Tax Foundation Releases New Data on State and Local Sales Taxes
Wednesday, February 15, 2012 at 9:22AM Tennessee, Arizona Have Highest Combined Sales Tax Rates
Washington, D.C., February 14, 2012—Tennessee, Arizona, Louisiana, Washington, and Oklahoma have the highest combined state and average local sales tax rates, according to a new report released today by the Tax Foundation. On the other end of the scale, Delaware, New Hampshire, and Oregon all have no state or local sales taxes, thus scoring combined rates of zero.
“While state sales taxes are generally easier to understand than the federal income tax system, the existence of thousands of local jurisdictions that set their own rates can lead to confusion” said Tax Foundation economist Scott Drenkard. “States with a moderate statewide rate can end up with an extremely high burden when local rates are added to the total.”
Thirty-six states allow localities to charge a local sales tax. These local rates range from very low - such as 0.25 percent in Tupelo, Mississippi - to quite high, as in the case of the 7 percent rate in Wrangell, Alaska. Because local rates vary so dramatically and sometimes apply to very small jurisdictions, the Tax Foundation calculates a population-weighted average for each state.
The states with the highest combined state and local rates are Tennessee (9.45 percent), Arizona (9.12 percent), Louisiana (8.85 percent), Washington (8.80 percent), and Oklahoma (8.66 percent). Among the states with a statewide sales tax, the lowest average combined rates are found in Hawaii (4.35 percent), Maine (5.00 percent), Virginia (5.00 percent), Wyoming, (5.34.percent), and South Dakota (5.39 percent).
California, despite a 1 percent reduction in its sales tax rate that took effect July 1, 2011, still has the highest state-level rate at 7.25 percent. Five states tie for the second-highest statewide rate with 7 percent each: Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee.
The states with the highest average local sales tax rates are Louisiana (4.85 percent), Colorado (4.54 percent), New York (4.48 percent), Alabama (4.33 percent), and Oklahoma (4.16 percent). The states with the lowest non-zero average local rates are Minnesota (0.30 percent), Vermont (0.14 percent), Idaho (0.02 percent), Mississippi (0.004 percent), and New Jersey (-0.03 percent). New Jersey has a unique system in which certain jurisdictions are exempt from collecting the 7 percent state tax and instead collect a 3.5 percent local tax. This results in a slightly negative statewide average local rate.
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
Tax Foundation Fiscal Fact No. 291, “State and Local Sales Taxes in 2012,” by Scott Drenkard is available online.