Tennessee has enacted legislation that gives certain counties new flexibility in how they tax food and food ingredients. Under the new law, counties that operate under a metropolitan form of government may choose to apply a reduced local sales tax rate to food or fully exempt these items from local tax. This is a significant shift from the uniform local tax structure that usually applies to most retail sales.
The law specifically allows these counties to treat food differently from other goods and services that are normally subject to the full local sales tax rate. Food and food ingredients, as defined under Tennessee law, can either be taxed at a lower rate or excluded entirely from local taxation. The decision to implement a reduced rate or exemption is left to the county, providing local governments with greater control over tax policy and cost-of-living considerations.
To adopt one of these options, a county must pass a formal resolution and submit a certified copy to the Tennessee Department of Revenue. Once received, the department will implement the change, which becomes effective on the first day of a calendar month at least 60 days later. Importantly, any reduced rate or exemption will apply only to tax periods beginning on or after October 1, 2026, giving both taxpayers and administrators time to prepare for the change.
In addition to granting this authority, the legislation makes conforming updates to related provisions in the Tennessee Code to uphold consistency across statutes. It also removes certain outdated language that is no longer necessary under the amended framework.
This change reflects a wider trend of states and local jurisdictions reevaluating how essential goods, such as food, are taxed. For businesses, the new law introduces possible changes to local tax collection requirements depending on where sales occur. Companies operating in Tennessee should monitor whether eligible counties adopt reduced rates or exemptions and be prepared to update their systems accordingly. (Tenn. H.B. 2186, 114th Gen. Assemb. (2026))