Taxable Foods: On Which Grocery Items Do You Pay Sales Tax?

Understanding How Food Sales Tax Works Across States

Food’s everywhere this time of year, and so are the sales taxes levied on it. Too bad those taxes aren’t levied in any way that seems to make sense to the average online food vendor selling into one of the trickier states.

Holiday Food Sales & Surprising Tax Implications

Thanksgiving for example, America’s biggest food holiday, can create a mishmash of sales taxes if you’re selling online. Where groceries are taxed, most of the homecooked items of the Thanksgiving or other holiday dinner generally remain sales-tax free nationwide (though wine, spirits and food platters, often sold at the holidays, usually incur some kind of tax).

Where Groceries Are Taxed in the U.S. (2025 Update)

States That Still Tax Groceries

“Generally” doesn’t mean “completely” in the world of sales tax, and 11 states still tax groceries:

Alabama

• Alabama (overall sales tax rate was recently lowered from 3% to 2%);

Arkansas

• Arkansas (sales tax on groceries and unprepared food discontinues on Jan. 1);

Hawaii

• Hawaii (taxed through the state’s general excise tax, with many exemptions);

Idaho

• Idaho (incur the full 6% sales tax rate, but most residents can claim a grocery sales tax credit);

Illinois

• Illinois (1% statewide sales tax discontinues Jan. 1 but localities may raise their own local taxes to compensate - an example of how the smallest local jurisdictions can muddy tax obligations in a state where you thought you clearly understood your responsibilities);

Mississippi

• Mississippi (rate reduced to 5% last summer);

Missouri

• Missouri (incur reduced rate of 1.225%, though local jurisdictions may significantly increase the total rate);

Tennessee

• Tennessee (incur reduced rate of 4%);

South Dakota

• South Dakota (incur temporarily reduced rate, and a measure to repeal sales tax on groceries failed with voters a year ago); and

Virginia & Utah

• Virginia and Utah (both taxed at reduced rates).

Why Grocery Sales Tax Rules Change So Often

An Ever-Changing Area for Businesses

As your sales of groceries and other unprepared food items increase in various states, keep a sharp eye on this area of sales tax. Eliminating grocery taxes often turns into a political tool used by lawmakers to curry favor with voters without a full examination of the fiscal fallout of such a major move.

The Debate: Relief for Consumers vs. Revenue Loss

The harshest critics of eliminating grocery taxes say that such a move generally provides surprisingly little relief to lower and middle-income taxpayers. Meanwhile the money taken in by grocery taxes often flows through long-established fiscal channels to headline expenditures such as infrastructure, education and medical care - tough areas to voters to slash funding. Either way, it can turn into a fiery debate that changes tax rates quickly.

A Real-World Example: South Dakota’s Political Struggle

(South Dakota offers an excellent recent example of how politically complex eliminating grocery taxes can be, especially as grocery sales tax bills get tagged on as riders for more controversial legislation.)

What to Expect Next for Grocery Sales Tax

Expect more states to consider such an elimination or, more likely, a gradual trimming of their sales tax on groceries - making calculating and maintaining your obligations even more difficult.

Need Help Navigating Food Sales Tax?

Sales tax questions wait for no man, or holiday. Be thankful there’s somebody you can turn to with this season and year-round. Contact TaxConnex to UPSOURCE your sales tax compliance to the experts.