Most states in the U.S. recognize that food is a basic necessity. They choose not to apply a sales tax to most grocery items. However, a handful of states still charge a significant tax on food. This creates a major financial incentive for their residents to shop elsewhere. People who live near the border of a state with a grocery tax will often drive out of town. They do this to save a significant amount of money on their weekly shopping trips.
1. Mississippi
Mississippi has one of the highest grocery taxes in the nation. The state charges its full 7% sales tax on most food items. For a family that spends hundreds of dollars on groceries each month, this adds up to a huge extra expense. As a result, residents in northern Mississippi will often drive to Tennessee to do their shopping. People on the western border will cross over into Louisiana or Arkansas to save money.
2. Alabama
Alabama also charges its full state sales tax on groceries, which is currently 4%. On top of that, counties and cities can add their own local taxes. This can push the total tax rate on food to nearly 10% in some areas. This drives many residents who live near the state line to shop in neighboring Georgia or Florida. Both of those states have zero sales tax on groceries. On a good note, the tax rate was reduced to 3%, a small win for consumers.
3. South Dakota
South Dakota is another state that fully taxes groceries at its standard sales tax rate. This makes it an expensive place to buy food, especially for large families. Shoppers who live in the southeastern part of the state, near Sioux Falls, have an easy alternative. They can make the short drive to Iowa or Minnesota. Both of those neighboring states offer tax-free grocery shopping.
4. Idaho
Idaho currently applies its 6% state sales tax to groceries. While the state offers a tax credit to residents to offset this cost, you still have to pay the tax at the register. For shoppers in western Idaho, near the city of Boise, it is often more convenient to simply cross the border into Oregon. Oregon is one of the few states in the country with no sales tax at all.
5. Kansas
Kansas has been slowly reducing its high sales tax on food, but the tax has not been eliminated. The state still charges a reduced tax rate on groceries. This is still more than the zero percent charged by its northern neighbor, Nebraska. For residents of northern Kansas, a trip to a Nebraska grocery store can still lead to noticeable savings on a large shopping bill.
6. Tennessee
Tennessee also has a reduced sales tax on groceries, but it is not zero. The state currently charges a 4% tax on food items. This is a much better deal than in neighboring Alabama. However, it is still more expensive than in neighboring Kentucky, Virginia, or Georgia. All three of those states have no sales tax on groceries. This encourages cross-border shopping on all sides of the state.
Voting With Your Wallet
The grocery tax is regressive. It disproportionately affects low-income families and seniors on a fixed income. The phenomenon of cross-border shopping is a clear sign that these taxes have a real impact on consumer behavior. It shows that people will literally go the extra mile to save money on their most necessary items.
Do you live in a state with a grocery tax? Does it affect where you choose to do your shopping? Let us know your thoughts!
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