing jointly.
Note: Because of the high standard deduction (2025: $13,850 single, $27,700 married) most voters forgo itemizing; therefore, claiming sales tax for groceries isn’t beneficial.
Deductions and Credits at the State Level
- Idaho: Grocery tax credit up to $140 per senior, $120 for others.
- Hawaii: Low-income households receive up to $220 in food tax credits.
- Alabama: Education Trust Fund growth may result in reduced grocery taxes.
Commercial tax consultants should be engaged to ascertain the qualification for grocery deductions or credits.
How Grocery Sales Taxes Affect Businesses
Grocery taxes have an impact on pricing, margins, and operations for businesses on all levels, including big-name retailers and small convenience stores.
Pricing Strategy
- Tax-Inclusive Pricing: Grocers must use sales tax-inclusive pricing, meaning every shelf price shows tax and costs are more than expected.
- Tax-Exclusive Pricing: Prices shown on the shelf do not include taxes, and they might surprise shoppers when the sales tax is added when they check out.
Inventory Classification
- Staff Training: Training shop staff on local and state legislation changes is obligatory to avoid over- or undercharging customers.
Reporting & Remittance
- Tax Filings: Grocery tax amounts for sales will have to be declared alongside reported sales. They have to be collected at least once a month or once every three months.
- Local Remittance: Should be reported separately from other sales to the municipal government.
Competitive Impact
- Exempt States: States that do not charge taxes give grocery stores located within or neighbouring these states a significant boost in competition with their taxed counterparts.
- Tax Holidays: Publicized tax-free times like back-to-school periods increase shopper activity, but places face complicated compliance.
Common Compliance Issues with Grocery Sales Taxes
It doesn’t matter how seasoned a business is, these challenges persist:
- Misclassification of Items: Delis that classify items like sandwiches as groceries rather than prepared food tend to overcharge taxes.
- Ignoring Local Option Taxes: Failing to charge taxes where the county mandates is never a good thing.
- Price Threshold Errors: Exempting things over state caps, like Massachusetts’ $2.75 rule, makes these things erroneous.
- SNAP vs. Non-SNAP Items: People using state-defined terms instead of federal-defined terms, SNAP, are subject to definitions for state aid programs are bound to get confused.
- Rounding & Discount Application: Issues with rounding errors when applying discounts at checkout for lists with multiple items.
Staff retraining and routine POS audits assist in identifying and mitigating these errors from turning into wasteful spending.
Best Practices for Managing Grocery Sales Tax Compliance
To tackle the complexity of the grocery tax, implement the following:
- Use Technology To Automate: Utilize a sales tax automation solution for real-time rate verification, proper item classification, nexus identification, and automated tax return submissions.
- Maintain a State-Specific Tax Matrix: Compile documents with rules like exempt items, thresholds, and local options for every area or jurisdiction that you operate in.
- Carry Out Self-Auditing Quarterly: Audit the recorded data in the POS system against the tax returns for discrepancies, identify gaps, and correct them.
- Train and Update Employees: Provide brief summaries of changes in rules on a monthly basis to the concerned team, along with checkout team quick reference cards.
- Oversee Legislation: Monitor newsletters for state DOR updates, waiting for tax holiday announcements or rate shifts.
- Engage Specialist Support: Utilize services provided by sales tax experts, or work directly with them, like Commenda, to reduce audit exposure and manage legislative changes.
Simplify Your Grocery Sales Tax Compliance with Commenda
Commenda’s platform is explicitly designed to handle grocery sales taxes without complications.
Automated Rate & Rule Engine: Allows state and local tax exemptions and reduces the rate for groceries, local option taxes follow through.
Multi-Jurisdiction Registration: Auto-register in every county or state you have registered nexus with.
Real-Time POS Integration: Guarantees that every grocery item is properly taxed (or exempted) during checkout.
Filing & Remittance Automation: Returns are filed monthly, quarterly, or annually on your behalf.
Audit Support & Documentation: This includes exemption certificate management, historical filing access, and more.
Take grocery tax off your plate by starting today with Commenda’s demo, so book a call now.
FAQs
Q. Why do some states charge sales tax on groceries while others do not?
A. States consider the need for revenue against the regressivity of grocery taxes. Most exempt food to alleviate the burden on low-income households, while others maintain reduced rates to fund education or infrastructure.
Q. Is the sales tax rate for groceries the same as for other products?
A. Not always. Some states apply a reduced rate (e.g., Alabama’s 3% vs 4% general), while others tax groceries at a full general rate or exempt them entirely.
Q. Can businesses deduct the sales tax they pay on groceries?
A. Businesses can deduct state and local sales taxes as a business expense, subject to normal accounting rules, but only itemized filers under SALT, capped at $10,000, can deduct consumer grocery taxes.
Q. Is it true that most states don’t differentiate between groceries and prepared foods when it comes to taxation?
A. Correct, takeout foods, dishes, and any food that has been prepared and is ready-to-eat are generally taxable, and prepared staples are usually exempt from grocery staples, with states using tests like “utensils provided” or “heated on-site.”
Q. What is the consequence that a business might face when failing to charge sales tax on groceries?
A. They run the risk of paying back tax, interest, and penalty (often capped at 50% of tax owed). Through corrective work, self-initiated audits, and public disclosures responsibly limit penalties.
Q. How can businesses easily monitor state-specific shifts in regulations regarding grocery sales tax?
A. Employ automated systems, subscribe to the state Department of Revenue bulletins, or team up with tax consultants. Updating staff training programs to equip them with new policies on exemptions, legislative changes, tax breaks, or tax-capturing holidays ensures holistic compliance.
