House Bill 3761/Senate Bill 3763, passed by the legislature on April 27, provides for a reduction in the state sales and use tax rate on sales of food and food ingredients. Effective July 1, the state sales and use tax rate on sales of food and food ingredients will be reduced from 5.5% to 5.25%.
With the change, food and food ingredients will be subject to a reduced state sales and use tax rate of 5.25% plus the applicable local sales and use tax rate. Prepared food, dietary supplements, candy, alcoholic beverages and tobacco continue to be subject to the general state sales and use tax rate of 7% plus the applicable local sales and use tax rate. Existing laws defining which items are considered food and food ingredients remain unchanged by the new legislation.
Businesses selling food items subject to the reduced rate of sales and use tax are advised to begin making the necessary changes to allow for the new rate beginning July 1. Changes to cash registers and accounting systems should be completed by the July 1 effective date. However, businesses must continue to collect and remit the existing 5.5% tax on sales of food and food ingredients made through June 30, to the Department of Revenue.
The Department of Revenue is responsible for the administration of state tax laws and motor vehicle title and registration laws established by the legislature and the collection of taxes and fees associated with those laws. The Department of Revenue collects approximately 91 percent of total state tax revenue. During the 2011 fiscal year, the department collected $10.4 billion in state taxes and fees. In addition to collecting state taxes, the Department of Revenue collects taxes for local, county and municipal governments. During the 2011 fiscal year, local government collections by the Department of Revenue exceeded $2.0 billion. In collecting taxes, the department enforces the revenue laws fairly and impartially in an effort to encourage voluntary taxpayer compliance. The department also apportions revenue collections for distribution to the various state funds and local units of government. To learn more about the department, log on to
www.TN.gov/revenue.