NCPA - National Center for Policy Analysis

States, Localities Impose A Variety Of Sales Taxes

July 27, 1999

There are 6,600 separate jurisdictions across the U.S. that set their own sales tax rates. Moreover, states, cities and counties tax some categories of goods and services and exempt others. Last year alone those jurisdictions adjusted their rates 579 times.

An almost infinite number of variations are creating headaches for those who want to tax sales on the Internet. In addition to the complications arising from the considerations above, there are additional factors to contend with.

  • Tax rates change at city and county lines -- and purchasers living in the same county can be taxed differently from their neighbors living in nearby cities.
  • Which products and services are taxed varies widely -- tangible goods are taxed in most states, while some tax certain services but not others.
  • Even the definition of items from snacks to sportswear varies from state to state.
  • Thirteen states exempt schools, churches and nonprofit organizations from taxes -- but Hawaii and Louisiana exempt none of them and most states fall somewhere in the middle.

A number of states have also instituted tax holidays ranging from four days to a week or so annually on some merchandise -- such as children's clothing.

In 1930, Mississippi became the first state to tax retail sales. By 1940, 23 other states had followed. Today only five states have no sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon.

The patchwork of exemptions can occasionally reach the ridiculous; for example, using dogs to chase geese off property in New Jersey isn't taxable.

Source: Richard Wolf, "Internet Could Clean Up Mishmash of Sales Taxes," USA Today, July 26, 1999.

 

Browse more articles on Tax and Spending Issues