NCPA - National Center for Policy Analysis

Ranking State and Local Sales Taxes

September 28, 2011

Retail sales taxes are often the most transparent way to collect tax revenue.  Indeed, while many citizens do not know the standard 10, 15, 25, 28, 33 and 35 percent federal personal income tax rates, they tend to have at least some idea of the sales tax in their state, or could reach into their pocket to pull out a receipt with the rate printed on it.  However, almost three-quarters of the states have some presence of local-option sales taxes that may be less known to residents, with rates varying from county to county.  A new report from the Tax Foundation provides a population-weighted average that reflects incidence of general sales taxes per state.  These calculations answer the question: "If I walk out of my house and buy something, what is the average sales tax I will pay?"

  • Currently Alaska, Delaware, Montana, New Hampshire and Oregon are the only states that do not levy a statewide sales tax.
  • Furthermore, four of the five also prohibit local sales taxes (excluding Alaska).
  • Among states that do collect a statewide tax, the states with the highest average combined rate (state tax plus the average local tax) are Tennessee (9.43 percent), Arizona (9.12 percent), Louisiana (8.84 percent), Washington (8.79 percent) and Oklahoma (8.66 percent).
  • The five with the lowest average combined rates are Hawaii (4.35 percent), Maine (5 percent), Virginia (5 percent), Wyoming (5.34 percent), and Wisconsin (5.43 percent).
  • California still retains the highest state-level rate at 7.25 percent with five states tying for the second-highest rate of 7 percent: Indiana, Mississippi, New Jersey, Rhode Island and Tennessee.
  • The lowest non-zero state-level sales tax is in Colorado, which boasts a rate of 2.9 percent, while seven states follow with 4 percent: Alabama, Georgia, Hawaii, Louisiana, New York, South Dakota and Wyoming.

Source: Scott Drenkard, "Ranking State and Local Sales Taxes," Tax Foundation, September 22, 2011.

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