Cookeville Keeping Watch On Impact Of 3-Month-Long Grocery Sales Tax Holiday

City of Cookeville cautious of how the sales tax holiday on food items will affect the city’s revenue.

The tax on food and food ingredients is set to start Tuesday and run through October 31st.

City Manager James Mills said last year was the first time there was a tax holiday of that nature, and the city noticed an almost $90,000 drop in revenue. He said this year with a proposed three-month-long tax holiday, they will be keeping a close eye on their numbers.

“If what happened last year were to happen this year and for three months that’s a revenue loss we would definitely feel,” Mills said. “And that’s significant to the city, 53 percent of the general fund is generated through sales tax. And that general fund pays for police and fire and pays for the day-to-day operations of the city.”

Mills said during sales tax holidays, state law indicates that municipalities are supposed to be held harmless for any potential loss in revenue. He said that means that the city would be reimbursed for any sales tax it would lose for the holiday.

Mills said last year they were not reimbursed the full $90,000, just the sales that were apparently reported. He said it would appear that there were miscalculations from either the state or the local businesses, which low-balled the city’s revenue loss.

“You would anticipate on a month that there would be a sale tax holiday that sales would actually increase because people can buy more and don’t have to pay sales tax,” Mills said. “But not only did that not happen, we actually saw a reduction in it.”

Mills said last year they had conversations with the Department of Revenue and the Comptrollers Office, so they hope that the state will monitor this issue as well. He said the city anticipates after voicing concerns last year there will be a closer inspection of the numbers coming in during this time.

Mills said the city typically does not see any impact from the “Back to School” sales tax weekend, which was July 28th through July 30th this year.