Alert
Prepare Direct-to-Consumer Sales for Final Food Sales Tax Reduction in Kansas
As a result of HB 2106, passed during the 2022 legislative session, the state of Kansas has officially eliminated the state sales tax on food and food ingredients effective January 1, 2025. This change represents the final phase of a gradual reduction, which began with a decrease to 4.0% in 2023 and further dropped to 2.0% in 2024.
Companies with direct-to-consumer sales should prepare for the complexity of managing varying local sales tax rates, as they must ensure compliance with both state and local regulations.
Background on Kansas Food Sales Tax
The elimination of the state sales tax aligns with Kansas’s goal of reducing the financial burden on its residents for essential grocery purchases. The legislation doesn’t apply to restaurant sales or prepared foods. The initiative specifically targets sales of groceries and food ingredients intended for home consumption, such as fruits, vegetables, meat, and dairy products. Prepared foods, including meals served in restaurants, remain subject to the full state and local sales tax rates.
Retailers are advised to adjust their point-of-sale systems to reflect the 0.0% state rate that started January 1, 2025. It’s important to note that local sales taxes imposed by cities and counties on food and food ingredients remain unaffected by the legislation, meaning food and food ingredients sales will still be subject to local taxes.
Food sales tax refers to the tax imposed on the purchase of groceries and unprepared food items intended for home consumption. While some states exempt groceries from sales tax entirely, others apply a reduced tax rate or the standard state sales tax. The definition of taxable food items varies by jurisdiction and may exclude specific items like dietary supplements, prepared meals, or beverages.
Companies should analyze their product catalog against state-specific taxability rules to confirm that items are correctly classified as taxable, exempt, or partially taxable. This review should include unprepared foods, packaging, and bundled goods, ensuring the sales tax decision matrix reflects current state laws and recent legislative changes.
What Are Food Sales Taxes?
Food sales taxes are applied to the purchase of groceries and other unprepared food items intended for personal consumption. These taxes are often defined in legislation as food products, food ingredients, food for human consumption, unprepared food, or food intended for home consumption.
This includes basic grocery items like fruits, vegetables, dairy products, meat, and grains. However, the specific definition of taxable and exempt food products can vary by state, with some states also including exemptions for certain dietary or medical items, such as baby formula or gluten-free products.
Prepared foods, including meals sold at restaurants or delis, are usually excluded from these exemptions and subject to standard sales tax rates.
How Does It Affect Kansas?
The legislation’s goal was to ease the financial burden on residents, particularly low- and middle-income families, by making essential food items more affordable. The food sales tax rate reduction and its impacts have been summarized by the Kansas Department of Revenue (KDOR).
We’re Here to Help
If you have questions about food sales tax reductions in Kansas, please contact your Moss Adams professional.