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SB 2314

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.

114th Regular Session (2025-2026) Introduced by Jeff Yarbro

The bill would eliminate the state sales tax on food and food ingredients starting July 1, 2026, with substantial revenue losses to state and local governments.

Placed on Senate Finance, Ways, and Means Committee calendar for 4/20/2026
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WeVote Research Nonpartisan
Bill Summary · SB 2314

Summary of SB 2314 (Session 114) – Tennessee

Purpose

Eliminate the state sales and use tax on the retail sale of food and food ingredients. The bill modifies several provisions related to how food is taxed and how tax revenues are allocated between state and local governments.

Key Provisions

  • Tax exemption for food and ingredients (primary change)

    • Amends § 67-6-228(a) to state that, except as otherwise provided, the retail sale of food and food ingredients shall not be taxed at the state level.
    • Adds a new subsection (c) to § 67-6-228 clarifying that, notwithstanding other provisions, food and food ingredients are taxable under part 7 of the chapter. This appears to preserve a potential path for taxation under certain circumstances, though the main effect is a strong exemption.

  • State vs. local tax implications

    • Reframes the allocation and eligibility for state and local tax collections related to food sales. The bill’s fiscal note shows substantial revenue reductions to the General Fund and to local governments due to the exemption.
    • The current 4.0% state tax on food and ingredients, plus local option taxes, would be eliminated for the state portion, with local option taxes continuing to be collected by localities but without the state-shared allocation.

  • Licensee and eligibility adjustments

    • Replaces references that require certain percentages of a business’s taxable sales to come from food sales with a broader requirement: 20% of sales must come from the sale of food and food ingredients for human consumption (affecting licensing criteria under § 57-3-802 and § 57-3-806(d)(1)).

  • Tax base and distribution specifics

    • Adjusts several statutory references to align with the food exemption, including removing language that ties revenue earmarks for K-12 education to the current tax rate on food.
    • Adds a new designation for “food and food ingredients” under § 67-6-329(a) and adjusts related subsections to reflect the exemption.

  • Effective date

    • The act takes effect July 1, 2026, assuming public welfare requirements are met.

Affected Parties

  • Taxpayers/consumers: Retail purchases of food and food ingredients would generally no longer incur the state sales tax beginning July 1, 2026.
  • Local governments: Local sales tax collections on food sales would be affected due to the loss of the state-shared allocation; localities would retain their own local option taxes but would no longer receive the state’s share.
  • Businesses/licensing: Businesses that file under the affected licensing statutes (restaurants, grocers, and other food retailers) may need to adjust compliance or reporting related to the 20% sales threshold for licensing purposes.

Fiscal Impact (as analyzed in the Fiscal Review)

  • State General Fund: Net decrease of about $820 million in FY26-27 and subsequent years.
  • Local governments: Mandatory net decrease in local revenue of about $23.5 million in FY26-27 and subsequent years.
  • Additional notes in the fiscal note describe how some tax savings could circulate back into the economy and partially offset losses, but the net effect remains a substantial reduction in state and local revenues.

Timeline/Status

  • Introduced and referred through a series of committees in early 2026.
  • As of the latest actions, on track for consideration in Senate Finance, Ways & Means committees in April 2026.

Bottom Line

SB 2314 would eliminate the state sales tax on food and food ingredients starting July 1, 2026, with significant anticipated revenue impacts to both the state and local governments. The bill also alters licensing and tax-base references to reflect the exemption.

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

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