Intermediate Deep Guide

Are food items taxable? What's the difference between grocery and prepared food?

⚡ TL;DR

Most states exempt unprepared groceries but tax prepared food, candy, and soft drinks. Tennessee taxes groceries at a reduced 4% state rate; Virginia dropped to 1% in 2023; Alabama and Mississippi apply the full rate to groceries with no exemption. Candy is taxable in most states even where other packaged food is exempt — the SST definition excludes items containing flour, so a Kit Kat and a Hershey bar are taxed differently.

Food taxability is one of the most product-specific and state-variable areas of sales tax. Most states exempt grocery food but tax prepared food, and both categories have state-specific definitions, carve-outs, and edge cases that affect ecommerce sellers of food, specialty food, and food-adjacent products.

The basic framework: grocery vs. prepared food

Generally exempt in most states:

Raw ingredients (produce, meat, dairy, grains)
Packaged foods for home preparation (canned goods, pasta, rice, cereals)
Bread, baked goods sold cold
Packaged snack foods (varies by state)

Generally taxable in most states:

Restaurant and deli meals
Hot prepared food (food sold at a temperature above ambient)
Food sold with eating utensils by the seller
Food sold for immediate consumption

State-by-state variation

Approach	States
Fully exempt (most groceries)	CA, TX, NY, IL (reduced 1%), PA, OH, MI, WA, GA (state rate only), NC, and most others
Taxable at reduced rate	TN (4% state rate), UT (3% state rate), VA (1% since 2023), AR (0.125% state rate)
Taxable at full rate	No major state taxes all food at full rate
No food exemption at state level	AL, MS (some areas), OK

Even “exempt” states often apply local taxes to food — Georgia exempts food from the 4% state rate but county LOST applies; Washington exempts food but local transit taxes may apply.

What’s consistently excluded from food exemptions

Across virtually all states that exempt food, these categories are typically taxable:

Candy: taxable in most states; SST defines candy as sweetened food without flour
Soft drinks and soda: taxable in most states; diet sodas and juice percentages vary by state definition
Dietary supplements and vitamins: usually not treated as food, see the supplements guide
Prepared food / hot food: taxable in all states
Alcohol: taxable in all states (often at elevated rates)

Ecommerce food sellers: key considerations

Shelf-stable packaged food shipped to customers is generally the most straightforward: it falls in the grocery exemption in most states. Confirm the product doesn’t qualify as candy or a supplement under the destination state’s definition.

Specialty foods (artisan, organic, premium) follow the same rules as standard packaged food: the price premium doesn’t change taxability.

Meal kits and subscription boxes with mixed contents (some taxable, some exempt) require allocating tax to the taxable items; see the subscription box guide.

Food sold with utensils or heating instructions for immediate consumption may cross into prepared food territory in some states even when shipped.

Frequently asked questions

Is food taxable?

It depends on the state and the type of food. Most states exempt food for home consumption (groceries) but tax prepared food. However, 'grocery' is defined differently by each state. Candy, soft drinks, and dietary supplements are typically excluded from food exemptions and taxed at the full rate even in states that otherwise exempt groceries.

What is the difference between grocery food and prepared food for sales tax purposes?

Groceries are generally defined as food sold for home preparation and consumption, raw ingredients, packaged foods, canned goods. Prepared food is food sold ready to eat, often hot, or assembled by the seller, restaurant meals, hot deli items, food sold with utensils. The exact line varies by state, but temperature, the form in which food is sold, and whether eating utensils are provided are common factors.

Are candy and soft drinks treated as exempt food?

Usually not. Most states that exempt groceries carve out candy and soft drinks, taxing them at the full rate even when other packaged food is exempt. The SST program's definition of candy (which 24 member states use) specifically excludes items containing flour, which is why a Kit Kat bar is treated differently from a Hershey bar in SST states.

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