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HB 1530

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 Todd Warner

Eliminates the state sales tax on food and food ingredients starting July 1, 2026, while preserving local tax framework and offsetting local revenue losses.

Taken off notice for cal in s/c Finance, Ways, and Means Subcommittee of Finance, Ways, and Means Committee
#sales #taxes
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Bill Summary · HB 1530

Summary of HB 1530 (Session 114) — Tennessee

Purpose and intent

  • Eliminate the state sales and use tax on the retail sale of food and food ingredients. The bill makes a broad change to how food sales are taxed under Tennessee law, effectively exempting most food and food ingredients from the state sales tax.

Key provisions and changes

  • Amends Tennessee Code Annotated Title 67, Chapter 6 and related sections to:
    • Section 67-6-228(a): Replaces current language to state that, notwithstanding other provisions, the retail sale of food and food ingredients shall not be taxed at the state level (with specified exceptions in subsections (b) and (c)).
    • Section 67-6-228(c): Adds that, notwithstanding existing provisions, food and food ingredients are taxable under part 7 of this chapter. (This appears to preserve a framework for taxation under alternate provisions or future changes.)
    • Section 67-6-103(c)(2): Deletes language that revenue from a 0.5% portion of the tax rate would continue to be deposited in the state general fund for K-12 education regardless of rate changes. (This removes a guaranteed education earmark tied to the exemption.)
    • Section 67-6-103(u): Replaces current allocation language to require the state to allocate and distribute to counties and municipalities an amount substantially equal to what would have been allocated under the exemption, based on exempt sales data and other relevant information.
    • Section 67-6-329(a): Adds a new subdivision identifying “Food and food ingredients” as a category.
    • Section 57-3-802(1) and Section 57-3-806(d)(1): Align provisions related to licensees’ sales mix requirements (e.g., the 20% threshold) to reference sales from food and food ingredients in general without the specific tax rate qualifier.
  • Effective date: July 1, 2026.

Who or what is affected

  • Retailers and businesses that sell food and food ingredients for human consumption in Tennessee.
  • State and local governments:
    • State: Elimination of the state sales tax on food/food ingredients.
    • Local governments: Local option sales tax remains; locals receive a payment (held harmless) to offset the loss of state-shared allocations from exempted food sales.
  • Education funding allocations: The bill removes the existing earmark tied to the 0.5% state tax rate used for K-12 education funding, but attempts to preserve local revenue distributions through a new calculation for allocations to counties and municipalities.

Fiscal and procedural notes

  • Fiscal impact (as analyzed by the Fiscal Review Committee):
    • State General Fund net revenue decrease of about $820 million in FY26-27 and beyond.
    • State General Fund expenditures to hold localities harmless from the loss of state-shared allocations: about $35.7 million per year (roughly $36.2 million including a minor administrative cost).
    • Local government revenue impact: Anticipated mandatory increase (offsetting some local losses) around $12.2 million per year.
    • Some portion of tax savings (estimated 50%) would be spent in the economy on non-food, taxable goods/services, providing a partial offset in other tax revenues.
  • Administrative considerations:
    • The Department of Revenue would require resources to implement reporting changes; estimated initial increase in state expenditures around $0.5 million.

Timeline

  • Effective date set for July 1, 2026, subject to public welfare requiring it.

Summary

HB 1530 would eliminate the Tennessee state sales tax on the retail sale of food and food ingredients, while preserving a framework for local taxation and ensuring local governments are held harmless for revenue losses due to the exemption. It seeks to adjust education funding earmarks and state-shared allocations accordingly, with substantial projected impacts on state and local revenues and related administrative costs.

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

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