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SB 2347

Taxes, Sales - As introduced, exempts from the state sales and use tax the retail sale of food and food ingredients. - Amends TCA Title 57, Chapter 3 and Title 67, Chapter 6.

114th Regular Session (2025-2026) Introduced by Joey Hensley

Eliminates the state sales tax on food and food ingredients starting July 1, 2026, while creating data-driven local revenue protections and adjusted state/local allocations.

Placed on Senate Finance, Ways, and Means Committee calendar for 4/20/2026
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Bill Summary · SB 2347

Summary of SB 2347 / HB 1530 (Tennessee, 114th Legislature)

Purpose

The bill proposes to eliminate the state sales and use tax on the retail sale of food and food ingredients, effective July 1, 2026. It would amend several Tennessee Code provisions to reflect this exemption and adjust related allocations and licensing requirements accordingly.

Key Provisions and Changes

  • Exemption from state sales tax on food and food ingredients

    • The core change is that the retail sale of food and food ingredients would be not taxed by the state, with the default current framework amended to preserve specific exceptions where applicable.
    • A new subsection states that, notwithstanding existing law, food and food ingredients are taxable under part 7 of the chapter unless otherwise provided.

  • Impact on state and local revenue allocations

    • The bill acknowledges a reduction in state general fund revenue from eliminating the state sales tax on food and food ingredients.
    • A new allocation rule (Section 67-6-103(u)) requires distributions to counties and municipalities to be “substantially equal” to what would have been allocated under existing law, based on exempt sales data and other relevant information reported by the commissioner.
    • Local option sales tax remains available for local governments, and locals are held harmless for loss of the state-shared allocation from the exemption.

  • Tax base classification adjustments

    • The exemption affects supplier licensing and tax base requirements:
    • Adds “Food and food ingredients” to the list of items treated as exempt from certain sales tax provisions for licensing purposes.
    • Removes references that would otherwise require maintaining minimum shares of food-related taxable sales for license eligibility to align with the new exemption.

  • Administrative and reporting changes

    • Revisions to reporting and data collection are included to support the new exemption, including relying on exempt sale data for state and local allocations.

  • Effective date

    • The act takes effect July 1, 2026.

Who Would Be Affected

  • General public and households: Directly benefits from the elimination of state sales tax on food and food ingredients.
  • Retailers and food service providers: Must adjust tax collection, reporting, and licensing to reflect the exemption.
  • Local governments: Continue to collect local option sales tax; the bill provides a mechanism to compensate for shifting state-shared allocations, maintaining revenue continuity at the local level.
  • State and local Finances: State general fund would see a significant revenue drop; local governments would see adjustments through the new allocation rule and continued local taxes.

Fiscal Impact (from the Fiscal Note)

  • State General Fund revenue: Net decrease of about $820 million in FY26-27 and beyond.
  • State expenditures: Incurred costs to hold local governments harmless from state-shared allocations, estimated around $35.7 million annually, plus a one-time $0.5 million for reporting-system changes.
  • Local government revenue: Net increase in local sales tax revenue due to shifting and related adjustments, estimated around $12.19 million annually.
  • About half of the tax savings would circulate back into the economy on non-food, sales-taxable purchases, with a corresponding impact on overall tax revenues.

Summary

SB 2347/HB 1530 repeals the state sales tax on food and food ingredients, while creating new mechanisms to preserve local revenue streams and to adjust state and local allocations accordingly. The bill preserves local option taxes and requires data-driven adjustments to distributions to counties and municipalities. The fiscal note indicates a substantial state revenue loss offset by local revenue changes and economic reallocation, with an estimated net recurring decrease in state revenue beginning in FY26-27. The bill becomes effective July 1, 2026.

Compiled from official sources — confirm details with the bill’s official record.

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