Tennessee to cut grocery sales tax on July 1

NASHVILLE — A quarter-penny reduction in Tennessee’s state sales tax on groceries goes into effect July 1, state Revenue Department officials are reminding businesses.

The cut, enacted by the General Assembly last month, trims the current sales tax from 5.5 percent to 5.25 percent. That comes to an average saving per person of about $3.40 a year.

The bill was formally sent today to Republican Gov. Bill Haslam, who proposed the reduction and is expected to sign it.

The state is giving up $22 million in revenue through the move. Haslam intends to come back with another quarter cent reduction next year which take the rate to 5 percent on food. Local sales taxes, which can be as high as 2.75 percent are not affected.

Haslam’s sales-tax reductions does not apply to prepared food, dietary supplements, candy, alcoholic beverages and tobacco, which continue to be subject to the general state sales and use tax rate of 7 percent plus the applicable local sales tax rate.

Meanwhile, Haslam, Republican Senate Speaker Ron Ramsey and Republican House Speaker Beth Harwell were among attendees given awards by the American Family Business Institute, a Washington, D.C.-based advocacy group, for legislation aimed at phasing out the state’s inheritance tax by 2016.

The first phase increases the current $1 million exemption on estates to $1.25 million. The state is giving up $14.1 million in revenue. By the 2016-17 fiscal year, the inheritance tax, dubbed the “death tax” by opponents, goes away entirely at a cost of $94.6 million to the state.

Lawmakers this year also eliminated the gift tax entirely at a projected annual state revenue loss of $14.9 million.