For the first time, the Tennessee General Assembly has approved two additional sales tax holidays for 2021. The additional sales tax holidays cover more purchases than the traditional sales tax holiday items of clothing, school supplies and computers. In 2021, this holiday is extended to food, food ingredients, prepared food purchases, gun safes and gun safety devices.
The traditional sales tax holiday will begin Friday, July 30th and end at 11:59 p.m. Sunday, August 1st. The new food sales tax holiday will begin Friday, July 30th and run through Thursday, August 5th. The gun safety sales tax holiday will last an entire year starting July 1, 2021 and ending June 30, 2022.
While these sales tax holidays should bring more joy to the end of summer and back-to-school shopping, there are several guidelines and limits to be aware of before you make your shopping list.
Food Sales Tax Holiday
The guidelines for what qualifies as food, food ingredients, and prepared food are outlined in Notice #21-10 by the TN Department of Revenue. To summarize, food and food ingredients do not include alcoholic beverages, tobacco, candy, or dietary supplements, but do include most foods sold by grocery stores. Prepared foods (including meals from restaurants) must meet one of three criteria:
- It is sold in a heated state or heated by the seller (ex. Rotisserie chicken)
- Contains two or more ingredients mixed by the seller (ex. bakery goods)
- Sold by a seller who also provides eating utensils (ex. lunch kit)
Most items not included in prepared foods are already captured in the food and food ingredients category. For example, a raw steak does not meet one of the three criteria to be considered prepared food, but it is considered a food or food ingredient. The important distinction is the differing sales tax rate of the categories. Outside of the upcoming sales tax holiday, prepared foods and food/food ingredients are taxed at 7% and 4% (state level tax), respectively. You may want to keep this in mind when trying to max out tax savings during the sales tax holiday.
Gun Safes and Safety Devices
The guidelines provided by Notice #21-13 are very straight forward in defining what constitutes gun safes and safety equipment. Gun safes are defined any "locking container" designed for the "secure storage of one or more firearms." Gun safety devices are defined as any "integral device to be equipped or installed on a firearm that permits the user to program the firearm to operate only for specified persons." For example, a trigger lock constitutes a gun safety device as it only allows the gun to be operated when it is unlocked by the person with the key. Starting July 1st any devices meeting these definitions will be tax-free in Tennessee for an entire year.
Traditional Sales Tax Holiday
In addition, the TN Department of Revenue has also issued guidelines for the traditional sales tax holiday items. Clothing and school supplies items cannot cost more than $100 per item, while computers cannot cost more than $1,500. Below are some items that do NOT meet the criteria of a computer for sales tax purposes:
- Individually purchased software
- Printer supplies
- Household appliances
Jewelry, handbags, and sports equipment are not considered clothing or school supplies; therefore, they are not included in the sales tax exemption. Overall, the addition of the two new sales tax holidays is exciting news and will be a great way to kick off and end the 2021 summer.