KNOXVILLE, Tenn. — Gov. Bill Lee signed $400 million worth of tax cuts into law this week, which will bring back the grocery sales tax holiday for 2023.
State lawmakers passed the "Tennessee Works Tax Act" at the end of the regular legislative session in April. Lee called it one of the largest tax cuts in state history, saying it will include $273 million for a one-time, three-month sales tax holiday on groceries.
The grocery sales tax holiday will run from Aug. 1 through Oct. 31, which is longer than the initial 2022 tax holiday. Tennesseans will be able to buy most food and food ingredients without having to pay sales tax during the entire 3-month period. The tax holiday in 2022 did not apply to things like tobacco products, alcoholic beverages, candy, dietary supplements and prepared food.
The bill also included $150 million in tax cuts for businesses through changes to the franchise and excise tax.
With the bill's passage, Tennessee also joins more than 30 states that have adopted a single sales factor franchise and excise tax on corporations. Ultimately, the change provides substantial tax breaks to multi-state corporations for any business done within the state. Proponents said this change will make Tennessee more attractive for large businesses to expand to, while opponents said it will lead to a decline in state revenue and potentially reduce funding for critical programs such as infrastructure and education.
“Tennessee remains one of the lowest-taxed states in the nation thanks to our tradition of conservative fiscal management,” said House Assistant Majority Leader Mark Cochran. “These tax cuts will further strengthen economic competitiveness, promote entrepreneurship and provide meaningful relief to families across our state.”