Tennessee grocery sales tax break is missing some consumers

Staff photo by Olivia Ross / Families check out the new East Ridge Food City in 2022.

In May, Gov. Bill Lee signed the Tennessee Works Tax Act, the single largest tax cut in state history designed to provide an estimated $400 million in savings for consumers, families and businesses. Along with $164 million in small business tax relief and $64 million to simplify tax administration, the bill included a one-time sales tax break on food and ingredients from Aug. 1 to Oct. 31. The food tax break began only days after the annual back-to-school sales tax holiday ended July 30.

But some Tennessee shoppers have barely noticed the cut, they said.

"You can go to the grocery store, buy everything you need, and pay no sales tax," Lee said in a July video announcement. "We try to cut taxes every chance we get in Tennessee because we want Tennesseeans to keep every bit of their hard-earned income as they can. We thought there's no better time to do it."

(READ MORE: Sales tax holidays in Tennessee offer breaks for back-to-school, grocery shoppers)

But one shopper had no clue the break was even happening, they said in a social media comment, and another saved only $12 on a recent purchase, they said. And other consumers are having the same experience.

Prior to seeing a post asking for shoppers' experiences, Erin O'Dowd, an Ashland City resident and singer-songwriter, was unaware the tax break was happening, she said. O'Dowd normally has her groceries delivered from a local Walmart, but she also visits Publix and Aldi occasionally, she said. O'Dowd might not have been aware of the news because she lives in a local "bubble," she said, but she was also surprised to hear Tennessee was offering a sales tax break and decided to research the bill online.

"Our politics don't seem to follow any sort of thing like that," O'Dowd told the Lookout. "I found the governor's statement interesting. He spun it at an angle to make himself look good. It made me chuckle because it only lasts three months. I grew up in Florida. They don't have taxes on groceries."

Now that she's aware of the break, O'Dowd will continue meal prepping and might indulge in some items she wouldn't otherwise buy, like fruit or juice, she said.

Other shoppers, like Nashville resident Trevarius Newman, heard about the tax break when it was announced but haven't saved as much money as they hoped, they said.

Newman checks his grocery receipts regularly, and there has been a $5 or $6 difference between purchases he made in December and this month, he said. Newman shops about once a week at Walmart in person, spending between $70 and $100 each time. Between a lack of awareness of the break and increased prices, it's not really a surprise some consumers haven't noticed — and that only one of his retail coworkers was aware when he asked around, Newman said.

"Inflation's been high," Newman told the Lookout. "Depending on what gets amplified and what doesn't, coupled with the lack of awareness on a tax break for groceries, it all just gets washed out."

(READ MORE: Tennessee revenue falls amid tax holidays, business break)

Additional advertisement by the government might help, Newman said. However, Franklin Michello, director of the Master of Science in finance program at Middle Tennessee State University, said he believes the lack of awareness is likely due to the types of news sources consumers pay attention to. Michello said residents who don't keep track of local consumer news are less likely to know about the break, he said.

Michello personally informed his neighbors about the holiday, he said.

As for high prices, they may even be elevated because of the break, according to Don Bruce, director of the Boyd Center for Business and Economic Research at the University of Tennessee. Shop owners may raise prices or forgo discounts and sales when they see a sales tax break, but further study would be needed after the break is over to know for sure, Bruce told the Lookout.

A temporary holiday was likely less objectionable to legislators than a permanent reduction or other cost-cutting policy because Tennessee is in a period of strong economic growth now, but that might not always be the case, Bruce said. A short-term reduction is superior, he said, because it would be difficult to repeal a permanent tax cut during times of economic distress.

Once aware, however, consumers hoping to make the most of the holiday should stock up on nonperishables like toilet paper, rice and beans while they still can, Michello said. People should also keep an eye on prices, which change frequently on a variety of items, Bruce said.

"There's a lot more than just the tax rate," Bruce said. "It's a matter of timing sales and getting things you need. If you can wait for bigger ticket items, remember the prices move, too."

Read more at TennesseeLookout.com.