By David Ferguson
There is a lot of bragging going on about the recent elimination of the last of the state sales taxes on groceries. And, yes, they should brag, considering how many years it has taken to eliminate the last small state levied tax on groceries.
This accomplishment, however, must be put into perspective. Yes, from a policy standpoint it is a big step because grocery taxes are known as one of the most regressive forms of tax. Yet, from a financial standpoint, the exemption passed in 2025 only has a small impact on your wallet. More about that in a bit.
WHY THE FOCUS ON REDUCING GROCERY TAXES?
Grocery taxes hurt the people who can least afford it, and therefore the taxes have long been recognized as one of the most regressive forms of taxation.
Over the last two decades, state lawmakers have reduced the state sales tax on groceries and have now eliminated them. They recognized the need to provide tax relief, especially to those families that are struggling to make ends meet, but who do not qualify for government assistance through programs such as SNAP (Supplemental Nutrition Assistance Program).
ONE STEP FORWARD. TWO STEPS BACK.
Unfortunately, while state levied sales taxes on groceries were going down, sales taxes on groceries have increased for many Arkansans. How is this possible? Groceries are not exempt from city or county sales taxes; and sales taxes have increased in many cities and counties.
Here is the problem. Arkansas law doesn’t provide a method to exclude groceries from local sales taxes. When a new city or county sales tax is passed it automatically applies to groceries. There is no method for local officials to propose a tax that exempts groceries and no method for the voters to propose a grocery exemption from a local sales tax.
DO LOCAL TAXES MATTER?
According to a 2025 report by the Arkansas Department of Finance and Administration the highest combined city and county sales tax rate in the state is 6.125% in the city of Gillham in Sevier County. Sales tax rates vary even among the cities in the same county. For example, in Washington County the combined local tax rate is 3.35% in Fayetteville, 4% in Tontitown, and 5.75% in Greenland. To see the local tax rates for your area click on this link to the DFA report – https://www.dfa.arkansas.gov/wp-content/uploads/cityCountyTaxTable_Apr_Jun_2025.pdf (NOTE: The report lists both the city and county rates and then the combined rate is displayed in the column on the right.)
ADDING IT UP
I don’t know how much you spend for groceries, but just for example let’s say you bring $100.00 worth of groceries to the checkout stand. The 1/8th percent state sales tax would have added another 12.5 cents to your bill. But, then there are also the local taxes to add to your bill. For example, if combined local tax where you buy groceries is 4%, then on each $100.00 of groceries you take to the checkout stand you are charged $4.00 in tax, and you pay $104.00.
Four dollars still doesn’t sound like much, but $100 is not even a drop in the bucket to what families are actually spending each week, month, and year.
Maybe you don’t have to worry about the cost of groceries, but there are many Arkansans who are struggling to make ends meet. If you are living paycheck to paycheck and are weighted down by debt, what you can afford to buy at the grocery store can be a big concern. A tight budget can also mean a struggling family has to fill their shopping cart with cheaper, highly processed “food” instead of healthier whole foods.
LONG FIGHT TO REDUCE GROCERY TAXES
There were several efforts in the 1990’s to try to completely exempt groceries. Those bills didn’t fly because: (1) some politicians wanted to keep the state tax on groceries to keep the tax base broad and have the revenue from groceries for revenue stability during bad economic times (state financial stability at the expense of those who could least afford the taxes); and (2) cities and counties didn’t want to lose ANY potential revenue (state legislators dared not cross their city and county officials who would remember their actions at the next election).
Former Governor Mike Beebe deserves the credit for making it a priority to reduce the state sales tax on groceries. During his terms, groceries were exempted from most of the state sales taxes. Before Beebe left office, he got another bill passed to set in motion the elimination of the last of the “statutorily” imposed taxes by triggering its elimination once state revenues reached a certain point. Beebe’s law was automatically triggered during former Governor Asa Hutchinson’s service. At that point groceries were exempt from all state imposed sales taxes, other than a 1/8th percent state sales tax, levied by an amendment to the Arkansas Constitution. In 2025, the legislature passed a law which exempts groceries from the 1/8th percent sales tax. Yes, the recent exemption everyone is talking about was only 1/8th percent, but it produced significant state revenue.
IN MY OPINION
The politicians in the 1990’s who wanted to completely exempt groceries had the right idea. But, that idea is still not going to fly in the legislature, because it would hurt local governments.
Another idea would be to pass a law exempting groceries from all future local sales taxes and to allow voters to approve grocery exemptions on existing sales taxes, if the tax is not dedicated to bonds. Good ideas but expect strong opposition from the Arkansas Municipal League and the Association of Arkansas Counties.
My recommendation to the Governor and members of the Arkansas General Assembly legislature is at a minimum: Amend the current laws authorizing city and county sales taxes to provide that any new sales tax or an extension of a sales tax will NOT APPLY to groceries, UNLESS the ballot title of the proposed tax clearly states the sales tax will be imposed on groceries. Inform the voters and let them decide whether to approve a proposed sales tax that applies to groceries!
It would be a step in the right direction.
David Ferguson is a former Director of Arkansas’ Bureau of Legislative Research, having a thirty-two-year career as an attorney for the Arkansas legislature. After retirement from state service, his primary focus has been beef cattle farming. He is also a former officer of Conduit for Action.
