Local Agencies in California Prohibited from Taxing Groceries

In response to local sweetened beverage taxes, effective June 28, 2018, local agencies in California cannot impose, increase, levy and collect, or enforce any California sales and use tax, fee, or other assessment on groceries. Local agencies may continue to levy and collect, enforce, or reauthorize any tax, fee, or other assessment on groceries imposed, extended, or increased on or before January 1, 2018. Any tax, fee, or other assessment on groceries imposed by a local agency after January 1, 2018 and before June 28, 2018 became inoperative as of June 28, 2018 and ceases to be imposed, levied and collected, and enforced as of that date. “Tax, fee, or other assessment on groceries” includes, but is not limited to sales tax, gross receipts tax, business and occupation tax, business license tax, excise tax, privilege tax, surcharge, or any other similar levy, charge, or exaction of any kind on groceries or the manufacture, supply, distribution, sale, acquisition, possession, ownership, transfer, transportation, delivery, use, or consumption of groceries. “Groceries” means any raw or processed food or beverage including its packaging, wrapper or container, or any ingredient thereof, intended for human consumption, including, but not limited to, meat, poultry, fish, fruits, vegetables, grains, bread, milk, cheese and other dairy products, carbonated and noncarbonated nonalcoholic beverages, kombucha with less than 0.5% alcohol by volume, condiments, spices, cereals, seasonings, leavening agents, eggs, cocoa, teas, and coffees whether raw or processed, including its packaging, wrapper, or container.  “Groceries” does not include alcoholic beverages, cannabis products, cigarettes, tobacco products, and electronic cigarettes.

The legislation does not prohibit the imposition, extension, increase, levy and collection, or enforcement of a tax, fee, or other assessment on groceries if both of the following apply:

  • The tax, fee, or other assessment is generally applicable to a broad range of businesses, business activity, or products
  • The tax, fee, or other assessment does not establish or rely on a classification related to or involving groceries or a subset of groceries for purposes of establishing or otherwise resulting in a higher tax rate due to that classification.

The legislation will become inoperative on January 1, 2031 and be repealed as of that date. (Ch. 61 (A.B. 1838), Laws 2018, effective June 28, 2018)

Posted on August 30, 2018