Grocery shoppers in eight states started 2026 still paying sales tax on basic food items, a shrinking club that got smaller on January 1 when Illinois and Arkansas each wiped their statewide grocery levies off the books. The two exits leave a dwindling group of holdouts, including Tennessee, Idaho, Utah, South Dakota, Hawaii, and others, where consumers continue to absorb tax charges on bread, milk, and produce at the register. For households already stretched by food costs, the split between tax-free and taxed states now carries real dollar consequences every week.
Two states dropped grocery taxes on January 1, 2026
Illinois ended its statewide 1% grocery sales and use tax effective January 1, 2026, according to the Illinois revenue bulletin. The change does not guarantee a tax-free checkout for every Illinois shopper, though. Municipalities and counties may adopt a replacement 1% grocery tax by local ordinance, which means some communities could restore the charge at the local level even as the state steps away from it. For retailers, that creates a patchwork of rules that may differ from one town to the next, requiring updated point-of-sale systems and clear communication with customers.
Arkansas followed the same calendar. Act 1008 removed the state’s 0.125% sales tax on groceries effective January 1, 2026, erasing what had been a symbolic but still measurable charge on food purchases. That rate was already among the lowest in the country, but its elimination still matters as a signal: lawmakers chose to zero out the tax entirely rather than leave a token rate in place. Shoppers will now only see local sales taxes on qualifying food items, which can still be substantial in some jurisdictions but no longer include a state-level add-on.
With both states off the list, the remaining group that taxes groceries at the state level is now down to eight. Tennessee stands out among them. The Tennessee Department of Revenue states that sales of food and food ingredients are taxed at a state rate of 4%, a reduced rate compared with the state’s general sales tax but still a meaningful addition to every grocery receipt. Local governments in Tennessee can also impose their own sales taxes, which stack on top of the state rate and further increase the final bill on everyday staples.
How the remaining eight states handle grocery taxation
The states that still tax groceries do not all use the same approach. Some apply their full general sales tax rate to food, treating a gallon of milk the same as a restaurant meal or a piece of electronics. Others charge a reduced rate, as Tennessee does, or pair the tax with an income-tax-based credit designed to offset the burden for lower-income residents. That diversity of methods reflects competing priorities: raising revenue, simplifying administration, and trying to limit the impact on families that spend a large share of their income on food.
Idaho and Utah, for example, broadly tax groceries but have debated or adopted credits meant to soften the blow for residents who file state income tax returns. South Dakota and Hawaii, which rely heavily on sales and excise taxes to fund government services, continue to apply their general sales tax to most food purchases. In those states, groceries are part of a broad consumption tax base that supporters argue keeps rates lower overall, while critics say it pushes more of the tax load onto people with the least ability to pay.
Even within this group of eight, the details matter. Some states exempt specific items such as infant formula or medical dietary products, while others draw lines between “food for home consumption” and prepared foods like deli meals or bakery items. Those distinctions can confuse shoppers and store owners alike, especially when the same product may be taxed differently depending on how it is sold or packaged. They also mean that a simple comparison of headline tax rates does not fully capture the real-world cost differences between states.
Equity concerns and budget trade-offs
Economists often describe grocery sales taxes as regressive because lower-income households devote a larger share of their income to food. A 4% or 5% levy on groceries therefore takes a bigger relative bite out of their budgets than it does for higher earners. That concern has driven many states over the past two decades to scale back or eliminate taxes on basic food items, even when doing so reduces a reliable source of revenue for schools, health programs, and public safety.
States that still tax groceries face a familiar trade-off. Eliminating the tax would provide immediate, visible relief at the checkout line but would also leave a hole in state and local budgets that must be filled by cutting services, raising other taxes, or both. Some policymakers argue that keeping food in the sales tax base allows for lower rates on everything else and helps states avoid steeper income or property taxes. Others counter that essential items like groceries should be treated differently from discretionary spending and that any lost revenue should be replaced with more progressive tax options.
What shoppers can expect next
For now, Illinois and Arkansas shoppers will see slightly smaller bills on qualifying groceries in 2026, though the exact savings will vary by community as local governments decide whether to impose or adjust their own food taxes. Residents in the remaining eight states that still tax groceries will continue paying at the register, with relief prospects tied to future legislative debates over tax policy and state budgets. As more states move away from taxing basic food items, pressure may grow on the remaining holdouts to revisit how they balance revenue needs with the cost of feeding a family.
