Tennessee Grocery Sales Tax Break Is Missing Some Consumers

The Tennessee Works Tax Act provides a one-time sales tax break on food and ingredients, but many consumers either aren’t aware of it or say it provides little help.

Image Credit: Walmart / CC

By Lonnie Lee Hood [Tennessee Lookout -CC BY-NC-ND 4.0] –

In May, Gov. Bill Lee signed the Tennessee Works Tax Act, the single largest tax cut in state history designed to provide an estimated $400 million in savings for consumers, families and businesses. Along with $164 million in small business tax relief and $64 million to simplify tax administration, the bill included a one-time sales tax break on food and ingredients from Aug. 1 to Oct. 31. The food tax break began only days after the annual back-to-school sales tax holiday ended July 30.

But some Tennessee shoppers say they’ve barely noticed the cut.

“You can go to the grocery store, buy everything you need, and pay no sales tax,” Lee said in a July video announcement. “We try to cut taxes every chance we get in Tennessee because we want Tennesseeans to keep every bit of their hard-earned income as they can. We thought there’s no better time to do it.”

Despite Lee’s statement, Tennesseans may not feel the impact as much as they’d like to. One shopper said in a social media comment they had no clue the break was even happening, and another said they saved only $12 on a recent purchase. They’re not alone; other consumers are having the same experience.

Erin O’Dowd, an Ashland City resident and singer-songwriter, said that prior to seeing a post asking for shoppers’ experiences, she was  unaware the tax break was happening. O’Dowd normally has her groceries delivered from a local Walmart store, but said she also visits Publix and Aldi occasionally. O’Dowd said she might not have been aware of the news because she lives in a local “bubble,” but she was also surprised to hear Tennessee was offering a sales tax break and decided to research the bill online.

“Our politics don’t seem to follow any sort of thing like that,” O’Dowd told the Lookout. “I found the governor’s statement interesting. He spun it at an angle to make himself look good. It made me chuckle because it only lasts three months. I grew up in Florida. They don’t have taxes on groceries.”

O’Dowd said that now she’s aware of the break she’ll continue meal prepping and might indulge in some items she wouldn’t otherwise buy, like fruit or juice.

Other shoppers, like Nashville resident Trevarius Newman, heard about the tax break when it was announced but say they haven’t saved as much money as they hoped. Newman said that he checks his grocery receipts regularly, and that there has been a $5 or $6 difference between purchases he made in December and this month. Newman shops about once a week at Walmart in person, spending between $70 and $100 each time. He said between a lack of awareness of the break and increased prices, it’s not really a surprise some consumers haven’t noticed — and that only one of his retail coworkers was aware when he asked around.

“Inflation’s been high,” Newman told the Lookout. “Depending on what gets amplified and what doesn’t, coupled with the lack of awareness on a tax break for groceries, it all just gets washed out.”

Newman said additional advertisement by the government might help. However, Franklin Michello, director of the Master of Science in Finance program at Middle Tennessee State University, said that he believes the lack of awareness is likely due to the types of news sources consumers pay attention to. Michello said residents who don’t keep track of local consumer news are far less likely to know about the break, and that he personally informed his neighbors about the holiday.

As for high prices, they may even be elevated because of the break, according to Don Bruce, director of the Boyd Center for Business and Economic Research at the University of Tennessee Knoxville. Bruce told the Lookout that shop owners may raise prices or forgo discounts and sales when they see a sales tax break, but that further study would be needed after the break is over to know for sure. 

Bruce said a temporary holiday was likely less objectionable to legislators than a permanent reduction or other cost-cutting policy because Tennessee is in a period of strong economic growth now, but that it might not always be the case. A short-term reduction is superior, he said, because it would be difficult to repeal a permanent tax cut during times of economic distress.

Once aware, however, Michello said consumers hoping to make the most of the holiday should stock up on non-perishables like toilet paper, rice and beans while they still can. Bruce said people should also keep an eye on prices, which change frequently on a variety of items.

“There’s a lot more than just the tax rate,” Bruce said. “It’s a matter of timing sales, and getting things you need. If you can wait for bigger ticket items, remember the prices move too.”