Updated August 2020
Due to COVID-19, many businesses are having to make creative decisions to stay afloat. One decision many restaurants have made, now that they are often closed to foot traffic, is to sell grocery items along with takeout orders.
However, selling groceries is a little different than selling prepared foods. And the biggest difference is that most states either do not consider grocery items taxable, or consider them taxable but at a reduced rate. Restaurant meals, on the other hand, are generally taxable.
To help the nation’s business owners pivot, we’re republishing our “Are grocery items taxable?” post to help give you some guidance on when you are and are not required to collect sales tax on grocery times.
Selling grocery items online is a growing niche, but one notorious pitfall is the fact that various different states tax grocery items differently. For example, groceries are taxable at the normal rates in Alabama, but totally exempt in Arizona. But in Georgia groceries are not subject to the state’s 4% sales tax rate but are subject to local (city, county, etc.) sales tax rates! Confusing, right?
If you sell online and have nexus in various states, you are required to keep up with all these rules or risk unhappy buyers wondering why you charged them sales tax. (…Or an unhappy State Department of Revenue wondering why you didn’t charge customers sales tax and demanding money out of your pocket.)
This list will help you sort out which states consider grocery items tax exempt. If a state isn’t on this list, then it considers grocery items fully taxable at the combined local rate. We’ll also show you how to collect the right amount of sales tax in every state whether you have your own shopping cart or sell on a platform like Amazon FBA or Walmart.
As always, sales tax is subject to change very rapidly. If you see anything on this list that needs updating, just let us know by leaving a comment on this post.
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States Where Grocery Items are Tax Exempt
Keep in mind that this list refers to non-prepared grocery food. In some cases, items you buy at the grocery store such as soft drinks, candy and confection are not tax-exempt or are taxed a different rate. Also note that foods prepared for consumption at a grocery store are taxable in all states.
Pro Tip! If you sell on Amazon FBA, make sure you set up the correct product tax codes so Amazon knows how to charge sales tax on your grocery items in each state.
Alaska – grocery items are tax exempt
Arizona – grocery items are tax exempt
Arkansas – Grocery items are not tax exempt, but food and food ingredients are taxed at a reduced Arkansas state rate of 1.5% + any local rate. (Search local rates at TaxJar’s Sales Tax Calculator.) Any food items ineligible for the reduced rate are taxed at the regular state rate. As of January 1, 2018 candy and soft drinks will be taxable at the full rate. (Source)
California – Grocery items are tax exempt
Colorado – grocery items are exempt from state tax, though local areas can levy a tax. Also, certain items are taxable, including carbonated water, chewing gum, seeds and plants to grow food, prepared salads and salad bars, cold sandwiches, deli trays, candy, soft drinks and hot/cold beverages served in unsealed cups through a vending machine.
Connecticut – grocery items are tax exempt
Florida – grocery items are tax exempt
Georgia – Georgia does not require sales tax on grocery items, but this exemption does not hold for any local (county, city, etc.) taxes. Further, the exemption for “food and food ingredients” does not include prepared food, alcoholic beverages, dietary supplements, drugs, over-the-counter drugs, or tobacco.
Illinois – Grocery items are not tax exempt, but they are taxable at a reduced rate of 1%. Candy, soft drinks, alcoholic beverages, and food prepared for immediate consumption do not qualify for the 1% rate.
Indiana – grocery items are tax exempt
Iowa – grocery items are tax exempt
Kentucky – Food and food ingredients are exempt from sales tax. This exemption does not include candy, tobacco, alcoholic beverages, soft drinks, dietary supplements, prepared food or any food sold through vending machines.
Louisiana – food sold for preparation and consumption in the home is tax exempt at the state level, though counties and other local jurisdictions may levy a tax
Maine – The exemption for food products for home consumption is limited to Maine’s definition of “grocery staples.”
Maryland – grocery items are tax exempt
Massachusetts – grocery items are tax exempt
Michigan – grocery items are tax exempt
Minnesota – grocery items are tax exempt
Missouri – Grocery items are taxable, but taxed at a reduced state rate of 1.225%.
Nebraska – grocery items are tax exempt
Nevada – grocery items tax exempt
New Jersey – grocery items are tax exempt
New Mexico – grocery items are tax exempt
New York – While grocery items are tax exempt, New York has some interesting considerations and exceptions. Click here for extremely detailed guidance on what grocery items are and are not tax exempt in New York.
North Carolina – Sales of grocery items are exempt from North Carolina state sales tax, but still subject to local taxes at a uniform reduced rate of 2%.
North Dakota – grocery items are tax exempt
Ohio – grocery items are exempt if sold for off-premises consumption
Pennsylvania – grocery items are tax exempt, and in Pennsylvania, this includes candy and gum but not alcohol.
Rhode Island – grocery items are tax exempt
South Carolina – Unprepared food that can be purchased with federal food stamps is exempt from state sales and use tax, but may be subject to other local sales and use taxes.
Tennessee – grocery items and ingredients are taxable, but taxed at a reduced state rate of 4%. Groceries are fully taxable at local rates.
Texas – grocery items are tax exempt
Utah – This is one of the more confusing states when it comes to taxing groceries. Grocery items are taxable, but taxed at a reduced rate of 1.75%. These transactions are also subject to local option and county option and results in a total combined rate on grocery food of 3 percent throughout Utah.
Vermont – grocery items are tax exempt. (This includes chips and soft drinks sold at grocery stores, even though these items are taxable in Vermont in other situations. You can read more about the taxability of chips and soft drinks here.)
Virginia – grocery items are taxable, but taxed at a reduced rate of 1.5% + a 1% local option tax in applicable areas
Washington – grocery items are tax exempt
Washington D.C. – grocery items are tax exempt
West Virginia – grocery items are tax exempt
Wisconsin – grocery items are tax exempt, though some snack foods are excluded from this exemption.
Wyoming – food for domestic home consumption is exempt
Collecting Sales Tax on Grocery Items
If you sell grocery items online, the TaxJar API has your back. Just use product code 40030 to indicate grocery items and we’ll ensure you collect the right amount of sales tax on all of the grocery items you sell, no matter if the groceries are taxable, tax exempt or taxed at a reduced rate.
Learn more about the TaxJar API here.
How does selling tax-exempt grocery items affect Amazon sellers?
The key for Amazon sellers is to ensure that you are coding your products correctly in Amazon seller central. We posted before a guide to coding your SKU’s in Amazon FBA, and how to change your product tax codes in Amazon. Once you’ve coded your SKU’s correctly, you should be all set.
If you need help beginning to set up your tax codes in Amazon Seller Central, download our free Amazon Sales Tax Quick Reference Guide. Or check out our video on how to set up your sales tax settings in Amazon:
Ready to eliminate your sales tax headaches?Schedule a demo
We hope this guide to states in which grocery items are tax exempt has helped you. Do you have any questions? Visit TaxJar.com/how-it-works to learn how you can get started with TaxJar!