Southern States Top List of Highest Combined Sales Tax Ratesby
Of the five states that have the highest average combined state and local sales tax rates, the top four are located in the Southeast, according to the Tax Foundation’s midyear report on state and local tax rates.
The four southern states are Louisiana (9.99 percent), Tennessee (9.45 percent), Arkansas (9.3 percent), and Alabama (8.97 percent). Washington rounded out the top five at 8.92 percent.
States with the lowest combined rates include Alaska (1.78 percent), Hawaii (4.35 percent), Wisconsin (5.41 percent), Wyoming (5.42 percent), and Maine (5.5 percent).
It’s tough to escape sales taxes with 45 states and the District of Columbia collecting them statewide and 38 states also tacking on local taxes, according to the report.
But some perspective is in order because, yes, even these tax rates can be deceiving. So much so, in fact, that sales tax rates can push consumers to the suburbs or another state in search of lower taxes, the report states. Or, consumers can opt to buy online, fueling the ongoing debate about whether to tax online sales.
In New Jersey, for example, Salem County isn’t required to collect the 7 percent state sales tax and instead levies a 3.5 percent local tax so retailers can compete with neighboring Delaware, which has no sales tax, the report states.
What’s more, states like Louisiana that have seemingly lower sales taxes can actually wind up having quite high tax rates when local sales taxes are factored in. Louisiana’s state rate is 5 percent, but when the average local rate of 4.99 percent is added, the combination ranks as the highest in the country.
And income and other taxes play a role here, too.
In New Hampshire, for example, there is no state sales tax and the state is known for its many outlet stores near the Maine and Massachusetts borders that lure shoppers. There’s also no income tax, but property taxes are high. Washington’s sales taxes are high but there’s no income tax, while Oregon is just the opposite.
All of which, of course, influences where businesses and people locate, how people shop and buy, and how the local and state economies fare.
Here’s a snapshot of the report’s other findings.
- Besides Delaware and New Hampshire, three other states don’t have state sales taxes: Alaska, Montana, and Oregon. Alaska and Montana allow local governments to levy sales taxes.
- For state sales tax rates only, California has the highest at 7.5 percent. Five states tie for second with a 7 percent state rate: Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee.
- The lowest state sales tax is Colorado’s 2.9 percent rate. The next lowest at 4 percent are Alabama, Georgia, Hawaii, New York, and Wyoming.
- For local sales tax rates only, five states rank the highest: Louisiana (4.99 percent), Alabama (4.98 percent), Colorado (4.60), New York (4.50 percent), and Oklahoma (4.44 percent).
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.