Mississippi is lowering its sales tax on groceries. Will consumers notice?

• See how much a family of four with a $1,000 per month grocery bill will save.

Starting July 1, Mississippi grocery shoppers will pay less sales tax on their purchases.

The state sales tax on groceries is decreasing from 7 percent to 5 percent.

For a family of four with a $1,000 per month grocery bill, that is a savings of $20 per month, or $240 annually.

The Mississippi Department of Revenue (MDOR) has notified retail businesses across the state of the upcoming reduction as part of the implementation of House Bill 1.

Lawmakers this session passed the bill and it was signed into law by Governor Tate Reeves (R).

READ MORE: With Governor Reeves’ signature, Mississippi now on track to end the tax on work

The legislation defines “groceries” as food or drink for human consumption that is eligible to be purchased with food stamps, MDOR noted.

Considering that a typical “grocery bill” consists of items outside that scope the savings could be even less than estimated above.

Items purchased with food stamps will continue to remain exempt from sales tax. Items that are not eligible to be purchased with food stamps will remain taxable at 7 percent.

MDOR has urged retailers to adjust their systems to accommodate for the decreased rate.

“There are certain adjustments that retail taxpayers must make in their system so that the new tax rate is active on July 1,” said Greg Duke, MDOR Office Director of Business Tax. “Retailers already have these grocery items coded in their system for food stamp exemptions so adjusting it should be straightforward. In addition to notifying retailers via their business accounts, we will contact many of them individually as well as grocery associations to help spread the word.”

MDOR Commissioner Chris Graham said in a statement that they are excited to be able to administer this reduction “to help provide relief on the cost of groceries to Mississippi families.”

The reduction in the sales tax on groceries is estimated to be annualized cut of $127 million for the state.

Cities and towns rely heavily on sales tax diversions from the state to meet their budgetary needs. Previously, the municipalities received 18.5 percent of all sales taxes collected by the state. Under the new law, an increase in that diversion rate for grocery tax collections was raised to 25.9 percent in an effort to “keep the cities whole.”