Arkansas Repeals State-Level Sales Tax on Groceries
Arkansas recently became the latest state to provide sales tax relief to its residents around food purchased for home consumption. House Bill 1685 received extremely broad support from both the House and Senate and was signed by the Governor on April 22 and will become effective January 1, 2026.
The new law repeals the state-level tax of 0.125% currently levied on food and food ingredients. Food, in this context, generally means groceries for home consumption (e.g., a gallon of milk, a loaf of bread, etc.). This is not to be confused with prepared food, which is regarded as being more for immediate consumption (e.g., a meal bought at a restaurant). Prepared food remains subject to the full tax rate.
Also, food is generally defined by most states to exclude items such as candy (and its complicated definitions), alcohol, and soda. In other words, these items are generally subject to the full sales tax rate.
Local Taxes Still Apply to Food for Home Consumption
Though the state-level grocery tax is repealed beginning next January, any local taxes levied by a municipality on food and food ingredients are not impacted by HB 1685. Any local sales taxes imposed by Arkansas counties and/or cities will continue to be allowed.
For example, Texarkana is the one city in the state that imposes a local 1% sales tax on food for home consumption. That imposition is not impacted by this repeal. As a result, retailers and consumers will be faced with the very odd and confusing taxing situation, like those in Georgia and South Carolina, where the food is exempt at the state level but still taxable in some local jurisdictions.
Sales Tax on Foods Gets Complicated
What makes this so odd and confusing is that the state actually administers the sales taxes for all municipalities in these states. It’s one registration and one recurring filing, all with the state, and the cities/counties have to adopt the state’s definitions.
The way it should be: if it’s exempt at the state level, it should be exempt at all levels. But I digress.
Illinois Follows a Similar Path
Arkansas is following in the footsteps of Illinois, who also recently repealed their tax on food. Illinois’ flat statewide 1% sales tax on sales of food for human consumption off-premises is repealed effective January 1, 2026 as well.
Similarly, the bill that repealed the grocery tax at the state level allows municipalities to impose a local tax of 1% on food for home consumption. Cook County has a 1.25% rate on food for home consumption.
States That Still Tax Food for Home Consumption (or Partially Do)
There are still states that fully tax food for home consumption (looking at you, Idaho) and those that offer a reduced statewide rate (Missouri and North Carolina, for example).
As a result, the taxation of food is a complicated area. Not only does one have to determine how food is defined and the types of products that are or aren’t included in that definition, one must also understand the taxing scheme of the state(s), including whether there is an exemption at the state level but not at the local level.
Let Clarus Untangle Food Sales Tax Rules for You
Why not trust Clarus Partners to do that for you? We have the expertise to confidently address all of these hurdles—from product classification to multi-jurisdictional compliance. Whether you’re a retailer, food supplier, or grocery chain, we’ll help ensure you’re charging (and paying) the right amount of sales tax—no surprises, no headaches.