We study the binomial and monomial ideals arising from linear equivalence of divisors on graphs from the point of view of Gröbner theory. We give an explicit description of a minimal Gröbner basis for each higher syzygy module. In each case the given minimal Gröbner basis is also a minimal generating set. The Betti numbers of $I_G$ and its initial ideal (with respect to a natural term order) coincide and they correspond to the number of ``connected flags'' in $G$. Moreover, the Betti numbers are independent of the characteristic of the base field.