Do You Pay Sales Tax on Groceries?
Sales tax on groceries is determined by state law and the specific classification of each item, which explains why the tax on your receipt can vary.
Whether you pay sales tax on groceries is more complex than a simple yes or no. The taxability of food items depends on what you buy, where you buy it, and the specific laws of the state and locality. For most people, the checkout receipt is a mix of taxed and untaxed items, reflecting a complicated system of definitions that vary across the country.
Defining Groceries for Tax Purposes
Tax authorities define a “grocery” based on its state of preparation, not its nutritional value. The primary distinction is between unprepared and prepared foods. Unprepared foods, or staple groceries, are intended for home preparation and include items like flour, sugar, raw eggs, milk, fresh fruits and vegetables, and uncooked meat. These items are most frequently exempt from sales tax.
The rules change once food is sold in a state ready for immediate consumption. Prepared foods are taxed even if their individual ingredients would be tax-exempt. This category includes items sold heated, such as a rotisserie chicken or hot soup from a deli, or food combined by the seller, like a freshly made sandwich. In some jurisdictions, providing utensils like a fork or plate can classify an item as prepared food, making it subject to sales tax.
Certain food-related products are consistently excluded from the “grocery” exemption. Candy is a primary example, and its taxability often hinges on a specific definition. Many states define candy as a product that contains sugar and, importantly, does not contain flour. This means a chocolate bar is often taxed, while a cookie bar containing flour may be considered a tax-exempt grocery item.
Sweetened beverages are another category frequently taxed at the standard rate. The definition of a taxable “soft drink” centers on whether it contains natural or artificial sweeteners and does not contain milk or a high percentage of real fruit juice. For instance, a carbonated, sweetened soda is taxed, while a bottle of unsweetened carbonated water or a drink with over 50% fruit juice might be exempt. Dietary supplements, identifiable by a “Supplement Facts” panel on their label, are also excluded from grocery exemptions and taxed as general merchandise.
State-by-State Sales Tax Rules
The tax treatment of groceries varies significantly from one state to another, creating a patchwork of regulations. These policies generally fall into one of four distinct categories.
A handful of states have no statewide sales tax at all, making the discussion of grocery taxes straightforward. In Alaska, Delaware, Montana, New Hampshire, and Oregon, you will not pay a state sales tax on groceries or any other retail goods. However, Alaska allows municipalities to levy their own local sales taxes, so some shoppers in that state may still see tax on their receipts.
The largest group of states fully exempts most grocery items from their sales tax base. In these states, staple food items are not taxed by the state. While the state does not tax these items, local jurisdictions like cities and counties may still be permitted to levy their own sales tax on groceries. This means that even in a state with a full exemption, your final grocery bill could include a local tax.
Several states have opted for a middle-ground approach, taxing groceries but at a reduced rate compared to other goods. States like Alabama, Missouri, Tennessee, and Utah apply a lower state sales tax rate specifically to food items. This policy aims to lessen the tax burden on necessities while still generating revenue.
Finally, a few states tax groceries at the full state sales tax rate. These states are Hawaii, Idaho, Mississippi, and South Dakota. While shoppers in these states pay the full tax, Hawaii and Idaho offer tax credits to some residents to help offset the cost.
Special Considerations and Related Items
Beyond the general rules for food items, several specific circumstances and product types have unique tax treatments that are consistently handled across most states. These considerations can affect the final tax on a grocery bill.
One of the primary rules relates to purchases made with the Supplemental Nutrition Assistance Program (SNAP). Under federal law, any food item that is eligible for purchase with SNAP benefits is automatically exempt from all state and local sales taxes, regardless of where the purchase is made. The exemption only applies to SNAP-eligible items, which include staple foods and not prepared hot foods or non-food items.
Grocery stores sell a wide array of non-food products that are almost universally subject to the standard sales tax rate. This includes products such as paper towels, cleaning supplies, pet food, and personal hygiene products. When these are purchased alongside tax-exempt groceries, the register system separates the items to apply tax correctly.
Finally, alcohol and tobacco products are never considered “groceries” for tax purposes and are always subject to the full state and local sales tax. In addition to the standard sales tax, they are also subject to separate excise taxes. These excise taxes are levied on the producer or wholesaler and are built into the shelf price of the product, with the regular sales tax calculated on top of that final price.