Why Tariffs Could Quietly Add to Your Grocery Bill Twice, According to Tax Compliance CEO

Tariffs won’t change tax rates, but they will raise what we pay.

In my earlier coverage, I’ve explored the consumer impact of the shifting tariff landscape, from practical ways to reduce grocery bills to which pantry staples to buy before prices climb.

For this follow-up, I spoke with Mike Sanders, CEO and Co-Founder of CereTax, a leading sales tax automation company. Sanders shared how tariffs don’t just raise prices; they also increase the sales tax collected, creating higher prices for consumers and new challenges for retailers, especially those operating across multiple states.

Tariffs Raise Prices — and the Tax Bill

Tariffs raise the landed cost of goods. Since sales tax is generally calculated on the total selling price, which includes the tariff cost once embedded, both consumers and businesses will see higher tax amounts on invoices. “When tariffs raise prices, sales tax goes up too,” Sanders says. For high-volume sellers, even a small percentage increase in the taxable base can mean a significant change in total tax liability. Accurate tax engine configuration, he adds, is critical to avoid errors.

Rates Stay the Same, but Collections Climb

“Tariffs won’t change tax rates, but they do raise the amount collected,” Sanders explains. Businesses selling in multiple jurisdictions may notice a ripple effect in monthly remittances, something that can influence cash flow forecasting.

Pricing Strategies Come with Tax Implications

When tariffs hit, companies must decide whether to absorb the cost, pass it on to customers, or switch to alternative products. “Tariffs force hard pricing decisions, each with sales tax consequences,” Sanders says. A product swap can even shift an item from a non-taxable category to a taxable one, depending on state rules.

Imported Food: Higher Shelf Prices and Taxes

For imported foods, tariffs raise prices at the shelf. In states where groceries are taxable — at either the full rate or a reduced rate — that increase also drives up sales tax. “Tariffs make imported foods cost more, and in some states, the tax goes up too,” Sanders says. Multi-state grocers face added complexity since the same product can be taxable in one jurisdiction and exempt in another.

Who Absorbs the Cost?

Larger retailers may absorb some tariff costs on essential grocery items to maintain customer loyalty, while recovering them on luxury or niche imports. Smaller retailers, often operating on tighter margins, are more likely to pass on the full increase. “Big chains may shield shoppers on staples, but smaller stores often can’t,” Sanders notes. Regardless of strategy, sales tax is calculated on the final selling price, meaning precise tax engine settings are essential.

Same Product, Different Tax Rules

Food tax rules vary dramatically across states. “The same cheese can cost more, or be taxed differently, depending on your state,” Sanders points out. This makes jurisdiction mapping and product taxability coding more important than ever to ensure compliance and accurate reporting.

Sanders’ advice is clear: in a tariff-heavy market, accurate and adaptable tax systems aren’t optional. They’re essential for avoiding costly mistakes and staying compliant, all while managing the growing impact on both business margins and consumer wallets.