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Memphis sales tax: what you pay and where it goes
Memphis shoppers pay one of the highest sales tax rates in the country. The combined rate inside the city is 9.75% — 7% to the State of Tennessee and 2.75% in local option tax shared between Shelby County and the City of Memphis. There is no separate Memphis-only sales tax line; the 2.75% local share is the maximum allowed under Tennessee law.
How the 9.75% breaks down
- 7.00% — State of Tennessee general sales tax
- 2.25% — Shelby County local option sales tax
- 0.50% — Memphis city local option sales tax
Groceries are taxed at a reduced state rate (4%) plus the same 2.75% local share, for a combined 6.75% on most food at home.
Where the local share is spent
By state law, half of the local-option sales tax collected inside Memphis must go to schools — historically Memphis-Shelby County Schools. The remaining share goes to the city's general fund, which pays for police, fire, sanitation, and parks. We track how the actual receipts compare to the budgeted amount each month.
Why the rate matters for the budget
Sales tax is the second-largest source of revenue for the City of Memphis after property tax. When collections come in below the budgeted forecast, the city has to either cut services mid-year or pull from reserves. That's why we watch the monthly receipts in near real-time during budget season.