For release... EMBARGOED until 9 pm Central Time, Tues., March 27

Contact:

• Donnie Douglas, Douglas' Food Market in Jellico, 423-784-6491 (store)
• Jeff Eversole, Village Market IGA in Harrogate, 423-869-2307 (store)
• Brian Miller, TFT, 865-687-9600 x14 (phone) or 865-712-8006 (cell)

Local grocers join call for responsible food tax cut

High food tax drives shoppers over state lines, hurts Tennessee businesses

With 50% of the state's population living in counties that border another state, cross-border shopping, or the loss of sales and tax revenue over states lines should be an important concern to state legislators. Increasingly, local grocers operating along the state line are joining the call for a lower food tax in Tennessee.

Frankie Scott, the owner of Scott's Bestway in Celina, is one of the locally-owned grocers being hurt by Tennessee's high food tax. The sales tax in Celina is maxed out at 9.75%, and 8.75% on groceries. After being part of the community for nearly four decades, Scott's store now has to compete with a recently-opened grocery store just over the state line in Kentucky where there is no food tax at all. That means the savings from the sales tax difference alone on a $200 basket of groceries is $18 for simply driving over the state line.

"Our store is just a few miles from the state line," states Scott, adding that it's hard to compete when they've got a 9% advantage by law. "We've seen a difference in recent years. I think that if we can get the sales tax on food lowered, it would help keep shoppers here in Tennessee." While the vast majority of their business is local, during summer they get a good share of tourist coming through because of nearby Dale Hollow Lake. Scott adds that when tourists come into the store, they are often surprised by the fact that Tennessee has a food tax at all, adding that they don't have a food tax where they come from. "They don't say much about the sales tax, but the food tax they notice," adds Scott.

Commenting on the bi-partisan Tax Swap to cut the state food tax in half, paid for with an increase in the state cigarette tax, Scott says, "I would encourage legislators to support this." Scott bought the store in the early 70's from her uncle who ran it for 10 years prior to that. The grocery store has been a fixture in the community for more than 40 years. What has changed is the new grocery store that opened over the state line in Kentucky, taking advantage of the low food tax in Kentucky and undercutting Tennessee owned and operated businesses.

Donnie Douglas, owner of Douglas’ Food Market in Jellico, agrees. "It’s so easy for people to just drive on over the line and avoid the additional tax cost," states Douglas. His store is just 150 yards from the Kentucky state line and the high food tax has a big impact on his business. As for paying for the food tax cut, Douglas adds, "Let them raise cigarette taxes all they want, this won't affect my store like the food tax does," referencing the popular Food Tax - Cigarette Tax Swap. Tennessee will come out ahead too since a lot more people eat than smoke.

Another grocer in adjacent Claiborne County adds, "People come in and complain about the high tax which they feel is just an added cost on things they purchase. A good number of these people don't mind driving over to Kentucky and shop to save the extra dollars on sales tax and benefit from the no tax on food over there."

Jeff Eversole, manager-operator of Village Market IGA in Harrogate just 2 miles from the Kentucky state line, has had a similar experience. His store location is so close to the Kentucky border that in order to stay competitive, he has to keep his food prices very low. Eversole states, "In this area, practically everyone goes into Kentucky to shop and take advantage of the lower sales tax and no sales tax on food. When you spend $100 on food, you are not out the additional $8.00 or so on tax. Eliminating the food tax would be a big help for everyone." Eversole adds, "If the food tax was lowered or eliminated, this would help keep the store open. Right now the pharmacy is a big part in keeping the business going."

Every state that borders Tennessee has a lower food tax with the most serious border-drain problems occurring along the 350-mile border with Kentucky where there is no food tax at all. Other grocers near the state lines of Virginia, North Carolina, and Georgia have had similar experiences. All three of these states tax food at between 2 and 2.5% (NC & GA have no state food tax, only local taxes on food). Soon the border-drain problem will begin affecting grocers in Tennessee's largest city, Memphis. A bill to cut the Arkansas food tax in half was passed earlier this year and will take effect on July 1.

The Food Tax - Cigarette Tax Swap (SB93-HB114) is a revenue-neutral tax swap that will cut the state food tax in half from 6 to 3%, paid for with a 44 cent increase in the state cigarette tax. Tennessee currently has the highest food tax in the nation while 35 states don't tax food at all. Meanwhile, Tennessee's cigarette tax of 20 cents a pack, compared to the national average of $1 a pack, is among the nation's lowest. Only three states are lower.

Supporters argue the Tax Swap simply injects some common sense and fairness into Tennessee's tax system by bringing both taxes away from the extremes and toward the middle, and for the many locally-owned grocers trying to run businesses near the state line, it's about helping them compete. Tennesseans for Fair Taxation (TFT) vice chair, Martha White of Jackson, states, "The tax swap is about fairness and putting food on the family table, but it's also about helping Tennessee grocers compete. It's time our state starts doing what they can to support locally-owned businesses instead of sending all our tax dollars and shoppers over to Kentucky and other border states."

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