Nashville Democrats revive proposal to end Tennessee’s grocery tax, pairing repeal with corporate tax changes

A renewed push targets the 4% state levy on food

Two Nashville Democratic lawmakers have revived legislation aimed at eliminating Tennessee’s state sales tax on groceries, a 4% levy applied to “food and food ingredients” in addition to local sales taxes. The proposal re-enters a crowded 2026 legislative landscape that includes multiple bills seeking full or partial relief from grocery-related taxes, reflecting bipartisan attention to consumer costs but sharp disagreement over fiscal tradeoffs.

Under Tennessee’s sales and use tax structure, most food and food ingredients are taxed at a reduced 4% state rate, plus an applicable local rate that varies by jurisdiction. That combined rate can reach 6.75% in some areas. The renewed Democratic plan is framed as a full repeal of grocery taxes while attempting to prevent budgetary shortfalls by restructuring how certain multistate and multinational businesses calculate and pay taxes in Tennessee.

How the Democratic plan proposes to replace revenue

The proposal from Sen. Charlane Oliver and Rep. Aftyn Behn pairs grocery-tax elimination with business-tax policy changes designed to offset the revenue loss. Their legislation incorporates two major concepts: a corporate minimum tax and “worldwide combined reporting,” an accounting approach that would require qualifying multinational businesses to include worldwide profits when determining Tennessee business-tax liability.

A fiscal summary for the measure describes eliminating state and local sales taxes on food and food ingredients and holding local governments harmless for revenue they would otherwise lose, while creating new business-tax mechanisms intended to backfill the gap. The lawmakers have characterized the grocery-tax repeal as a targeted cost-of-living measure and argue that large corporations use tax structures that reduce their Tennessee tax obligations.

The policy debate centers on whether revenue replacement should come from spending reductions, alternative tax changes, or a narrower form of grocery-tax relief.

Competing proposals: full repeal vs. partial exemptions

Republican-led alternatives have advanced different approaches. One set of bills would exempt fresh fruits and vegetables from the state grocery tax while leaving other food items subject to the reduced rate. Another Republican proposal filed in prior sessions has sought full state-level repeal of the grocery tax, with provisions meant to avoid shifting costs onto local governments or raising other local taxes.

• Full grocery-tax repeal proposals would remove the 4% state tax on food and food ingredients.
• Produce-only proposals would remove the state tax on fresh fruits and vegetables but retain taxes on other groceries.
• Local tax authority remains a separate issue, with recent legislative changes allowing many municipalities to reduce their local grocery-tax portion.

Nashville’s local authority dispute adds pressure

Alongside the statewide debate, Metro Nashville officials have pressed state lawmakers to clarify whether Nashville—unlike most Tennessee cities—can reduce its local grocery-tax rate. The Metro Council recently approved a resolution urging legislation that would explicitly allow Nashville to lower or eliminate the local grocery tax it collects, and the mayor has indicated interest in pursuing changes on a timeline tied to the next city budget cycle.

The Democratic grocery-tax repeal proposal is scheduled for committee consideration in the General Assembly in the coming days, as lawmakers continue weighing the budgetary and policy implications of competing approaches.