What Mississippi Retailers and Out-of-State Sellers Need to Know
Mississippi is reducing its sales tax rate on groceries from 7% to 5%, effective July 1, 2025. This change offers some relief to families while requiring retailers to adjust their systems for compliance.
Grocery Sales Tax Is Changing: Here’s What’s New
Lower Rate on Grocery Items
Starting July 1, 2025, the Mississippi sales tax rate for eligible grocery items drops from 7% to 5%. This is part of House Bill 1, passed in the 2025 legislative session.
What Qualifies as “Groceries”?
The 5% rate applies to food and beverages meant for human consumption that are eligible for purchase with food stamps or Supplemental Nutrition Assistance Program (SNAP).
Key points:
- Grocery items that can be bought with food stamps = taxed at 5%.
- These items are already coded in most retail systems for SNAP exemptions.
- Items that don’t qualify for food stamps = remain taxed at 7%.
What Qualifies for Food Stamps?
Generally, items that qualify for food stamps (SNAP) include most foods and beverages intended for human consumption, like fruits, vegetables, meat, dairy, and breads, but exclude non-food items, prepared hot foods, and alcohol.
You can find a full list of eligible and ineligible items on the USDA’s SNAP eligibility page.
How to Report the New Rates
For Mississippi-based retailers:
- Report grocery sales at 5% using Rate Code 40.
- Report other retail sales at 7% using Rate Code 74.
For out-of-state retailers:
- Report grocery sales at 5% using Rate Code 41.
- Report other retail sales at 7% using Rate Code 75.
How Businesses Can Prepare for the July 1 Tax Rate Change
To stay compliant and avoid disruptions:
- Review your product list to confirm which items are eligible for the reduced rate.
- Update your POS or accounting systems to apply the correct rate codes.
- Coordinate with your tax software provider or internal team to implement the changes before July 1.
- Educate staff on which items are impacted and how the system changes will affect transactions.
Retailers already set up to handle food stamp exemptions should find this update relatively easy to apply.
How TaxValet Simplifies Compliance with Changing Tax Laws
Tax rate changes like this one are a perfect example of why working with a sales tax expert matters. If you're a TaxValet client, our team is already monitoring these updates and adjusting your filings accordingly—so you don’t have to lift a finger.
From setting up rate changes to ensuring accurate reporting, we handle the details so you can focus on running your business.
Want help navigating Mississippi’s updated grocery tax? Reach out to us today for a free consultation.