With inflation on the rise and prices skyrocketing everywhere, many people are certainly feeling a pinch in their budget, especially when it comes to groceries.
Thirteen of the 45 states with a sales tax levy statewide taxes on groceries, in addition to any local or municipal taxes collected. Of these 13, some states offer lower food tax rates or a rebate that you can claim on your tax return, but others tax groceries based on the full sales tax rate.
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1.Alabama
Alabama is one of three states that applies the 4% statewide sales tax rate to food and groceries. If you live in Tuscaloosa or Cullman counties, you’ll also have to pay 5% local tax, which means you pay 9% sales tax on top of your grocery bill, one of the combined rates the highest in the country.
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2. Mississippi
Mississippi has a relatively low cost of living, but groceries are still taxed at 7%. A benefit of this high rate is that local taxes are not allowed on groceries in addition to the state tax. There is currently legislation in the Mississippi statehouse that would reduce the tax on groceries to 3.5%.
3. South Dakota
South Dakota state sales tax is 4.5%, and grocery purchases are subject to this rate, plus applicable local taxes.
South Dakota does not distinguish between groceries and candy or soda, unlike some other states, so all consumable items are taxed at the same rate. There is a limited rebate program for low-income seniors or people with disabilities to help offset certain sales or property taxes, but to qualify you must be age 65 or older or have a permanent disability and earn less than $12,889 as an individual or less than $17,420 for a multi-person household.
4.Illinois
Sales of food, drugs and medical devices in Illinois are only subject to a tax rate of 1% plus applicable local taxes.
The state also taxes candy, soda, and alcohol at the state tax rate of 6.25%, plus municipal taxes. Illinois is one of 18 states that declares treats made with flour not candy, so they are taxed like regular groceries. For example, a plain chocolate bar is subject to more than six times the tax charged on a chocolate bar containing cookie pieces.
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5.Missouri
Missouri applies a reduced sales tax rate of 1.225% on groceries, down from the standard sales tax rate of 4.225%. This includes food for home consumption and also includes plants or seeds to grow your own produce. Local taxes may still apply, and depending on the county you live in, they can add 2-6% to your overall grocery bill.
6. Virginia
Food is subject to a reduced sales tax rate of 2.5% in Virginia, although alcohol, tobacco, and certain prepared foods are not included in this rate. As of 2020, personal hygiene products such as diapers, incontinence pads, feminine hygiene products, and even sheets and mattress pads are also included in this reduced sales tax rate.
There is no sales tax on soda or candy in Virginia, but an excise tax on soft drink wholesalers or distributors is levied based on gross sales, so these charges are likely passed on to consumers in the form of higher prices.
7.Utah
If you buy groceries in Utah, you will see a 3% tax added to your grocery receipt for general grocery sales. This is a combined rate including 1.75% state tax, 1% local option, and 0.25% county option.
Alcohol and tobacco are subject to the normal rate of sales tax of 4.7% plus any local taxes. Prepared foods, such as food sold at a deli or previously heated, or any food sold with utensils, are exempt from the reduced rate and subject to the combined tax rate, which can be as high as 8.85%, depending on the county where you make the purchase.
8. Arkansas
Arkansas taxes groceries at a greatly reduced rate of 0.125%, plus local taxes. Candy and soft drinks are taxed at a sales tax rate of 6.5%, along with non-food items such as toothpaste or ice cream. The tax code states that anything called candy cannot include flour; otherwise, it is considered food and subject to the reduced tax rate.
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9. Hawaii
When you’re thinking about how to stop living paycheck to paycheck, moving to Hawaii probably isn’t at the top of your savings list. Although Hawaii technically has no state sales tax, it does charge businesses a 4% general excise tax. Businesses then typically pass this cost on to customers, along with any applicable municipal taxes.
Hawaii offers a refundable alimony tax credit for low-income residents, but it’s starting to phase out for anyone filing as an individual and earning $30,000 or more per year (or $50,000 per year for joint filers ). People using this credit must complete and submit a separate form with their tax return, which creates an additional hurdle.
10. Tennessee
Tennessee does not charge income tax, but it does have a sales tax rate of 7% plus any additional local or municipal taxes. Groceries are subject to a reduced sales tax rate of 4%, but prepared foods, including baked goods, hot soup, deli meats, candies and alcohol, are taxed at the 7% sales tax rate.
In 2021, the state offered three days of sales tax exemption where foods, food ingredients, and prepared foods were not charged, although alcohol, candies, and dietary supplements were still taxable. .
11. Oklahoma
Oklahoma state sales tax is 4.5%, and you can expect to pay it on your groceries. There is a sales tax relief credit for low-income residents, but it is only $40 per person in households earning less than $50,000 for seniors, people with disabilities permanent or those claiming a dependant. For anyone who doesn’t fall into these categories, you must earn $20,000 or less per year to qualify. The amount of the rebate has not changed over the past three decades.
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12.Idaho
Idaho charges a state tax rate of 6% on groceries, but offers a tax credit that averages about $100 per person. The Idaho House of Representatives recently debated a bill to increase the tax credit to $120 per person in 2023, but it is still under discussion in the state Senate.
13.Kansas
Grocery shopping in Kansas means you’ll pay 6.5% state sales tax, plus local taxes, which is the second highest rate in the country. Legislation is currently being debated to eliminate the sales tax on groceries, but has yet to pass.
Kansas offers a tax credit of $125 per person per year, and you must be at least 55 years of age or older, have a permanent disability or have a dependent under 18, and earn less than $25,800 . It should also be the last tax credit taken from your state tax return, after any other applicable credits or deductions, so it may not benefit low-income families who don’t have to. maybe not much income tax anyway.
At the end of the line
Food and grocery taxes are controversial because food costs tend to take up a larger share of the monthly budget of low-income families. Most people don’t shop based on a particular item’s tax rate, but ignoring the taxes at the bottom of your receipt can eat into an already tight budget.
As tax season approaches, check out the best tax software and remember that small tax amounts add up, especially on necessities like groceries. Pay attention to your receipts and find out about grocery and food taxes in your area so you know what to expect and plan accordingly.
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