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However, taxpayers should be aware that subsequent changes in the Tax Law or its interpretation may affect the accuracy of a Tax Bulletin. The information provided in this document does not cover every situation and is not intended to replace the law or change its meaning. Skip to main content. The exemption for food includes: food products; dietary foods; health supplements; and certain beverages. Food must meet these conditions to be exempt from tax: it must be sold for human consumption; it must be sold unheated; and it must be sold in the same form and condition, quantities, and packaging as is commonly used by retail food stores.
These foods and beverages, however, are not exempt from tax: candy and confectionary; alcoholic beverages; soft drinks, fruit drinks, sodas, or similar beverages; heated or prepared meals sandwiches, salad bars, etc. Alabama, Arkansas, Mississippi and Utah are in the bottom fifth of states in per capita income. And the Wilson-led study points out that most of the counties that do not exempt grocery from the sales tax are located in Southern states like Alabama, Arkansas and Mississippi, where food insecurity tends to be the most acute.
Alabama state Sen. In Alabama, most of the sales tax goes toward education. And Nancy Dennis, spokeswoman for the Alabama Retail Association , noted that every time the sales tax goes up, retail sales go down.
That worries both retailers and educators in the state. Swanson said the city gets revenue from more than 50 sources of taxes and fees, and that any or several of them could be increased to make up for lost grocery tax revenue.
Or, he said, the city could reduce spending somewhere else. He also questions how effective the tax is because many people in Daphne drive across the Florida border to buy their food because that state has no tax.
Shoppers in other states also appear willing to drive to dodge the tax. A Wichita State University study published earlier this year found that Kansans living near the Colorado, Nebraska and Missouri borders often cross over to buy groceries, avoiding state and local taxes in their home state that can run as high as Kansas lawmakers this year again discussed eliminating the tax before abandoning the idea in the face of ongoing budget shortfalls.
The grocery tax also is under review in Mississippi, where Republican Gov. Moyle, a Republican, would like to scrap the tax to give relief to a broader spectrum of taxpayers. A decade ago, then-Utah Gov. Jon Huntsman, a Republican, signed a tax bill that he hoped would be his legacy. Twenty-three states and D. Eleven of the states that exempt groceries from their sales tax base include both candy and soda in their definition of groceries: Arizona, Georgia, Louisiana, Massachusetts, Michigan, Nebraska, Nevada, New Mexico, South Carolina, Vermont, and Wyoming.
While 32 states exempt groceries, six additional states Arkansas, Illinois, Missouri, Tennessee, Utah, and Virginia tax groceries at a lower, preferential rate. Four of those six states include both candy and soda in the rate applied to those lower-taxed groceries. Arkansas and Illinois exclude soda and candy from the tax preference, taxing them at the standard rate. The aim of a grocery exemption is to reduce tax burdens on necessities, particularly those which take up a large share of overall consumption for low-income consumers, which obligates states to decide which products are essential.
This raises obvious questions about a host of other food items like chips, baked goods, and ice cream. In the name of narrowing the exemption to necessities, most states end up excluding certain foods and beverages. This picking and choosing creates arbitrary and counterintuitive discrepancies that go beyond the bowl of Halloween candy. If you live in New Jersey, it also affects the jack-o-lantern on your front porch. A recent tweet by the New Jersey Division of Taxation reminded consumers that decorative pumpkins are subject to sales tax, but pumpkins intended to be eaten are exempt.
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