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- In most cases, grocery items are exempt from sales tax. An exception, however, is "hot prepared food products," which are taxable at California’s 7.25% state sales tax rate plus the local district tax rate (see rates here), whether sold to take away or consumed in store.
- Essential items like food and medical supplies are not taxed. Examples of zero-rated basic groceries include fruits, vegetables, milk products, meat, eggs, and coffee beans.
Taxation of Specific Food Items
- While no state currently taxes sweetened beverages, several localities levy what’s commonly referred to as a soda tax.
- Alaska, Delaware, Montana, New Hampshire, and Oregon do not tax groceries, candy, or soft drinks.
- Flour, sugar, bread, milk, eggs, fruits, vegetables, and similar groceries are not subject to Texas sales and use tax.
State-Specific Grocery Taxes
- Visitors to Minneapolis, Minnesota, pay the highest meals tax: a combined rate of 10.775 percent.
- California, Utah, and Virginia levy mandatory statewide local additional sales tax at the state level.
- Iowa’s state sales tax rate is 6%, with an exemption for food and prescription drugs.
Tax Credits and Rebates
- Four states tax groceries at the regular sales tax rate but offer credits or rebates offsetting some of the tax for some parts of the population.
Overview of Grocery Taxation in the U.S.
- Of the 45 states with a sales tax, 13 charge taxes on groceries.
- Mississippi applies a 7% sales tax to groceries, making it the highest in the country.
- Only five states have no sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.
Impact and Criticisms
- Grocery taxes can provide significant revenue for states, impacting low-income populations.
- Critics argue that these taxes disproportionately affect lower-income individuals.
